One of the ways in which Senate Finance Committee Chairman Max Baucus’s healthcare bill is supposed to pay for itself is by cutting $162 billion in federal subsidies to Medicare Advantage, a popular–and money-saving–alternative to Medicare in which seniors choose private companies to administer their benefits instead of the federal government. One Advantage insurer, Humana Inc of Kentucky sent a letter to its customers earlier this month warning them that they stood to lose attractive features of Advantage insurance, such as coverage of preventive care. The letter asked its recipients to contact their lawmakers.
Baucus promptly complained to the Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees Medicare. Just as promptly, CMS issued a cease-and-desist letter to Humana and other insurers on Sept. 18 on grounds that Humana’s letter was misleading and announced it was opening an investigation into Humana’s administration of its Advantage insurance.
Senate Republicans were understandably outraged at Baucus’s use of an Obama administration agency to muzzle the free speech right of Humana to criticize a Democrat-backed bill. “We cannot allow government officials to target individuals or companies because they do not like what they have to say,” Senate Minority Leader Mitch McConnell declared.
The Humana matter isn’t just about political intimidation, however. As the American Spectator’s Philip Klein, citing a GOP report, writes, CMS’s cease-and-desist order exampted one entity, AARP, the 40-million-member retired-persons organization that sells an Advantage plan to its members. AARP makes the bulk of its insurance-sales income, however, some $672 million a year and a source of 60 percent of AARP revenue (according to the GOP report’s analysis of AARP financial statements), from selling Medigap supplemental insurance policies targeted at recipients of regular Medicare who desire more than the stingy coverage offered by the federal program.
The Senate subsidy cut would provide a strong incentive for insurers to stop offering Advantage plans. As Klein writes:
If these changes go through, millions of seniors who have chosen Medicare Advantage would lose their current coverage, forcing them into government-administered plans with less generous benefits. As a result, many of them would have to purchase policies to supplement traditional Medicare. Enter AARP.
Furthermore, under the House healthcare bill, Advantage insurers would be required to pay out 85 percent of premium revenue in claims to policyholders, while Medigap insurers would have to pay only 65 percent. Another boon to AARP.
So what’s the quo for the Democrats’ quid to AARP? While the organization has not officially endorsed Obamacare, it has all but done so unofficially. As Klein wrote earlier:
During the current debate, AARP has funded ads pushing for health care legislation and hosted town-hall style events throughout the country. It has set up a website called “Health Action Now,” which urges visitors to sign a petition, imploring, “President Obama has promised health reform before the end of the year — but we need to make sure that Congress follows through.” The site even has a feature in which users enter their phone number, wait for their phone to ring, and are automatically connected to their member of Congress, so that they can deliver AARP’s message that “the time for action is now.”
Of course, with one party controlling the White House and both chambers of Congress, “action now” effectively means supporting Democratic legislation.
Ironically, senior citizens are the most vociferous opponents of Obamacare, mostly because Obama wants to pay for it by cutting $622 million out of Medicare over the next 10 years. Americans over age 65 voted overwhelmingly for Obama’s Republican opponent, John McCain, in the 2008 election.