The Office of Inspector General (OIG) has investigated many fraudulent workers’ compensation claim cases. Most of these investigations involve postal employees scamming the system. But, employees aren’t the only ones who abuse the system. Sometimes, medical providers used by postal employees injured on the job, defraud and abuse the system. A few seek to take advantage of this program by submitting false bills, colluding with claimants to extend benefits, or falsifying claim documents. But OIG Special Agents, along with the Department of Labor OIG, found an orthopedic surgeon in New Orleans with a scam of his own.

The surgeon, who operated a medical practice in New Orleans, claimed to have performed health care services after Hurricane Katrina when his office was not even open! Forty-seven of the claims involved names of postal employees. The surgeon pled guilty in federal court to fraud and has agreed to pay $750,000.00 in restitution. He also faces a possible maximum sentence of 10 years in prison and a fine of $250,000 at his sentencing in May.

These scammers – employees and providers – are who we are interested in. Last year our investigative efforts saved the Postal Service over $185 million in long-term compensation costs. If you know of someone who is scamming the system, give us a call at 1-888-USPS-OIG. Or drop us an email at HOTLINE@uspsoig.gov.

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The Postal Accountability and Enhancement Act (PAEA) of 2006 ushered in a new era of enhanced pricing flexibility and gave the Postal Service a profit incentive. It also exposed the Postal Service to antitrust scrutiny for the first time in its history. The Postal Service, its regulators, and mailers all face new choices in determining how they will adapt. The Postal Service must determine how to use its new pricing flexibility to retain earnings. The regulator must determine how to balance the Postal Service’s pricing flexibility against other regulatory goals such as ensuring a level playing field. Mailers have new opportunities to work with the Postal Service to create customized pricing agreements.

The Office of Inspector General (OIG) retained Professor John C. Panzar to examine the pricing incentives confronting the Postal Service in this new environment. Under the PAEA regulatory structure, the prices of most of the Postal Service’s products cannot as a whole grow faster than inflation. Dr Panzar analyzed the implications of this price cap on the Postal Service’s pricing initiatives, focusing on three areas: worksharing discounts, quantity discounts, and discounts for using particular methods of accessing postal services or “channels”:

• • Worksharing Discounts – Although, historically, the Postal Service has generally set worksharing discounts equal to the cost the Postal Service avoids when it lets others take on this work, Dr. Panzar found the Postal Service faces a strong economic incentive to set worksharing discounts below the costs those activities avoid. This is permissible under PAEA, but it would break with long-standing practice and invite antitrust scrutiny.
• • Quantity Discounts – Dr. Panzar found that the Postal Service has an economic incentive to offer quantity discounts. Moreover, if the customers receiving discounts are not in competition with other less favored customers, quantity discounts are a “win-win” as the price cap automatically protects everyone. If customers are in competition, however, those who do not get quantity discounts are disadvantaged and may seek antitrust relief.
• • Channel-Based Discounts – PAEA allows cost-based discounts based on alternative distribution channels such as offering Internet prices at a discount to post office prices. Dr. Panzar found these types of discounts are likely to be attractive to the Postal Service — particularly when the channels are new.

Dr. Panzar is a Professor of Economics at the University of Auckland (New Zealand), and the Louis W. Menk Professor Emeritus at Northwestern University, He has authored two books and numerous articles on pricing and costing issues facing multi-product network industries like postal services.  His paper (Report Number RARC-WP-10-002) is available in the OIG's reading room.

A study just released by the U.S. Postal Service’s Office of Inspector General (OIG) shows that the current system of funding the Postal Service’s Civil Service Retirement System pension responsibility is inequitable and has resulted in the Postal Service overpaying $75 billion to the pension fund. The OIG estimates that if the overcharge was used to prepay the Postal Service’s health benefits fund, it would fully meet all of the Postal Service’s accrued retiree health care liabilities and eliminate the need for the required annual payments of more than $5 billion. Also, the health benefits fund could immediately start meeting its intended purpose -- paying the annual payment for current retirees, which was $2 billion in 2009.

The report further illustrates the inequity in the methodology used to determine the Postal Service’s contribution to the CSRS fund. Key findings from the report: Read more