USPS Applies for Medicare Subsidy To Fund Prescription Drug Benefits
The U.S. Postal Service has applied to the Medicare program for a retiree prescription drug benefit subsidy, an incentive under the 2003 Medicare law that offers payments to public and private employers who continue to provide drug coverage to Medicare-eligible employees and retirees after the Medicare prescription drug benefit takes effect in 2006, the Washington Post reports.
USPS CFO Richard Strasser said the cost to the agency for providing retiree health insurance has doubled in the past five years.
In 2006, the agency estimates it will spend 10% of its operating costs, or $7 billion, on health benefits for employees and retirees. Under the subsidy provision, employers can receive a tax-free payment from Medicare equal to 28% of their drug costs. The subsidy could save the Postal Service at least $250 million annually, the Post reports.
The exact amount of the subsidy will not be known until calculations of benefits levels and claims are made, Strasser said.
Nearly 330,000 USPS retirees and their spouses are eligible for Medicare.
USPS qualifies for the subsidy because it partially pays premiums under the Federal Employees Health Benefits Program, which provides more generous drug coverage than the Medicare drug benefit.
The Office of Personnel Management, which administers FEHBP, will not seek the Medicare subsidy for other civil service retirees. According to the Post, OPM officials maintain there is "no reason for the government to pay itself to continue providing drug coverage when it has no intention of dropping or modifying FEHBP drug benefits."
The Post notes that the Postal Service is not a typical government agency because it uses postage revenue rather than tax dollars to finance health insurance.
Strasser said the savings the agency would receive through the subsidy "is a small amount, but the postal ratepayer is entitled to that amount."
Charles Fallis, president of the National Active and Retired Federal Employees Association, criticized OPM's decision not to apply for the subsidy, saying other civil service retirees might have to pay more for health coverage than USPS retirees because of OPM's decision (Barr, Washington Post, 11/9).
Additional information about the Medicare drug benefit also is available online.