War on Seniors
Senior citizens are by far the biggest losers in health reform. Consider that:
- More than half the cost of health reform will be paid for by $523 billion of cuts in Medicare spending over the next ten years.
- Although there are some new benefits for seniors (mainly new drug coverage), the costs exceed the benefits by a factor of more than ten to one.
- As many as 8.5 million of the 11 million seniors in Medicare Advantage (MA) plans may lose their coverage, according to Medicare’s Chief Actuary.
- Those lucky enough to retain their MA coverage will face steep cuts in benefits or hefty increases in premiums or both.
- In addition to these direct costs there are indirect costs, including new taxes on drugs and medical devices. Although these taxes don’t single out senior citizens, who do you think are the heaviest users of wheelchairs, crutches, artificial joints, pacemakers, etc.?
- To make matters worse, severe rationing problems lie ahead, as 32 million newly insured people try to double their consumption of medical care under a reform bill that produces not one new doctor or nurse or other paramedical personnel. Because many of the newly insured will be in private plans paying market rates, they will be more attractive to doctors than Medicare enrollees paying about 20% to 30% less.
So how did this happen? Aren’t senior citizens supposed to be the most powerful voting bloc? Aren’t they supposed to be represented by the all-powerful AARP?
Unfortunately for seniors (and indeed all Medicare enrollees), AARP sold out its own members. Just as the AMA sold out the doctors and the labor unions sold out their own members, AARP signed on to legislation that helps AARP but hurts the millions of people who AARP claims to represent.
The table below lists the expected costs for Medicare enrollees over the next several years. As the table shows, cuts in Medicare spending will average $22 per enrollee beginning next year, and rising to $290 in 2014. Medicare Advantage members will face more severe cuts: $195 per enrollee beginning next year, rising to $1,267 in 2014.
In defense of its plans, the Obama Administration claims that it will target these cuts to eliminate waste — to encourage low-cost, high-quality care and discourage high-cost, low-quality practices. Yet there is no reason to be hopeful. The cuts in Medicare Advantage subsidies, for example, appear to be based on special interest politics alone, not on any lofty goals.
We have been criticized in some quarters for apparent hypocrisy. NCPA studies have long established that Medicare is on an unsustainable course and that reform is urgently needed. How, then, can we criticize attempts to pare the program back?
My position is that (1) pay-as-you-go Medicare must be transformed into a funded system in which each generation pays its own way; (2) if there are savings to be found in Medicare, we are going to need every penny to help pay for the reform; (3) it is a huge mistake to take money from any source to create a new health entitlement for young people on top of the $107 trillion in unfunded liabilities the federal government already has; and (4) it is doubly bad if we believe that future Congresses will not be bound by the planned cuts — just as the current Congress is apparently not bound by the commitment of earlier Congresses to cut Medicare payments to physicians.
What about Medicare Advantage (MA) plans? Isn’t the government paying these plans about 13% more than what enrollees would cost if they were in traditional Medicare? Yes, but:
- Part of the overpayment is due to Congress’s desire to make MA plans available in rural areas, where they are less economical.
- Elsewhere, overpayments are creating benefits for enrollees of up to $825 per person per year, such as extra coverage for drugs.
- Even as Congress cuts MA payments, it is expanding drug coverage for Medicare enrollees — indicating that the pressure to provide the benefits will remain after the MA plans are gone.
- MA enrollees tend to be moderate-income seniors who do not have Medigap insurance; thus, MA coverage is solving a social problem that will have to be solved in some other way if MA plans do not solve it.
- And if millions of seniors go from MA plans back into traditional Medicare, paying discounted rates to providers, all seniors may find access to care more difficult.
As for AARP, we have previously noted that AARP markets its own Medigap insurance. With MA plans out of the way, that market will greatly expand. Moreover, AARP is getting special treatment under health reform. Specifically, AARP’s Medigap insurance is:
- Exempt from the prohibition on pre-existing condition exclusions.
- Exempt from a $500,000 cap on executive compensation for insurance industry executives.
- Exempt from the tax on insurance companies.
