AARiP-Off: Group Rakes in Funds from Medicare Prescription Drug Plans

AARP created a controversy within its own membership when it backed George W. Bush’s Medicare Plan D, which provides insurance for seniors buying prescription drugs. Plan D is a scam on a number of fronts: By design, the government is promoting and susidizing a plan that is effectively run by the private insurance companies, in concert with the pharmaceutical companies. The long and the short of it is that the government pays out money at rates set by these two huge industries, with seniors picking up the substantial premiums and co-payments (and full costs when they fall into the the notorious coverage gap). All efforts to get the government to take over this program and directly negotiate drug prices have been rebuffed by both industries, despite a Democratic majority in Congress.


As the main lobby representing the 37 million Americans over 65 (12 percent of the population), AARP ought to be leading the charge against a program that puts corporate profits before its members’ health. Instead, its efforts have focused on reaping a large share of those profits itself. From the beginning, AARP partnered with insurance companies to offer Part D insurance plans, which soon gained a corner on the market. (I admit that I’m signed up for one of them myself.)


Now, Bloomberg news has reported that AARP “collects hundreds of millions of dollars annually from insurers who pay for AARP’s endorsement of their policies…The insurance companies build the cost of these so-called royalties and fees, which amounted to $497.6 million in 2007, into the premiums they charge AARP members, according to AARP’s consolidated financial statement for that year.” Critics say that the AARP-sponsored policies often sell at inflated prices, and don’t offer the best coverage for the money.


The Bloomberg report continues: “AARP uses the royalties and fees to fund about half the expenses that pay for activities such as publishing brochures about health care and consumer fraud –as well as for paying down the $200 million bond debt that funded the association’s marble and brass-studded Washington headquarters.” AARP headquarters takes up an entire block in downtown Washington, D.C. This in the capital city where an astounding 24 percent of people over 65 live in poverty–the highest poverty level for seniors in the nation.


Iowa’s Senator Charles Grassley, the ranking Republican on the Senate Finance Committee, recently questioned AARP CEO William Novelli and state insurance commissioners as to whether AARP is misrepresenting claims it makes in pitches for the organization’s health insurance policies “The pitch for these products should be straight up and informative, instead of designed to leave the impression of being comprehensive when the product is, in fact, very limited and leaves consumers seriously in debt if they need intensive medical care,” Grassley said. “Individuals shopping in the health insurance marketplace shouldn’t be taken advantage of. A big time advocate for health security should not target under- and un-insured Americans with misleading marketing. Consumers deserve better. It’s not better than nothing to encourage people to buy something described as ‘health security’ when there’s no basic protection against high medical costs.”


Grassley is right to question whether these plans are “better than nothing.” In fact, the same question could be asked about Medicare Part D as a whole. A study released last week by the Center for Economic and Policy Research found that three years into the program, “most seniors experienced no reductions in their health care spending as a result of the Medicare Drug benefit.”


3 responses to “AARiP-Off: Group Rakes in Funds from Medicare Prescription Drug Plans

  1. I agree 200%. Medicare Part D combines the worst features of government and private plans. As a plan sponsor who has to deal with the Medicare Part D Retiree Drug subsidy, I see close up how confusing it is for our members and we try very hard to make it simple.
    But the conflict of interest at AARP on health care is no different than at the Chamber of Commerce or NFIB. They ought to recuse themselves from the debate. See my own blog on the subject. http://thehealthcaremaze.wordpress.com/2008/11/22/health-insurance-for-small-business/

  2. As soon as I learned that AARP had endorsed (and even lobbied for, if I remember correctly) the Medicare D scam, I tore up my AARP membership card and told them to take me off of their list. As a social worker, I serve a number of seniors who are on Medicare D. The formularies are constantly being revised, the premiums and co-pays keep going up, and the proliferation of plans causes great confusion. This was a program made in Big Pharma/DC hell.

  3. Pingback: AARP’s Cosmo for Old Farts « Unsilent Generation

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