Whoa!

The Postal Service's recent announcement of another rate increase has started (expectedly) to incite complaints from the public, as though nothing else is going up in price.

The one-penny rate hike, effective May 12, represents "the second increase in about a year", whines The Messenger, a newspaper in Fort Dodge, Iowa.

The Messenger in an editorial in today's edition says:

"Never mind that inflation in general may not reflect the Postal Service's expenses. And never mind that the new system does not provide the incentives for efficiency that existed in the past.

And concludes: "It may be time for Congress to revisit the issue, asking whether it has been made too easy for the Postal Service to put its stamp of approval on rate increases."

Wonder who's out there miseducating a Midwestern paper and prompting calls for Congress to kick the postal reform tires?

Fuelish Surcharges

The PAEA permits the Postal Service to escape the law's inflation-linked limit on USPS shipping prices if "extraordinary or exceptional circumstances" come about -- but that would take something nearly cataclysmic, like a dramatic and unexpected surge in fuel prices, perhaps brought about by a geopolitical crisis in the Middle East.

The drip-drip-drip in incremental hikes in prices at the pump, on the other hand, won't give the USPS a reprieve.

Compare that with the variety of surcharges that FedEx, UPS and DHL regularly pass-on to their customers, including a fuel surcharge pegged to rising fuel prices.

The Motley Fool focused on the impact of these extra charges and highlighted the difference they make in shipping a package via USPS versus its competitors. It also noted that FedEx and UPS and FedEx last year raised their rates an average of 4.9% for their ground and express services.

The Postal Service has a pretty nifty set of tools on its website to help consumers get a handle on how much they'll save and avoid those nasty surcharges by shipping with the Blue Eagle, versus UPS and FedEx. The site also provides You-Tube-like-video from small biz owners testifying to the savings they reaped through partnering with USPS. Smart marketing, USPS.

Slip-Sliding Away?

As the U.S. economy continues to unravel, the looming question for the U.S. Postal Service is how significantly a recession could rock mailer spending -- and ultimately the state of USPS finances.

Especially in the first full year of operations under the new postal law and PRC rules, which generally limit postal price hikes in mailing services (which constitute 90 percent of postal revenues) to inflationary changes, regardless whether USPS revenues go up or down.

The first indication of how bad a bite the economic downturn may take out of USPS revenues will be revealed next Wednesday, January 30, at the next meeting of the USPS Board of Governors.

That will come when USPS Chief Financial Officer H. Glen Walker reports on the financial results of the most recent quarter (October - December, 2007). That period historically represents the largest quarter of USPS receipts, due to holiday-related mail volume, both in first-class and advertising mail.

Retailer data on 2007 holiday sales show that the period was a setback for many merchants, with 2007 the weakest year since 2002. Since then, consumer spending has remained sluggish, and could continue at a dismal pace into 2009, experts say. Consumer spending is a bellweather for the economy and generally reflects the direction of advertising spending using the mail, and upon which postal revenues are increasingly reliant.

Bigger than a Bread Box

OK, it may not be sexy. But it's an important start.

The first actions by the Postal Service exercising its broader product and pricing flexibility under the new postal reform law have been announced by USPS.

They occurred in connection with filing notifications by USPS with the Postal Regulatory Commission.

Effective March 3, USPS will offer a new, larger Priority Mail Flat Rate Box, that will help customers to ship 50 percent more than with the current box. It will be offered at a discount to overseas military addresses — another postal first for the armed forces.

The Postal Service also announced a new Sunday and holiday delivery price for Express Mail.

For further details and prices, read here.

Justice Dealt Following Attack on Postal Supervisor

Add this to the annals of postal violence.

A January 17 press release by the U.S. Attorney for Maryland announced the sentencing of two USPS employees, resulting from their violent attack upon their supervisor at the Postal Service Incoming Mail Facility in Linthicum, Maryland.

