Raiding Medicare Won’t Produce Postal Reform

By James Martin & Saul Anuzis

Originally published on January 4, 2022

Congress has a plan to fix the United States Postal Service’s well-known financial crisis. The only catch? The plan Congress has hatched up will do little to reform the Postal Service, but will instead saddle Medicare with new liabilities and exacerbating an already fragile fiscal outlook. 

Leave it to Congress to attempt to fix one problem by creating an even bigger, and unrelated, mess. 

One of the most glaring problems facing the United States Postal Service, of course, is its balance sheets, which are covered in red ink. The USPS has not come close to breaking even for many years. In fact, according to a report produced by the Government Accountability Office in 2020, the postal system’s total losses over the past 13 years are close to $78 billion. “USPS’s current business model is not financially stable” is the report’s inescapable conclusion. 

More than half of the mail the USPS delivers is “marketing mail,” (industry-speak for “junk mail”). The United States Postal Service continues to add delivery stops, even as its volume of mail pieces continues to decline, with junk mail accounting for the overwhelming majority of daily deliveries. With email, online bill payment options, and automated bank transactions, letters account for a diminishing percentage of overall USPS mail, with packages increasingly accounting for a larger share. 

With a business model that prioritizes six-days-per-week delivery of mostly unwanted mail, it is hardly surprising that the postal system is under water. 

The need for postal reform is clear, and Congress is right to seek to modernize and make reforms to the postal system. The reform proposal Congress has devised, however, is a classic Washington solution — sleight-of-hand accounting tricks and cost-shifting, rather than any meaningful cost reductions. 

The proposal on the table is the Postal Service Reform Act, introduced in both the House and Senate this past spring. The main “reform” idea contained in the legislation is to shift more of the USPS’s expenses over to taxpayers, by removing close to 2 million postal employees and retirees from the Federal Employees Health Benefits Program (FEHBP). Current employees will not remain in the FEHBP once they reach retirement. The Postal Service pays for the benefits in the FEHBP, which is, of course, an enormous cost because of the sheer size of the USPS workforce. Instead of remaining in FEHBP, future retirees will be placed in the Medicare system, and taxpayers will foot the bill. Current Postal Service retirees will have the option to move to Medicare or remain in the FEHBP, and it is unclear how many of those retirees would elect to make the switch.

See the Washington accounting magic at work? Cost reductions are mere cost shifts, and rather than requiring the USPS to pay for its obligations, federal taxpayers will be on the hook for this expense. Voilà! Washington-style cost savings! 

Like the Postal Service, Medicare is facing its own fiscal crisis. As a portion of both GDP and the federal budget, Medicare expenses continue to rise. Last year, for the first time ever, the United States spent more on Medicare than it spent for national defense. 

This past August, Medicare’s trustees sent a harrowing — but hardly surprising — letter and report, announcing that Medicare’s trust fund will be depleted within five years. 

Even without forcing the Postal Service’s future retirees onto Medicare, the system is already strained and facing certain bankruptcy. 

In recent years, Washington, DC has treated Medicare as an evergreen piggy bank, ignoring all of the warning signs about the program’s eventual fiscal collapse. 

In 2019, when the House of Representatives’ drug-pricing bill was discovered to reduce Medicare spending by close to $490 billion over a decade, those “savings” were then used for congressional Democrats’ pet projects, including the Green New Deal aspects of the infrastructure bill, and even used to fund some of the Covid spending in 2020. 

The idea that Medicare should now be used as a bailout plan for the Postal Service falls into the same category of robbing Medicare, hoping that no one will notice. 

Americans expect Congress to reform our Postal Service and bring our mail system into the 21st Century without breaking a promise to seniors and future generations of seniors. Postal reform should not come at the cost of weakening Medicare. 

The United States is the most innovative country in the world. Surely Congress can come up with a creative reform package to help the Postal Service change its money-losing business model without shoving USPS costs on taxpayers through a Medicare raid.

James Martin is founder & chairman of the 60 Plus Association and the American Association of Senior Citizens.

Saul Anuzis is president of the 60 Plus Association and the American Association of Senior Citizens.