- Exempt from a requirement imposed on MA plans to spend at least 85 percent of their premium dollars on medical claims.
Meanwhile, the MA plans that are headed for extinction are ostensibly doing everything President Obama says he wants to accomplish with health reform:
- They provide subsidized coverage to low- and moderate-income people who could otherwise not afford it.
- They control costs better than conventional insurance by eliminating unnecessary care.
- They provide higher quality care.
- They have no pre-existing condition limitations and some plans actually specialize in attracting and caring for patients with multiple illnesses.
- They provide an annual choice of plans.
- They even compete against a public plan.
Good post. It’s amazing that AARP can get away with this. Why doesn’t somebody sue them?
I now understand why so many gray-haired folks were at the town hall meetings protesting. But I suspect that even the protestors did not realize how bad it was going to be.
I cannot understand why the AARP is a backer of taxpayer-subsidized universal coverage for non-seniors. Seniors are the only demographic entitled to a substantial health benefit that is (for the most part) not means-tested. Expanding the gravy train to more than half the population (everyone below the median income and seniors) makes the current system even more unsustainable.
I have never understood why seniors were made to pay for the bulk of health reform. Even more surprising, as you have pointed out, John, Medicare Advantage members probably overwhelmingly tend to vote Democratic. Let’s see if they continue to vote for the people who screwed them in November.
I believe AARP has a major campaign under way to convice the seniors that they haven’t been screwed. All paid for, I presume, with AARP dues money.
I turned in my AARP card two years ago. AARP claims to represent seniors, but they really represent their own interests first and foremost.
John did not include a song this time. Maybe “Memories” would have worked. AARP positions on these issues are not new; the heat of the reform process just made AARP’s positions more well known. What some may forget is that AARP was the leader in the push for Medicare Catastrophic Coverage (and Rx drug coverage) 20 years ago, and rejoiced in the passage of that bill. The next year, when higher income seniors discovered what the new law was going to cost them, they screamed, and AARP reversed course. It led the way to repeal the act, and succeeded again! Let’s see if history repeats.
If I was a cynical person, I’d be betting that the Obama regime passed health care “reform” specifically to kill off seniors by denying them care so it could get out of paying for Medicare, Social Security and other entitlements for the elderly.
The president of AARP was on John Stossel a few weeks ago talking about how today’s youth will need Medicare more than ever, so they should enjoy paying so much into the system. It made my skin crawl.
Obama has said to the black caucus that he can’t give special treatment for blacks, but that general policies can work to disproportionately help blacks since a high proportion of them are poor and young. This policy is in agreement with that approach.
John, Medicare Advantage is an HMO boondoggle and about the only thing the Dems are doing right. It is a massive subsidy program for the corporations. When the HMOs ran Medicare Part C, they were a catastrophic failure because of inherent of the bureaucratic inepititude. Do you know what profits are sucked out of the revenue before any patient is treated? That is the question not noted. Regualr Medicare may not be affordable by some. in such case why not give the money directly to patients based on income and avoid the expensive corporation. American managed care organizations (MCOs)are not private free market just because they claim to bo so and sell stock on Wall Street. They differ only in size and power from nationalized MCOs abroad. National socialiized medicine is little different than corporate–both were create to ration “free” care. Even if MCOs are driven by benolovece only, they all have the fatal flaw that regulating a microeconomic sector with price information is impossbile. only subsidies can keep command and control MCOs functioning. Bob
Isn’t it obvious from this post and the discussion of it that Medicare should be abolished altogether? All the proposed fixes are as convoluted as the program itself. The government has no special advantage over private companies in providing insurance, has no incentive to do anything right, and has absolutely no constitutional authority to be involved in the health insurance market. Medicare is inefficient, unnecessary, and illegal. Why argue for anything other than its outright elimination?
One of the points that AARP has made that resonates with seniors is that the new plan extends the life of medicare from 2017 to 2027. Can someone explain how this is done. Are they taking in the new medicare tax on incomes over $250k and the cuts in the advantage plans and putting IOU’s in the trust funds to build them up. If so, what happens when those trust funds need the money in 2017?
