USPS Won't Get Medicare Drug Subsidy

The Bush administration denied the U.S. Postal Service's request for a Medicare prescription drug subsidy, which could have saved the agency $250 million annually.

In October, the USPS applied with the Centers for Medicare and Medicaid Services, which is part of the Department of Health and Human Services, to be a Medicare Part D provider. This would have let it receive the employer's retiree prescription drug subsidy under the Medicare Modernization Act of 2003.

The USPS said it qualified for this subsidy through its direct payment of the employer's premium to the Federal Employees Health Benefits Program that is administered by the federal Office of Personnel Management. After communicating with OPM, however, the Centers for Medicare and Medicaid Services rejected the application because the USPS participates in the Federal Employees Health Benefits Program, which is not taking the subsidy.

OPM said it decided to forgo the subsidy because there is no rationale to pay itself to continue providing drug coverage to federal retirees of agencies that are fully supported by federal tax dollars. But the USPS said it is distinct in that it directly funds the costs of its retirees' health benefits with revenue generated through postage rates, not taxpayer dollars.

“We are currently pursuing recourse around the plan sponsor issue, which was the basis used by Centers for Medicare and Medicaid Services to reverse their previous acceptance of the postal service application,” USPS spokesman Jim Quirk said.

Several members of Congress supported the postal service's proposal.

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