Postal Service Won't Get Medicare Drug Subsidy; Officials Say Coverage Is Sufficient

By Stephen Barr
Monday, December 19, 2005

A request by the U.S. Postal Service for a Medicare prescription drug subsidy, projected to save postal customers at least $250 million annually, has been denied by the Bush administration.

Officials decided that the Postal Service will not be allowed to receive a subsidy because it participates in the Federal Employees Health Benefits Program, which is not taking the subsidy.

Congress agreed to provide the subsidy as a way to keep employers from abandoning or reducing drug coverage for their retirees, and FEHBP has no intention of reducing its prescription drug benefit, officials emphasized.

"The employees are being protected," said Nancy H. Kichak , an Office of Personnel Management associate director who oversees FEHBP.

The Centers for Medicare and Medicaid Services rejected the Postal Service application after an exchange of letters with OPM, officials said. The postal executive in charge of the subsidy application could not be reached to comment, a spokesman said.

Like many large employers, the Postal Service is looking for ways to rein in operating expenses, which are financed through postage rates.

The cost of providing health insurance to postal retirees and survivors has doubled over the past five years, according to postal officials. Next year, the officials estimate, the Postal Service will spend more than $7 billion on health benefits for employees and retirees.

The 2003 Medicare law, which expanded the program to provide a prescription drug benefit known as Part D, includes the subsidy as a way of encouraging employers to continue providing drug coverage to retirees. Under the provision, public and private employers providing qualified drug coverage can receive a tax-free payment from Medicare equal to 28 percent of their drug costs.

The National Active and Retired Federal Employees Association has urged FEHBP to take the subsidy as a way to possibly reduce increases in the program's health insurance premiums.

In October, OPM opted to skip the subsidy for civil service retirees because officials saw no reason for the government to pay itself to continue providing drug coverage when it had no intention of dropping or modifying FEHBP drug benefits. Officials have portrayed those benefits as more generous than the coverage that will be offered through Medicare's Part D.

Pentagon Executive Scale Approved

The Pentagon has announced that its performance management and pay system for senior executives has received a seal of approval from OPM. The certification permits the Defense Department to raise the top of its executive pay scale from $149,200 to $162,100.

The Pentagon's initial plan for evaluating the job performance of Senior Executive Service members did not pass muster at OPM. Most other large agencies got their new SES systems approved by OPM more than a year ago.

It's not clear when the Pentagon's new system might lead to pay raises for the 1,217 SES members at Defense. Officials have indicated that performance pay decisions might not be made until after Sept. 30, and perhaps as late as next December.

The Pentagon's slow rollout of performance pay for executives has raised questions about whether the department can set pay in a timely manner for hundreds of thousands of rank-and-file employees when it converts to the National Security Personnel System next year.

David S. Chu , undersecretary of defense for personnel and readiness, called the certification "an important milestone." In a statement, Chu said, "Our cadre of senior executives is positioned to lead the way in the department's transformation to a performance-based pay system."


Jerry Benoit will retire from the Housing and Urban Development Department on Jan. 3 after more than 41 years of federal service. Most of his time at HUD has been devoted to designing and managing the housing voucher program that provides rent subsidies for more than 2 million low-income families nationwide.

Robert J. Shue , a senior official in the office of the undersecretary of defense (comptroller), will retire Jan. 3 after 37 years of federal service, including 13 years with the Commerce Department. At Defense, he led its liaison with Congress's defense appropriations subcommittees and helped prepare Defense budget requests.

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