Patti:
When the trust funds’ expenses exceed their income (not including interest), they must purchase Treasury securities.
This has already occurred in the Medicare HI trust fund, as of 2008.
People are way too focused, in my opinion, on when the trust funds outgo exceed their income, and when the trust funds actually are depleted, except for the current year’s contributions.
What is even more important, I believe, is how the non Social Security part of the budget is viewed, in particular, public debt.
Randall Mariger, staff economist at the Treasury stated in a paper in 2008 on page 12 “The optimal non-Social Security policy can be implemented simply by ignoring Social Security surpluses and treating the trust fund balance as a liability to the non Social Security budget no different than debt held by the public.”
On page 16 “Trust fund accumulations do increase the government’s capacity to pay benefits if they pay down publicly held debt dollar for dollar.”
However, this has bot been done,
Instead, the surpluses have been used to pay for other government expenses.
And, on page 20, “Increasing payroll tax revenues postponing the negative cash flow date seems to improve long-term federal finances. However, the additional revenues only make it possible for the non Social Security policy to be irresponsible for lomger.”
Don Levit
What John Seater said.
John: Good piece.
Question. How does AARP benefit and yet we members suffer. Isn’t AARP an NFP organization whose only purpose is to support the welfare of their constituency. And with all the screaming about how bad medicare and medicaid are, you all are up in arms about cutting services. Government intervention is bad, but medicare and medicaid are OK and need help. Hmmmmm
You are so right (u always are). I’ve been on the stump (as recently as Harrisburg, Pa. state Capitol Monday railing against the AARP: Association Against Retired Persons).
Keep up your good work. The more ammo the better to expose these greedy so and sos who do it using tax dollars as u well know.
Don
Thanks for the reply. I agree with you on trust fund accounting. Any surplus should have been used to pay down existing debt, instead it was used to grow government.
I’m still trying to figure out how AARP can state medicare solvency is extended by 10 years with this bill. Can someone explain it?
Congress has further responsibility for our health care crisis. By managing Medicare Congress has underpaid primary care while emphasizing technological medicine. Thus coordinated care, preventative care and the rational use of resources have been neglected. Congress via Medicare has not emphasized intensive physician per review with the result being a great deal of irrational medicine (see The Dartmouth Atlas of Health Care). Possible solutions to this situation are presented on my blog, http://drkennethfisher.blogspot.com. Thank you, Kenneth A. Fisher, M.D.
Could someone plese tell me when the “cut in prescriptions” is supposed to start? All of my prescriptions went up this month/
Obama ET AL do not need to say anything denying “death panels.” Obama, Reid & Pelosi [the unholy trinity from hell] by their actions have shown contempt for the elders in our society by what they have put in the unconstitutional health care bill.
And this comment is aimed at those of you who are younger and think this is just great. If you truly LOVE your parents and grandparents are you going to sit by and enjoy the suffering they are going to experience under this abominable legislation? Id your answer is: “i don’t have a problem with it”, then consider this: before YOU know it, YOU will be standing where your grandparents and parents now stand and will be SCREWED just like them! The question is: are you going to raise your voice and DO SOMETHING for not only them, but YOURSELF as you age and get to that point in life?
All too often I hear the liberal media quoting things young people have said such as: “move over, grandma, I want MY healthcare now.” That speaks volumes about several things–one, how you were raised and two, your value system. Like a spoiled brat who will not share their toys, we have a youth-oriented culture that the Obama propaganda machine is exploiting and the young ones who are being exploited don’t even know it because they have been dumbed-down by the educational system in this country NOT to thunk for THEMSELVES.
I mus add that I have heard some encouraging reports that the youth in America is slowly waking up to the fact that Obama has/is using smoke and mirrors to advance his socialist agenda.
Let’s see, what is the line I have heard attributed to communist dictators: ” you must first win their minds” and you will win their souls.
Wake up youth of America; your parents and grandparents and great-grandparents died so YOU could have the liberty to make your own way in life instead of being a SLAVE to the government welfare system. Do the right thing and stand up and claim your right to succeed and being prosperous.