According to the U.S. Attorney's Office:

"U.S. District Judge William M. Nickerson sentenced John Bermudez, Jr., age 31, of Brooklyn, Maryland today to 10 months in prison followed by three years of supervised release for assault of a government official and sentenced his brother, Gregory Bermudez, age 28, of Millersville, Maryland to eight months in prison, followed by three years of supervised release, on the same charge, announced United States Attorney for the District of Maryland Rod J. Rosenstein. John Bermudez was convicted by a federal jury on August 2, 2007 after a three day trial and Gregory Bermudez pleaded guilty on July 26, 2007.

According to the guilty plea, testimony at trial and other court documents, Gregory Bermudez and John Bermudez, Jr., worked at the United States Postal Service Incoming Mail Facility (IMF) in Linthicum, Maryland. On February 8, 2006 at the IMF a supervisor instructed John Bermudez to stop playing cards and return to work. Both defendants argued with the supervisor, who sought the assistance of the manager of the work floor. When the manager responded he discovered the defendants in a heated argument with another employee. Unable to regain control of the work floor, the manager informed the defendants that he was calling the police and turned to walk away. The defendants followed the manager and, as the manager approached the phone, Gregory Bermudez struck him from behind with his fist. The victim fell to the ground and both defendants punched and kicked him as he lay on the ground. The defendants then left the facility through the loading dock area."

BMC Outsourcing RFP On the Way

The Postal Service expects next month to request proposals on how to contract-out some Bulk Mail Center activities, according to APWU.

APWU reports on its website that its national officers learned of the BMC outsourcing plans during a USPS “pre-decisional briefing” on developments associated with the Request for Information (RFI) Concerning a Time-Definite Surface Network issued by USPS last July.

That document, according to USPS, sought to “identify interested organizations with the capability to implement a time-definite mail distribution and transportation network."

In the RFI, the Postal Service invited private sector companies to indicate whether they were interested in helping to build and operate a private, sub-contracted national or regional network of facilities to support the distribution and transportation of Standard, Periodical and Package mail. Responses were due by September 24.

It appears now, nearly five months later, that USPS received a sufficient positive response from logistics operators to proceed to the next step: solicitating actual proposals on how to outsource some BMC activities.

The Postal Service's interest in privatizing portions of the mail distribution and transportation network represents one of its major cost-containment strategies, according to its updated Transformation Plan.

Attempting to tamp down job anxiety about the impact of potential BMC outsourcing, APWU President William Burrus said, "“While we expect changes to the BMC network and to the employee complement, we do not anticipate that they will result in a significant reduction in the number of USPS employees.” Burrus also held open the possibility of “in-sourcing” some functions that are currently performed by non-USPS employees.

More DNM Shots in Concord

The Postal Service has fired back at the claims of Do Not Mail advocates in New Hampshire, where the state legislature is considering a Do Not Mail bill, HB 1506. (Earlier posts on the bill are here and here.)

The Concord Monitor, the state capital's newspaper, on Friday printed the reply of Joanne Giordano, USPS vice president for public affairs and communications, to a January 11 Monitor op-ed by ForestEthics legislative consultant Steven Krieger and George DeWolf, the activist-constituent who requested the bill from its sponsor, New Hampshire lawmaker Susi Nord.

Giordano alleged that the Krieger-Wolf commentary contained "a number of inaccurate, misleading and misinformed statements that need to be addressed. Primary among them is the fact that consumers have several options to help manage the amount and type of mail that enters their home."

Pointing to the relationship between advertising mail and jobs, Giordano also said:

"In 2006, advertising mail brought more than $3.8 billion in increased sales to New Hampshire's economy and played a critical role in the success of New Hampshire businesses, large and small.

It's also important to understand that according to the nation's environmental watchdog, the Environmental Protection Agency, only 2.4 percent of materials found in landfills across the country is attributed to advertising mail."

On Thursday, January 24, the Commerce Committee of the New Hampshire House of Representatives will resume its hearing on Nord's DNM bill. The Committee suspended its January 10 hearing and agreed to pick up two weeks later when too many witnesses -- especially opponents -- appeared to testify.

HIPAA Hubbub

NALC President Bill Young has followed through on his threat.

