Unsanitized: The War on the Postal Service Continues

Also, why we needed so many hospital beds in New York City. This is The COVID-19 Daily Report for May 6, 2020.

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First Response

We’re in a time when many people are confined to their homes and require package delivery of basic goods. It’s an election year where the safest option to exercise your civic duty is clearly receiving a ballot in the mail, filling it out, and returning it. So of course it makes perfect sense that the U.S. Postal Service’s very existence is under threat.

We got some really bad news on that front this week. Late Monday afternoon, the Postal Regulatory Commission filed an update with the Securities and Exchange Commission announcing the resignation of vice chair David C. Williams from the USPS Board of Governors, effective at the end of April. Williams had been confirmed for the position just in August 2018, by a Senate voice vote. Technically, he was filling a term that expired in December 2019, but he had until the end of this year to depart, and could have been reinstated for a new term.

This is distressing for a couple reasons. First of all, nobody is more knowledgeable about the inner workings of the postal service than David Williams. He was the longtime Inspector General who wrote the famous (to me, anyway) white paper in 2014 arguing for the return of postal banking. He was an innovative voice for improving revenues at the agency while also solving basic societal problems (wouldn’t postal banks have been a good place to deposit CARES Act payments so they weren’t stolen to cover existing debts?). And he understood the mission of the postal service, to connect the nation and promote commerce.

Read all of our Unsanitized reports

Worst of all, my sources indicate that this was a resignation in protest. Everyone has been focused on Donald Trump blathering that the USPS needs to quadruple package delivery charges to Amazon or they won’t get any rescue funds. But the CARES Act included a $10 billion expansion of the Treasury Department’s line of credit to the postal service. There have been reports that Treasury was using the leverage gained through those purse strings to demand significant changes to the agency, not limited to package rates. It includes forcing concessions on postal union pay and benefits, interfering in hiring decisions (including the next postmaster general, the key figure on postal policy), and the terms of large contracts. The USPS would have to formally request the loan money, and as of late April they hadn’t, though there had been preliminary discussions.

Williams’ resignation suggests the worst is about to happen: that Treasury will use its power and the leverage of the coronavirus crisis to fundamentally damage the postal service and its workers. Williams didn’t respond to a request for comment, but Rep. Bill Pascrell (D-NJ), a stalwart defender of the Postal Service, gave a statement to the Prospect that, if you read between the lines, signals what happened here. “If political pressure played a role in the sudden departure of David Williams, it is an ominous storm cloud over the head of our postal service,” Pascrell said. “As one of the most respected leaders of the USPS and a longtime advocate of postal empowerment and postal banking, Williams’ leadership is desperately needed to guide the post office through what may be its most precarious moment in modern times. Congress must investigate the circumstances here and guard against Donald Trump’s efforts to use this pandemic to decapitate one of our nation’s crown jewels and endanger the USPS’s over 600,000 employees.”

The American Postal Workers Union, the most aggressive of the postal service’s four unions, has not yet responded to a request for comment.

There will be plenty of vacancies at the Board of Governors if Donald Trump loses in November, and a Democratic president and Senate would likely have Williams atop the list to fill one of the seats. But will the postal service exist by then? This is a classic example of capitalizing on crisis, with forces interested in the destruction of a trusted and vital service making their move. FedEx, UPS and Amazon must be thrilled to see their rival floating in the water and their ally holding the life preserver.

Odds and Sods

I was quoted in this South Florida Sun-Sentinel story on mortgage companies lying to their borrowers about forbearance and balloon payments.

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Bedtime Stories

The scenes out of New York City, which is finally moving past its emergency phase, were indelible. The Jacob Javits center turned into a hospital. A naval ship, the USNS Comfort, docking in the harbor as a floating medical center. Makeshift tents in Central Park.

While New Yorkers cheered their medical personnel during the shift change every night, my thoughts turned to the question of why New York City needed so much assistance just to house patients. Sure, they had one of the worst, if not the worst spike in the world. But Olivia Webb, a policy analyst at the American Economic Liberties Project, identifies another factor. In a new research paper provided exclusively to the Prospect, Webb notes that, between 2002 and 2013, New York City closed 22 hospitals adding up to 6,000 beds. That’s equivalent to six Comfort ships, or six Javits centers. It includes facilities in each of the five boroughs: Flatbush General Hospital (Brooklyn), St. Vincent’s Midtown (Manhattan), St. John’s Queens, SVCMC Staten Island, and Westchester Square Medical Center (The Bronx).

In 2013, as Long Island College Hospital was closing, an op-ed in the New York Post from Stephen Berger, chair of the Commission on Health Care Facilities in the 21st Century, explained how “sometimes hospitals simply reach a point where their survival is no longer financially tenable and their services are no longer essential.” That report called for the downsizing of 4,000 beds, which should rightly be seen today as a catastrophic mistake.

As Webb explains, the idea that hospital closures “save” patients money by eliminating slack in the system is just not borne out. Medical costs per patient in New York state were above the national average by over 50 percent from 2013-2017. “The real driver of cost in the American health care system isn’t excess capacity, but consolidated power,” Webb writes, pointing out the high prices for prescription drugs, medical supplies, and all the oligopolist middlemen you have to pay off to get those items.

The obsession to close hospitals represents something known as “concentration creep”: one side of the transaction consolidates, forcing consolidation on the other side. There are four companies known as “group purchasing organizations” that sell supplies to practically all hospitals, based on sole-source contracts with suppliers. One company is responsible for about half of all IV bags in the U.S. Prescription drugs are usually micro-monopolies. To gain leverage, hospitals merge. And as a result, 90 percent of all metro areas have “highly concentrated” hospital systems, according to UC-Berkeley researcher Brent Fulton.

This had an impact in the coronavirus crisis. The U.S. had 3.5 hospital beds per 1000 people in 2000, and by 2016 that number was 2.8. Less slack in the hospital system meant quicker and more extreme lockdowns to protect what remained from becoming overwhelmed. And this is likely to get worse, not better: the cancellation of elective surgeries, the bread and butter moneymaker for hospitals, has led to medical staff being furloughed and operating with reduced pay, during a pandemic.

Webb outlines some solutions, including nationalizing hospital financing and capping patient rates in the short term, eminent domain takeovers of shuttered hospitals, and breakups of consolidated parts of the industry, “with the goal of guiding the restructuring of these markets so they are aligned with public health and well-being.” We cannot keep thinking of the only problem in medical care as the type of insurance system we have. Consolidation was supposed to be efficient, but the coronavirus revealed hidden risk. We cannot let it happen again.

Today I Learned

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