To Robert Kramer:
The economic literature suggests that not-for-profit groups like AARP tend to act just like for profit groups with two caveats: 1) since profits are not distributed to shareholders they go to the people working there in the form of less job stress, better hours, nicer offices, more vacation, higher salaries, and the like. 2) The organization is under less pressure to be an efficient producer since it escapes taxes, unlike its for-profit brethern, and its managers are not rewarded for reducing costs or maximizing revenues.
Until I became a senior, I rarely needed to use my health insurance nor did I see many doctors. Instead, I worked several jobs to support and educate my children after being widowed at a young age. Now that I am older and able to enjoy all the things I sacrificed in my younger years, I am fighting pancreatic cancer. I have reason to live but government has stepped in citing that the dollar is worth more than life not knowing or caring that many seniors still contribute such things as child care for grandchildren, volunteer, offer family support etc. I have no faith in my government but I still nave dependents I care for, as well, support my children. Because my will to live is strong, I have done well but without hope and still being needed, life would not be worth living. This has become a world I do notlike nor recognize thanks to the corruption and radical control of government.
LeeAllan (post above)- I just want to start off by sending you good wishes, and hope that you’ll continue to enjoy your family for a good long time!
You reminded me of the occasion when a woman questioned Obama about her own grandmother, who would be deemed “too old” for heart surgery, despite being full of life. The president replied that in such cases, the country had to start thinking of “painkillers instead of pacemakers.” In other words, give Grandma what’s cheap…not what she needs to survive.
Not only did AARP sell out its members, it sold out all veterans and retired military (those dependent on Medicare Part B and TFL). What an abysmal Commander- in-Chief. He knows not what he does, then tries to make it sound like he does with glib. He and his henchmen and women do this with malice aforethought. Words matter….actions matter even more. The President has failed at both. I have already written to PELOSI and REED suggesting that future generations of their families may want to change their surname
To John Goodman and commenters: I suggest that many of you are operating on the assumption that the Obama Administration has the intention of improving the health care delivery and health care financing industries in this nation.
John identifies the enormous disconnect between stated federal policies and demographic and financial realities. He points out (correctly) that companies such as AARP have maneuvered to their advantage. Most of the comments below John’s article focus on details about AARP, Medicare, Medicare Advantage, and on and on about details.
The details don’t matter. The fact is, the purpose of all the structural “reforms” and legal and administrative rules is NOT to improve health care, and it is not to reduce costs, and it is not to improve efficiency. All of political posturing and all of the legislation is a complete smoke screen.
The cuts to Medicare and to Medicare Advantage plans at a time when seniors are starting to retire in droves and existing Medicare Advantage policyholders will be forced to give up their policies and return exclusively to Medicare make sense IF you intend to collapse Medicare entirely.
In the meantime, the younger people who have company or individual private health insurance plans will have their plans moved into the infamous “insurance exchanges,” where those plans will have loaded onto them both federal and state mandates. Those mandates will include coverage of those who cannot afford coverage as well as those who choose not to buy coverage until they are sick. Costs will necessarily skyrocket. And the political pressure will become overwhelming to disallow premium increases. The private companies will attempt to ration health care, but eventually the political pressure to ban such rationing will be overwhelming.
At this point, most health insurance companies and service providers will fold. Only a few companies that sell to the upper income strata will survive. Thus we will have Medicare in collapse and private insurers and providers in collapse, and the federal government will step in with Obama’s dream of single-payer universal government coverage.
All this is by design. So forget about arguing about the merits of this coverage or that policy or who has sold out whom (such as AARP). The real objective of all this is the conquest of your individual liberty.
Re: why is AARP doing this??
AARP has one non-profit entity and several affiliated for profit ones. The for profit entities generate income from licensing the AARP name and logo:: car insurance, LTC, Medicare plans etc.