Verbal shots between Young, the USPS Board of Governors, and the Postal Service's Office of Inspector General have escalated into a lawsuit brought last week by the NALC -- and its ally for the moment, APWU -- challenging the USPS Office of Inspector General's practice of surreptitiously obtaining the medical files of USPS employees who, the IG believes, may be fraudulently receiving workers' compensation benefits, abusing sick leave, or otherwise engaging in medical fraud.

When President Young, in his President's Message in the NALC's Postal Record, brought the matter to the attention of NALC members in December, he promised them, "I have directed NALC's attorneys to pursue this matter relentlessly through litigation."

The NALC/APWU lawsuit, filed in a Manhattan federal court on January 17 against the Postal Service and the Office of Inspector General, contests the IG's activities in asking doctors and hospitals treating postal employees involved in workers' compensation claims to quietly turn over the employees' medical records to assist the IG's investigation of the underlying claim and potential fraud.

Despite the Inspector General's broad statutory authority to investigate "fraud, waste and misconduct" throughout USPS, the NALC/APWU lawsuit calls the IG's actions an "unwarranted intrusion by government agencies into the privacy of their employees' medical information, an intrusion that exceeds the agencies' statutory authority and violates federal law, regulations, and the United States Constitution."

President Young, more hyperbolically in his Postal Record editorial, likened the IG's actions to recent news reports of "[u]nauthorized surveillance, illegal searches, suspension of civil liberties, illegal beatings -- all the way from wiretaps to water-boarding." The "Bad Cop" thing, as Mr. Young calls it.

Several initial observations on the lawsuit and underlying controversy:

* Interestingly, the NALC-APWU lawsuit never mentions the alleged reason -- the investigation of OWCP abuse by postal employees -- as the motivator for the IG's interest in USPS employee medical files. Neither do the press releases of NALC or APWU heralding the lawsuit. Hmmmm. Referring to potential fraud by their own members probably doesn't favor the optics of the unions' claims.

Even President Young, in his December editorial, acknowledged in his typically straight-forward fashion: "Now we are not stupid. With 800,000 USPS employees, there are bound to be some bad apples. Even among our own 225,000 city letter carriers, there will be some who do not deserve to wear the uniform."

* Second, why didn't the postal employees whose medical files were allegedly hijacked by the IG race up the courthouse steps to press their alleged rights? Why did the unions have to step up and file this lawsuit? Do they even have the legal standing to press this action?

* Third, in support of their lawsuit, the unions cite the Health Insurance Portability and Accountability Act of 1996, or HIPAA. That law, as APWU points out in its press release, was intended to protect the privacy rights of Americans in their medical records. It generally prohibits health care providers from disclosing the medical records of their patients to third parties without patient consent. But HIPAA hardly provides iron-clad privacy protection, and there are exceptions to the HIPPA Privacy Rule. One exception, for example, permits health care officials to disclose a patient's medical records to "health oversight agencies" without the consent of the patient, when the health oversight agency is pursuing a legally authorized investigation, including into workers' compensation benefits.

* Fourth, the heart of the unions' lawsuit relies on its premise that the USPS Office of Inspector General is not a "health oversight agency." Is it?

In the OIG's standard letter of request to a health care provider for a USPS employee's medical records (included as Exhibit A of the complaint in the unions' lawsuit), the OIG asserts: "The Office of Inspector General is a health oversight agency because it oversees through our investigations a government health program in which health information is necessary to determine eligibilty or compliance."

The Department of Health and Human Service's own guidance on the HIPAA Privacy Rule states: "The Privacy Rule permits covered entities to disclose protected health information to workers' compensation insurers, State administrators, employers, and other persons or entities involved in workers' compensation systems, without the individual's authorization ..."

* Finally, the USPS IG, in cataloging on its website the types of hotline complaints it welcomes, includes the following workers' compensation (OWCP) activities, including:

• OWCP Fraud (employee): Fraud committed by an USPS employee in connection with an OWCP claim.

• OWCP Fraud (medical provider): Fraud committed by a medical provider (including physicians, durable medical equipment vendors, pharmacies, hospitals, laboratories) involving an OWCP claim (billing the USPS for unnecessary medical services or medical services that were never rendered).

