Email and social media may be contributing to the decline of the United States Postal Service, but retiree health care costs are what’s really killing it. When your local post office closes and Saturday delivery ends, you can blame Facebook and Google if you want, but the health care system is perhaps a more deserving culprit.
The postal service is mandated by Congress to pay about $5.5 billion per year for retiree health benefits (last year’s payment was deferred to this year, pushing the 2012 total to $11 billion). That’s a huge chunk of the $14 billion in expected losses for 2012, and it looks like that $11 billion might not be paid in this year. I don’t know what the USPS pays for health care for active staff and dependents but no doubt it’s also a significant contributor to the fiscal gap.
Health care costs are a major drag on the public and private sectors. As I pointed out a couple weeks ago, four of the six major financial challenges facing the states are health care related.
The federal budget deficit is largely a function of health care spending. And of course companies and individuals face challenges paying for health care, too. Other countries face health care cost challenges, too, but no one has it as bad as the US. If anything, our demographics make us lucky, because our elderly population comprises a lower share than in Western Europe and Japan.
I can understand why critics of ObamaCare rail against the individual mandate and other coercive aspects of the Act. Sure, it can seem un-American to force someone to buy something. But our current health care system is a serious drag on the economy and on private enterprise. It sounds heretical but maybe a real ’government takeover’ of the health care system with serious ’rationing’ is what we need to revive capitalism.
By David E. Williams
David E. Williams is the co-founder of MedPharma Partners who writes regularly on the Health Business Blog.Visit website | More posts by Author
Thanks for the heads up on the incorrect numbers. I fixed the headline and changed the text to reflect that this year's total includes last year's bill as well. You are right, what a mess.
You might want to check your facts. The USPS is not required to pay "$11 billion per year for retiree health benefits." In 2006 Congress required the USPS to PREPAY $5.5 billion for future potential retiree's health benefits. It has nothing to do with current retirees. Because the USPS didn't have $5.5 billion in spare cash last year, Congress postponed the 2011 payment until this week. And it doesn't "look like" the $11 billion "might" not be paid in this year- the Postmaster General made it clear the USPS couldn't afford to make the payments over a year ago.
The USPS already has $44 billion stashed away for future retiree health benefits. It has also overpaid the Federal Employee Retirement System by $11 billion. So the prefunding is a heck of a lot more than "huge chunk of the $14 billion in expected losses for 2012"- it's ALL of it, and then some!
For a good summary of the mess, read Joe Nocera's column in the New York Times.
http://www.nytimes.com/2012/07/31/opinion/nocera-its-d-day-for-the-post-office.html