Q. People are switching from traditional Medicare to private plans because they think they’re getting a good deal. As more make the switch, what are the ramifications for Medicare itself?

By Gilbert Cranberg
gilcranberg@yahoo.com

Call it the riddle of AARP. It’s truly puzzling why an organization that represents some 38 million individuals 50 and over, many of whom depend on Medicare, would endorse a Medicare offshoot – Medicare Advantage – that siphons money from traditional Medicare and is seen by many as part of an effort to privatize Medicare.

AARP says in ads, “Discover the only Medicare Advantage health plan that carries the AARP name.” The plan is provided by UnitedHealthcare, among the nation’s largest for-profit health insurers.

Why should anyone drop out of popular, tried and true government-run Medicare and opt for a  private insurance plan? The chief reason is that Medicare has been grossly overpaying the private plans to cover seniors who desert traditional Medicare. The generous payments make it possible to lure seniors with attractive premiums and benefits. In some places they even rebate the $93.50 monthly Part B premium. It’s not unusual for Medical Advantage plans to offer enrollees free health club membership and zero premium for coverage that includes the Part D drug benefit without extra cost.

Of course, there is cost, including profits to the private insurer, but seniors are willing to enroll because it seems like such a good deal and because they may not realize that leaving traditional Medicare in the lurch weakens it for other seniors.

AARP understands all this. It criticizes the over-payments to Medicare Advantage. It declared recently, “The $54 billion in excess payments private Medicare Advantage plans in Medicare are due to receive should be used to improve the Medicare program by keeping premiums down as access to doctors is preserved...Congress should stop subsidizing private insurance companies in Medicare with excess payments.”

AARP added pointedly that the extra benefits offered by Medicare Advantage plans “are subsidized by taxpayers and through higher premiums paid by ALL Medicare beneficiaries....private insurance plans keep a significant portion of these excess payments for their own profits.”     

If you sense a disconnect between what AARP says and what it does by endorsing a Medicare Advantage plan that profits  when AARP members enroll, well, as I said at the outset, it’s a puzzle. AARP spokesmen say that the organization is working to eliminate the overpayments and that its mission is to improve the “Medicare Advantage marketplace.”

Perhaps the plan it endorses is a superior product, but AARP in effect is endorsing something it believes is too heavily subsidized. Its endsorsement amounts to a seal of approval for Medicare Advantage despite the serious misgivings AARP has expressed about it.

Reducing or eliminating the overpayments will be an uphill battle. The insurance companies are not only a potent lobbying force, they now have as allies millions of enrollees who benefit from the overpayments and aren’t bashful about defending what they see as their interests. AARP in effect is adding potential lobbyists in support of the insurance companies each time it induces a senior to join its endorsed Medicare Advantage plan.

If AARP succeeds in cutting the overpayments, a likely result could be higher Medicare Advantage charges or reduced benefits, or both, for AARP members who enroll. The plan AARP is touting says enrollees are protected against such changes for a year. Thereafter, those who follow AARP’s advice and buy the coverage could find that the organization’s lobbying on payments to Medicare Advantage has been at their expense.

If you read the small print at the end of AARP’s ad for Medicare Advantage you learn that “UnitedHealthcare pays a fee to AARP and its affiliate for use of the AARP trademark and other services.” I asked the AARP spokesmen how much AARP is paid for its endorsement of the plan. I was told that, as a “private business contract,” it won’t be disclosed. I said that AARP is a membership organization, and that, as a member, I believe I am entitled to the information. It was not disclosed.

Was AARP influenced to endorse a Medicare Advantage plan because of a financial tie-in? I do not know. I do know that the drain of money from Medicare by Medicare Advantage is harmful to a lot of seniors. AARP’s interest in stemming the drain is laudable, but its chances of success are iffy at best. A recent move in the U.S. House to cut the overpayments did not succeed.

I simply cannot fathom why AARP lends itself to what looks all too much like an effort to privatize a prize government program.

Nor do I understand why the press does not regard any of the above as newsworthy. Medicare is important to readers, and AARP has big membership and influence. Yet what you just read came not from accounts in the mainstream press but by simply following up AARP’s ad for Medicare Advantage in my local newspaper.

