“Bankrupt” USPS needs own health care system, says Donahoe

The US Postal Service would already be going through bankruptcy proceedings if it were a private company, the US Postmaster General Patrick Donahoe will tell US lawmakers today. Donahoe is due to give evidence to the House of Representatives oversight committee today regarding its proposals to set up its own independent healthcare system as a central pillar of reforms to salvage its financial viability.

20 cents in every dollar generated by USPS currently goes towards its healthcare liabilities for staff and retirees.

The Postmaster General wants an independent system he says would save the struggling Postal Service $7bn a year. USPS would require Congress to vote through postal reform legislation to make the changes.

“Without this fundamental change to dramatically reduce health care spending, there is no assurance we can afford our health care commitments to Postal employees and retirees,” he said in prepared testimony submitted to the committee.

Commenting on the overall situation for USPS, Donahoe said doing nothing was “not an option” for the US Postal Service, which is currently on track to see its one-billion-a-month losses turn into $21bn annual losses by 2016.

“The financial crisis facing the Postal Service demands both immediate and comprehensive reform,” Donahoe said in his testimony as submitted to the committee.

The US House of Representatives saw postal reform proposals pass out of committee last autumn, but the measures are yet to be debated by the full House. Even if they are passed by the Republican-controlled House, Democrats controlling the Senate have said they stand little chance of passing the upper chamber of Congress.

USPS proposals for an independent health care system have not yet been included in the House bill or a rival Senate proposal currently awaiting debate by the full Senate.

Health care

USPS plans for its independent health care system would rely on employees making more use of government benefits under the Medicare national social insurance system, restructure pre-payments for its future retire healthcare liabilities and take advantage of prescription drug benefits currently available to private sector companies providing employee healthcare contributions.

The proposal would also see a simplified range of healthcare coverage for employees and retirees and their families solicited via a competitive bidding process.

Postal employees and retirees would see their premiums and contributions reduced, insisted Donahoe’s testimony.

Of the total $7bn a year that would be saved by the independent health care plan, up to $5.8bn would be from reduced pre-funding requirements for retiree health benefits, $1.1bn in reduced premiums.

Donahoe said with help from Congress, the healthcare plan could be in place as early as January.

Also due to give testimony to the House committee today, independent consultant Walton Francis, the principal author of a guidebook on health plans for federal employees, said USPS was to blame for “fiscal and bargaining mistakes” in its health care arrangements.

“The USPS has for decades provided unnecessary subsidies to its employees’ health insurance costs and, despite some recent reductions, still pays a higher share of premiums by far than is standard among American corporations or consistent with its fiscal condition,” said Francis in his prepared remarks.
The testimony from Francis submitted to the committee ahead of today’s hearing was fairly damning of the USPS proposals for an independent health care system, in how it would impact on health plans of union members who are not postal employees, and the general competence of USPS in running its own system.
Francis said the USPS plan would mean an “either unintended or deliberate decision to drastically reduce insurance benefits” for workers, and concluded that “it is neither necessary nor sensible to do anything remotely so drastic as dismantling the Federal Employee Health Benefits Programme to achieve the savings (USPS) needs, and possibly even higher savings”.

Union demand

Meanwhile, the leading union in the United States for mail carriers yesterday called on US Senators to vote against the postal reform bill expected to reach the Senate floor soon.

The National Association of Letter Carriers, which represents 284,000 USPS letter carriers, wrote to Senators calling S.1789 – the 21st Century Postal Service Act – a “fatally flawed” bill.

Frederic Rolando, the NALC president, said the proposals from Senators Joe Lieberman, Susan Collins, Tom Carper and Scott Brown was a “well-intentioned Band-Aid that does too little to address the Postal Service’s most serious problems”.

While the USPS continues to make losses of a billion dollars per month or more, the union urged Senators to torpedo the bill rather than accept any legislation that would affect the current state of the Postal Service network.

The NALC president jumped on recently-disclosed figures, denounced by USPS, that suggested that planned mail plant closures could depress mail volumes by a greater amount than USPS estimated publicly, as well as recent comments from Senator Collins warning that shrinking the USPS network would drive away mail customers.

Rolando detailed his belief that the major solution to the Postal Service’s financial woes at the moment would be to hand back massive rebates from USPS pension fund surplusses, and end obligations to pre-fund future healthcare liabilities for retirees.

“Any burden at all is indefensible at a time when 150,000 jobs are at risk,” said the NALC president, who blamed the 2006 postal reform bill for much of the current trouble at USPS.

Rolando said USPS also needs more opportunity to develop new business, and the powers to raise postage rates to immediate cover all costs of the services being provided.

“We embrace the Postal Service’s obligation to provide universal service at affordable prices to all Americans,” said Rolando, “but if we want the Service to continue to support itself, it must be given the tools to do so.”

There had been hopes last week that S.1789 would return to the Senate floor last night. However, Senate Republicans surprised some by opting to allow a debate on an oil subsidies bill, which left no time for a vote on the postal reform legislation. S.1789 could now receive its cloture vote later this week, although some in Washington are now suggesting little happen before the Easter recess, which spans the first two weeks of April.

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