5/13: Yesterday I briefly posted an entry I wrote on AARP and Medicare. In the original post, I incorrectly stated that AARP does not use its name to sell Medicare Advantage plans. While there are no AARP branded plans in my area of Michigan, there are AARP branded Medicare Advantage plans elsewhere in the country.
I apologize for the error and my corrected post is below. CWS
Rep. Paul Ryan recently slammed AARP stating that AARP is focused on protecting its business interests in its campaign against Rep. Ryan’s Medicare plan. In response, AARP made an interesting statement arguing that it would actually make more money if it supported Rep. Ryan’s plan. Thus, according to AARP, its opposition to Rep. Ryan’s plan is proof that it is putting its member advocacy above its financial interests.
Let me be clear. I generally support AARP and I do not support Rep. Paul Ryan’s voucher plan for Medicare. Replacing vouchers to buy private insurance will not halt the real budget busting culprit — rising health care costs (and the massive administrative expenses caused by private insurance). Exhibit 1 for demonstrating that private insurance will not lower health care costs is the current Medicare Advantage program that costs 9%+ more than Original Medicare.
But AARP’s response to Rep. Ryan’s criticisms also deserves a critical look. AARP allows its name to be used to market several different types of Medicare plans, but it is probably best known for Medicare supplemental plans (“Medigap” plans) that work with Original Medicare. Under Rep. Ryan’s plan, vouchers would replace Original Medicare and the new system would likely look a lot more like Medicare Advantage.
While AARP says that it could make more money under Rep. Ryan’s plan, I question whether it would be in its overall business interest. Medigap plans are great for AARP because they are largely uncontroversial. Generally, if Medicare pays, then the Medigap plan will pay. There are also no dreaded networks. Because Medigap insurers have to follow detailed federal rules, if something is not covered, the insurer (and AARP) gets to point the blame at the government. Associating your name with a Medigap plan is mostly risk free.
At little risk to its “brand,” AARP allows UnitedHealthcare to use its name to mark up Medigap products. In my experience, AARP/Unitedhealthcare Medigap plans are rarely the cheapest. But because Medigap plans are standardized, it is almost always in a Medicare beneficiary’s interest to choose the cheapest Medigap plan. What initially seems like a modest additional $20/$30 a month more for an AARP marketed plan, adds up to $240 – $360 dollars a year more per beneficiary simply for the AARP name. Despite explaining this, many beneficiaries still get the AARP plan because “they trust AARP.”
AARP has a good deal going with Original Medicare because it is able to earn substantial royalties at little risk to its image. If AARP has to rely more on private insurance plans, they would be getting deeper into the dirty world of provider networks, variations in quality, and unpopular coverage decisions. For individuals struggling to get the health care they need under an AARP branded plan, AARP will be a four-letter word.
Of course I support AARP’s efforts to oppose Rep. Ryan’s plan. But I do think it is important for Medicare beneficiaries to realize that AARP does have a business interest in anything it says about Medicare.
Christopher W. Smith is an elder law attorney that specializes in aging and special needs issues. He can be found at http://www.smithelderlaw.com and on Twitter @ElderPlanning and is licensed to practice law in Michigan and Indiana.