Perhaps buyouts and the like have so shorn newsrooms of old-timers that few if any are left who relate to the concerns of seniors. If so, and if that explains why AARP and Medicare Advantage are a non-story, it would be a colossal blunder. What seniors lack in demographics that appeal to advertisers they more than make up in loyalty to newspapers as readers.

I recently attended a sales pitch for Medicare Advantage by a private insurance company, Humana, that has made a major effort to switch seniors from traditional Medicare. No one from the press covered it. But then, hardly a day passes without an insurer advertising similar sessions. The implications for Medicare in the drive to undercut it are enormous, and the press is missing the story.

Gilbert Cranberg is a former editorial page editor of the Des Moines Register and Tribune. E-mail: gilcranberg@yahoo.com

Comments

Submit a comment - Jump to bottom of list

B.S. in Health Care Management Posted by Jean 12/29/2009, 09:49 PM All the Senior "Advantage" plans are government plans - All of them are paid with taxpayer money - The Government contracts with private insurance companies who take at least 15% profit off the top - first - for themselves. All the people enrolled in Advantage plans are delusional - they THINK they have private insurance but it is paid for by the government -which is you & me and in the process weakens the original Medicare. If you enroll in an Advantage plan you are not enrolled in Medicare. Subsidized by the taxpayers, overpament to these insurance companies runs into the billions of dollars. This is a bold-faced attempt to privatize Medicare. These plans are placed as big TV ads and a lure to get Seniors to enroll. The coverage in the plans vary widely from state to state and even county to county. If left in place the insurance companies will slowly but surely start withdrawing coverage because - this is important - the insurance companies first mission is to make a PROFIT - not to deliver health care. These are some of the billions of dollars at stake in this health care reform and I don't trust the companies to maintain this 'cadillac' coverage in the future. How can these Seniors deny health care coverage to the rest of the country by taking government dollars for themselves and think that others should get nothing. This is why you see outrage by some Senior groups - they are afraid of losing the good deal they have. Why this isn't being reported by some of the journalists in this country is a mystery to me.

Retired Engineer Posted by Donald Smith 07/07/2010, 09:37 PM The so called 15% overpayment covers the administrative fee that Medicare pays to CMS and other private contractors is an administrative fee. Medicare merely factored that into the payment structure to the Medicare Advantage providers who must handle all of their own paperwork. It is Medicare that set the rates for payments of services depending on provider location. There is NO "overpayment" to the Managed Care Providers, just parity. The Managed Care Providers are generally HMO's that cover a limited number of Doctors and hospitals that may not give you the premium services of a Mayo Clinic or Johns Hopkins. Therefore their costs are lower. They can, however, often offer a fitmess center membership and other inexpensive wellness perks that focus on prevention of illness. The fact that the Medicare Advantage Plan offers more just confirms the efficiency of free enterprise over a government run program that is laden with waste. I have been on 3 separate Medicare Advantage Plans since my move to Florida. They compete to get my business and I compare them each every year to see that they offer my primary care physician, hospital, and medications. And I do get the $96.50 rebate for my wife and I. Compared to Medicare and my former corporate 20% supplemental retiree medical plan, my out of pocket is reduced about $5000 per year Nevertheless, i'm sure the government will find a way to destroy Medicare Advantage and expand the bureaurcy.

a nobody Posted by Eric Siverson 07/23/2010, 06:00 PM I'am sure the federal government pays humana so much money evrey yr to cover their obligation to pay 80 % of my health bills . It must be substancual becuase humana only charges me about fifty dollars a month to pay my 20% obligation + my drug bills . I would really like to know what the government pays Humana for this ? Maybe they will pay me and I will pay my own bills ? I was sure happy to get on medicare becuase they negotiated more reasonable health care charges for me . before medicare . the clinic and doctor sent me bogus bills usaully more than twice as high as they charged people who had insurance from their employer . If I complained they said I needed to relise that a lot of people dont pay , so we have to make up for that on you . I consider the whole insurance and medicial industry a bunch of slick thieves . Submit a comment - Jump to top of list