Congressional Budget Office Projects HR 756 Saves $6 Billion

Posted by Bob Levi on 06/02/17

Yesterday, the Congressional Budget Office (CBO) finally released the projected cost associated with enactment of HR 756, the Postal Reform Act of 2017. The CBO determined that the bill would reduce federal spending by $6 billion over the next decade.

On March 16, the House Committee on Oversight and Government Reform approved HR 756 by voice vote. The CBO estimate is a prerequisite for a vote by the House of Representatives, and is an essential step for consideration by the House Ways and Means Committee and the House Energy and Commerce Committee. The legislation was referred to these two committees, since a provision in the bill impacts the Medicare program and the panels have jurisdiction over the program.

The major budget effects of HR 756 are as follows: The partial restoration of the exigent postage rate would increase postal revenue by $8.6 billion; the phase-out of door delivery for business mail would save $2 billion; and the creation of a postal health plan within the FEHBP, combined with Medicare integration, would increase spending by $4.5 billion. Consequently, there is a net 10-year savings of $6 billion.

Additional revenue could accrue to the Postal Service as the result of providing services on behalf of state, local and tribal governments, and from changes in the manner that the USPS contracts with private entities. Moreover, modest USPS savings would result from using postal-specific data for calculating certain retirement liabilities.

Medicare integration, a consequential element of HR 756, would result in USPS savings of $4.7 billion. However, since Medicare will become the primary insurer for all Medicare-eligible annuitants, Medicare costs would grow by $10.7 billion -- this includes Medicare Part B coverage and providing the USPS with a prescription drug subsidy. Interestingly, USPS Medicare integration would reduce non-postal FEHBP premiums by $3.3 billion. 

Finally, CBO projects that the financial relief provided by the bill would enable the agency to resume modest investment in infrastructure and operations.