AARP tells Congress it should cut Medicare plans’ pay

 By Susan Jaffe
3/5/2008 © Florida Health News
WASHINGTON – AARP wants Congress to trim overly generous federal payments to private Medicare Advantage plans, even though the seniors' advocacy group allows one of those plans to carry its brand. Orlando physician Byron Thames, an AARP board member, cited a report from a Medicare advisory commission that said Medicare Advantage plans are paid a lot more than it costs to treat beneficiaries in traditional Medicare. AARP and United Health Group have a seven-year licensing agreement that allows United to use the AARP brand on its SecureHorizons Medicare Advantage plan and prescription drug products, according to a United spokesman.

The group – 39 million members strong, including almost 3 million in Florida -- is in the second year of a seven-year contract UnitedHealthcare, which operates two Medicare Advantage health plans, SecureHorizons and Evercare. In return for allowing United to license its brand name for SecureHorizons and the prescription drug plans, AARP receives a flat fee each year. Royalties from  endorsed insurance products contributed nearly 40 percent of AARP’s 2006 revenue of more than $1 billion, the group reports. 

Thames

An AARP official from Orlando told a congressional committee last week that United and other insurers are getting too much money. Byron Thames, a physician and AARP board member, cited a report from a Medicare advisory commission that said Medicare Advantage plans are paid an average of 12 percent more than it costs to treat beneficiaries in traditional Medicare. Payments to some companies are as much as 17 percent higher, he said.

Cutting the payments will not force the plans to reduce the benefits they provide, Thames told the health subcommittee of the U. S. House of Representatives Committee on Ways and Means. The plans could still offer more benefits than traditional Medicare by “eliminating waste and needless care, and cost-effective plan operation.”

If this stance annoys UnitedHealthcare, there is no sign of it.  The company doesn’t question AARP’s policy positions, says Kathy Winans, executive director for United’s SecureHorizons plans in Florida. 

"The bottom line is Medicare Advantage plans are good for beneficiaries,” she said.

AARP has made the pay cut argument before without rupturing its relationship with United. Meanwhile, the AARP brand on United products has helped to make United the largest Medicare contractor in the country and second-largest in Florida, behind only Humana. United has 100,000 Florida Medicare members.

The debate over Medicare Advantage payments comes at a time when the Bush Administration is trying to reduce the Medicare budget by cutting payments to physicians and hospitals. Yet the president has promised to veto any legislation that cuts payments to insurance companies.

Rep. Pete Stark, the California Democrat who chairs the subcommittee, said the insurance companies shouldn’t get special treatment. "We have to figure out how best to reimburse all the professionals who work hard and get the best quality we can,” he said.

Thames also described the extra steps AARP negotiated with the company to make sure that Medicare beneficiaries aren’t tricked into signing up. Federal and state regulators have received many complaints about unscrupulous marketers signing seniors up for private plans they can’t afford or promising more than they deliver.

Only trained agents for United who sign a code of ethics can sell the AARP-endorsed Medicare plans, Thames said. AARP also sends its members to sales meetings as “secret shoppers” to see whether agents are following the proper procedures.

FHN Washington correspondent Susan Jaffe can be reached at susanjaffe@earthlink.net.

 Note:  A correction was published on March 7, 2008 that addressed the contractual arrangements between UnitedHealthcare and AARP. This archive copy has been altered to contain only the correct information.