Bowing to reality yesterday the U.S. Postal service notified its half million employees that they were tearing up their union collective bargaining contract and withdrawing from the federal government’s massive health and retirement plans. The postal service also announced 120,000 layoffs in addition to the 100,000 that will leave the service through attrition.
But its decision to end its collective bargaining agreement with government unions and to end the highly vaunted federal health care program are the most revealing. Wisconsin Governor Scott Walker was assailed for ending that state’s collective bargaining agreements with state unions. The Governor and Republicans faced weeks of violent protests by union rank and file members. The Wisconsin case was a rallying point for leftist activist groups and union bosses.
Since Wisconsin’s initiative, other elected officials including those from liberal Democratic Montgomery County, Maryland just outside the nation’s capital have followed Walker’s initiative. They are proceeding across the country to tear up collective bargaining agreements to cancel lavish health and pension programs.
But the termination of the large postal service participation in the government health plan is a killer. It also could further doom the prospects for Obamacare which goes into full effect in 2014.
Officially the postal service is withdrawing its 480,000 pensioners and 600,000 active employees from the Federal Employees Health Benefits Program and replacing the program with a cheaper, more efficient health program.
Liberals have hailed the FEBHP program for decades and said it was the “model” for all future private and public plans. In 2003, for example, three liberal health care reform academics led by former Carter Health and Human Services official Karen Davis published a study on behalf of the liberal Commonwealth Foundation. They heaped praised on the program for its low cost and affordability
“Largely because of its ability to constrain cost growth reasonably well with limited government intervention, the program has been proposed by some political leaders and analysts as a model to replace the current Medicare program, to cover small businesses and the uninsured, or, in some cases, to cover the entire nation. “
This was just wishful thinking. Today the postal service demolished all the rosy projections about cost benefits. Anthony J. Vegliante, the USPS chief of human resources officer said it does not meet private sector health care standards and it is far more expensive than private insurers. He concluded “So cost may be above the private sector, while value may be below the private sector.”
Government unions have vigorously opposed any changes or reform in the federal health program, which covers 8.5 million federal workers. But the postal service was aware the health costs were sinking them and a cost saving effort had to be implemented. They also were going to require that employees actually pay co-pays and premiums. How about that for radical change?
The Washington Post acquired a copy of a devastating financial analysis of the postal service. In the last four years it has lost $20 billion, including $8.5 billion in 2010. Over the same period mail volume has dropped 20%.
In deciding to tear up its health and pension plans, the postal service said it can do so because “exceptional circumstances require exceptional remedies.”
The document obtained by the Washington Post darkly concluded “The Postal Service is facing dire economic challenges that threaten its very existence. . . . If the Postal Service was a private sector business, it would have filed for bankruptcy and utilized the reorganization process to restructure its labor agreements to reflect the new financial reality,”
This is D-Day for government unions. Congress will have to approve the changes and you can expect an all out lobbying war by the unions and their political allies later in the fall. But the writing is on the wall.