Regarding the Medicare plans — AARP does not manage the risk. That is done, under the current contract by United Healthcare and its subsidiary Pacificare, which owns SecureHorizons. AARP derives revenue from UHC by selling its brand and pocketing a healthy licensing fee. (pun intended)
John is correct in pointing out that at least one motivation of AARP in supporting the reform legislation is that it will help boost the sale of the branded Medigap products, which presumably generates more licensing fees. Furthermore, with the massive future enrollment in Medicare with the boomers, and the predictable decline in Medicare reimbursements, it is logical to conclude that Medicare Advantage will have trouble keeping up, and Medigap will be chosen by more people — ergo, more licensing revenue.
Prior to June 1, 2010, AARP has always heralded their philosophical support of community rating — meaning that a 65 and 85 year old would pay the same rate, all other factors being equal. However, as of June 1, 2010 when the so-called Modernized Medigap plans come into effect, this rating philosophy is largely being abandoned. The most likely reason for this is the significant rate discrepancy that has begun to cost them market share. Is there a tie-in with their support of new government programs? Hmmmm…..
AARP also licenses individual health policies for sale to people that belong to the organization. These plans are also underwritten by a major insurance carrier (ie. Aetna) So here to, reform and mandated coverages, help them.
Bottom line:: AARPs licensing fees generate something like $650 million per year in revenue — most of the AARP budget. They couldn’t operate the organization they have on dues payments — those wouldn’t even pay what they spend on lobbying.
AARP makes scads of money vertically marketing products to their membership, through their for profit arms’ licensing fees.
Another spoke in this wheel — they were bought off for their support of the reform legislation. Note John’s points at the end of his blog.
For them, it fits together pretty neatly.
Oh, and Bob G. — ditch the argument about single payor being more efficient blah, blah, blah. You have no clue. This whole convoluted mess, as Richard spells out, is to capture more political control. Helping people and controlling costs is not even in the equation. If it were, this could have been handled in about 12 pages. And now these wonderful pols are going to try and use the same parliamentarian methods to botch us up totally with financial regulation and cap and trade. I think even the Federalist would have blanched.
NMI: Thanks for your comment. This is helpful background information.
Here in Minnesota, the Minnesota Nurses Association,vehemently endorsed the Health Care Bill. More importantly,if you spoke out against it,well lets just say, you “felt” the Peer Pressure. Their are no other “important” opinions worth discussing here in the “Liberal Country of Minnesota”.
AARP is first and formost an insurance marketing organization. Anyone who thinks AARP is lobbying for seniors is not paying attention. Seniors had better wake up and form and effective lobbying effort.
Obama ET AL do not need to say anything denying “death panels.” Obama, Reid & Pelosi [the unholy trinity from hell] by their actions have shown contempt for the elders in our society by what they have put in the unconstitutional health care bill.
And this comment is aimed at those of you who are younger and think this is just great. If you truly LOVE your parents and grandparents are you going to sit by and enjoy the suffering they are going to experience under this abominable legislation? Id your answer is: “i don’t have a problem with it”, then consider this: before YOU know it, YOU will be standing where your grandparents and parents now stand and will be SCREWED just like them! The question is: are you going to raise your voice and DO SOMETHING for not only them, but YOURSELF as you age and get to that point in life?
All too often I hear the liberal media quoting things young people have said such as: “move over, grandma, I want MY healthcare now.” That speaks volumes about several things–one, how you were raised and two, your value system. Like a spoiled brat who will not share their toys, we have a youth-oriented culture that the Obama propaganda machine is exploiting and the young ones who are being exploited don’t even know it because they have been dumbed-down by the educational system in this country NOT to thunk for THEMSELVES.
I mus add that I have heard some encouraging reports that the youth in America is slowly waking up to the fact that Obama has/is using smoke and mirrors to advance his socialist agenda.
Let’s see, what is the line I have heard attributed to communist dictators: ” you must first win their minds” and you will win their souls.
Wake up youth of America; your parents and grandparents and great-grandparents died so YOU could have the liberty to make your own way in life instead of being a SLAVE to the government welfare system. Do the right thing and stand up and claim your right to succeed and being prosperous.