• OWCP Processing (management’s failure involving processing paperwork): Complaint involving the process in which the USPS handled an OWCP claim or that there are fundamental flaws involving the process in which the USPS handles OWCP claims.

The NALC-APWU lawsuit has been assigned to federal district judge Denny Chin. Judge Chin was nominated to the federal bench in 1994 by President Clinton. He has handled his share of controverisal cases during his judicial tenure. In 2006, he attracted attention when he dismissed a lawsuit brought by a Florida man against the company behind the Atkins diet. In a footnote, Judge Chin dished advice when he wrote that he has had success with his own “much simpler diet, which can be described in four words: Run more, eat less.”

The FTC and the "M" Word

The Federal Trade Commission has issued its much-awaited, Congressionally mandated study on the USPS's mail monopoly, identifying the federal and state laws that apply differently to the Postal Service compared to its competitors, and what measures should be adopted to end such differences, including regulatory action by the PRC.

While there is certain to be further commentary here and elsewhere in the coming days, a quick read of the study report shows that its conclusions are provocative, with morsels of support for everyone -- USPS and its competitors -- to satisfy each side's policy biases.

The study concludes that:

* Because of its status as a governmental institution and its universal service obligation, the Postal Service is burdened with a unique "net competitive disadvantage versus private carriers."

* From a market-wide perspective, the federally-imposed restrictions that impose economic burdens on the USPS and the implicit subsidies that provide the USPS an economic advantage should be viewed as "two distortions that compound each other and negatively affect the provision of competitive mail products."

* Congress should consider whether to reduce the constraints on the USPS's competitive products operations, to assist USPS in its management of labor costs and configuration of its network. At the same time, the PRC should consider requiring USPS to account for its implicit subsidies when making pricing and production decisions.

* Worksharing and recent PRC regulations requiring contribution to institutional costs may reduce any advantage the USPS' postal monopoly provides in its delivery of competitive products.

* In the longer term, Congress should consider action that further eliminates the legal differences between the USPS and its competitors, including:

-- Relaxing the current mailbox monopoly to allow consumers to choose to have private carriers deliver competitive products to their mailboxes would create net benefits for consumers;

-- Narrowing the postal monopoly to allow greater competition while still maintaining universal service; and

-- Establishing the USPS' competitive products division as a separate corporate entity -- with either private or governmental ownership.

The two Democrat members of the five-member FTC -- Pamela Jones Harbour and Jon Liebowitz -- in a concurring statement, criticized the report for its review of alternative business models that exceeded, they say, the mandate of the study and relied on inconclusive information.

Mail-In Voters: A New Force?

Today's New York Times picks up the story thread reported here last week: the significant impact that voting-by-mail could have on the results of Presidential primaries in a number of states, and especially in California on Super Tuesday, February 5. California election officials estimate half of the state's 15.5 million voters may vote by mail.

The early-voting dynamic of VBM has forced the Presidential candidates to adjust their campaign strategies, the Times notes, recognizing that many voters could be making their candidate selections over their kitchen tables now, not weeks from now in a voting booth. This has prompted the campaigns of the Presidential contenders to devote greater spending on phone banks, mailings and other tactics to specifically target these voters.

Voting by mail could shape the results in primary-significant states beyond California, including Florida and New Jersey.

The Times reports that "Officials in Florida, where the primary is January 29, report an increase in requests for absentee ballots, attributing it largely to the closeness of the races in both parties. About 42 percent of Democrats and 47 percent of Republicans in the state have requested absentee ballots."

Officials in New Jersey, which moved its primary to February 5 from March, also anticipate large numbers of mail-in voters, averting the potential of bad weather and capitalizing on the convenience of voting by mail.

Thirty-one states allow some form of voting-by-mail. Several states have changed their laws to "no excuse" voting, permitting allow voters to cast ballots by mail for any reason, as opposed to limiting it to sickness or absence from one's residence on Election Day.

The Times notes VBM's appeal, pointing to its convenience and alignment with on-the-go lifestyles of many Americans. But VBM is not without its critics, according to the paper, who claim that circumstances could change precipitously by the time of election day, pointing to the impact of Hillary's weepy moment two days before the New Hampshire primary.