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An Open Letter to AARP

One of our readers just forwarded us a letter that she received from the American Association of Retired Persons, also known as AARP.

The letter explains why AARP does not support HR 676, the United States National Health Insurance Act (also known as the Expanded and Improved Medicare for All Act).

The letter makes several faulty claims about HR 676, as well as about the Medicare program and about healthcare reform generally.

We thought we’d break down the statements one-by-one to give readers a second opinion.

Exhibit A from AARP:

“First, H.R. 676 does not address the problem of increasing healthcare costs. Rather, it allows costs to continue to grow. By 2016, projections show total health spending almost doubling to $4.1 trillion and consuming one-fifth of the nation’s gross domestic product. Possible efforts to control costs include: “comparative effectiveness” research, a generic pathway for biologic drugs, and increased attention to prevention and care coordination, none of which are included in H.R. 676.”

Our Response

HR 676 does not do a lot of things.

It does not, for example, preserve a role for private insurance providers.

But to say that HR 676 would do nothing to control costs is a mistake.

Why?

HR 676 aims to provide government-financed insurance coverage for all Americans.  The legislation would accomplish this goal by essentially expanding the existing Medicare program.

  • You can read the text of the full legislation here.

HR 676 would reduce spending simply by eliminating the excessive administrative costs currently generated by private insurers.  Some folks estimate that these costs consume up to 30% of our total healthcare dollars (roughly $350 billion per year)!

  • Medicare spends about 5% on administrative overhead.
  • In comparison, private insurers spend between 12-30% of premiums on overhead, depending on the size of the insurance group.
  • Private insurance administration is one of the fastest growing components of our healthcare system.  Click here to read more about this.

Why do private insurers spend more than a government-run program on overhead? 

As for-profit enterprises, private insurers spend significant dollars on advertising to attract customers.  They also choose to pay their CEOs and upper-level management exorbitant salaries.  And they spend money on medical underwriting, which is the process used to deny patients access to needed tests and procedures.

None of this spending goes towards delivering care!!

The second point to make here is that while HR 676 does not specifically mention comparative-effectiveness research, generic drugs or wellness and prevention efforts, these initiatives could easily be implemented alongside of the single-payer plan.

The important thing to remember is that the single-payer proposal would do nothing more than pay for universal insurance coverage.  It would reduce the cost of our healthcare system by eliminating private insurance administrative costs (and it would do away with private insurers period).  Supporters of this legislation would almost certainly be open to additional delivery-reform measures that have the potential to cut costs further.

Exhibit B from AARP

“Additionally, H. R. 676 essentially eliminates Medicare, Medicaid, and the SCHIP programs that have served the American public well for many years. These programs have very finely tuned financing arrangements and have adapted their coverage to meet the needs of many Americans. Starting over with a new, “single-payer” program will not eliminate the problems Medicare, Medicaid, and SCHIP currently face, such as the spiraling costs of procedures and prescription medications, as well as technological advances that are often not comprehensively tested to be proven safe or effective before marketing.”

Our Response

This statement represents fear-mongering at its best.

The public relations reps at AARP are surely aware of the near-universal support that Medicare enjoys.  Are they trying to scare folks, especially senior citizens, by suggesting that a single-payer plan would dismantle the Medicare program?

As we’ve already explained, a single-payer insurance system is designed to work by expanding the Medicare program to all Americans, NOT by dismantling it, as AARP suggests.

Secondly, it’s true that Medicare (and Social Security) is currently facing serious problems when it comes to long-term financing.

According to data released by the Obama White House this May, the Medicare fund that pays hospital bills will run out of money in 2017, two years sooner than estimated a year ago.  This fund does not pay for other benefits, such as doctors’ visits and prescription drugs.

Check out this excellent chartpack from the Kaiser Family Foundation on the fiscal condition of the Medicare program.

There are a number of reasons why the Medicare fund is faltering.

  • The Economic Recession: Since the recession began in December 2007, the country has lost 5.7 million jobs.  This means that fewer workers are contributing to the Medicare trust fund through payroll taxes.
  • The Aging Baby Boomer Generation: In the coming decade, the number of Medicare beneficiaries will increase from the current 45 million to almost 60 million.
  • The Increasing Cost of Care: The overall increase in the per-unit cost of healthcare, combined with our greater use of new procedures and technologies, is stressing the existing fund.

Adopting a single-payer insurance program won’t address these issues.  But the single-payer legislation certainly wouldn’t stand in the way of efforts to reform the Medicare program.

If anything, legislators would have an additional incentive to fix this important entitlement program since more folks would be insured through it.

So what about fixing Medicare?  The President has commented that health reform generally should take priority, and that Medicare will be fixed as a matter-of-course.

But As We See It, certain steps can be taken right now to reduce the cost of the Medicare program; and legislators would be foolhardy to wait.

  • In particular, Congress should eliminate the overpayments to private insurers participating in Medicare.  This would reap savings of $266 billion per year over the next decade, since Medicare currently pays these providers 14% more than if the government just administered the insurance itself.
  • The Medicare Advantage program “advantages” only the insurance carriers; taxpayers and health consumers are left footing the bill.

We’re glad to hear that AARP supports comprehensive healthcare reform, and that the organization has made an effort to collect signatures in support of a general reform program.

But we question their motives in rejecting HR 676, especially when the evidence and arguments they present do not stand up to basic criticisms.

Bottom Line

AARP made a serious mistake six years ago when it endorsed President George W. Bush’s 2003 prescription drug program, known as the Medicare Prescription Drug, Improvement and Modernization Act.  The President denied Medicare the power to negotiate for bulk prices, which would have helped to lower the cost of prescription drugs.  The plan also offered seniors up to 2,000 choices of insurers, which was far too many for seniors to negotiate on their own.

We hope that AARP will do their homework on HR 676, and develop a better understanding of how the legislation would work before making further comments.

As we see it, there is no reason to take single-payer off the table at this point.

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