Leave it to the Bush administration to turn its back on the great pumpkin in the pumpkin patch, the National Active and Retired Federal Employees Association says.

The Office of Personnel Management is not applying for an employer subsidy available under the new Medicare prescription drug law -- the deadline is today -- and NARFE contends the government is missing out on a chance to lower health insurance premiums for employees and retirees.

"OPM will leave $1 billion on the table for every year they do not apply for this payment. It is a little like not being allowed to go trick or treating on Halloween night when everyone else gets to go," NARFE President Charles L. Fallis said.

Under the 2003 law, employers can receive subsidies for drug coverage on the condition that their drug benefit for Medicare-eligible retirees is at least as good as the new Medicare drug plan. NARFE, which has nearly 400,000 members, lobbied Congress to make the federal government, as an employer, eligible for the subsidy.

Nancy H. Kichak, an associate director at OPM, said the administration evaluated the Medicare drug subsidy as part of fiscal 2006 budget planning. "This review indicated that there was no good rationale for the federal government to pay itself to continue providing drug coverage to federal retirees," she said.

Kichak said the intent of the subsidy is to encourage employers to continue providing prescription drug coverage to their retirees. Because federal employees and retirees have "excellent access" to health benefits, and because OPM does not plan to eliminate prescription drug coverage for retirees, "we determined we would refrain from exercising the option to request the subsidy," she said.

But Fallis said the decision will mean that retirees "have to pay frightfully more" than they would with a subsidy.

He noted that the California Public Employees' Retirement System, known as Calpers, had applied for the employer subsidy. Calpers provides health benefits to state and local government workers and retirees in California and is second in size to the Federal Employees Health Benefits Program, which provides coverage to nearly 8 million Americans.

"Other retirees will be treated to lower premiums than they otherwise would have received because their employer applied for the subsidy," Fallis said.

Hold the Candy

Federal employees may not see much of a treat in the Labor Department's Employment Cost Index released Friday. The index showed that federal employees are in line for a 1.7 percent across-the-board pay raise in January 2007.

The index is used to help set pay raises under the 1990 Federal Employees Pay Comparability Act. The pay law usually serves as a starting point for Congress and the White House when they make their budget recommendations. In most years, federal employees get an across-the-board raise and a locality adjustment.

The 1.7 percent across-the-board increase forecast for 2007 would be one of the lowest in decades and, given current trends, might not keep employees even with inflation.

Congress is on track to provide federal employees with an average 3.1 percent raise next year. During the past seven years, most employees have received raises of more than 3.5 percent annually.


Kathleen Day Koch, deputy general counsel at the Department of Housing and Urban Development, will retire Nov. 1, the agency announced.

Koch began her government career in 1977 as a lawyer in HUD's honors program. During her career, she served as chief of the Office of Equal Employment Opportunity Affairs at the FBI, as head of the U.S. Office of Special Counsel and as general counsel to the Federal Labor Relations Authority. She also served as an associate counsel to President Ronald Reagan.

Blue Cross on Diary Live

The 2006 "open season" for enrolling in the federal employee health insurance program begins Nov. 14. Stephen W. Gammarino, senior vice president for national programs at the Blue Cross and Blue Shield Association, will take your questions and comments on the open season at noon Wednesday on Federal Diary Live at www.washingtonpost.com. Please join us.

E-mail: barrs@washpost.com