George Graham

OMG! AARP is in Favor of Cutting Subsidies to Medicare Advantage

You’ve heard the President’s promise: No Medicare benefits will be sacrificed to make health care reform possible. And technically, I suppose, he is not really lying. But it certainly looks as if he is being … well … slippery. The truth is that a substantial part of the funds identified to finance the plans circulating in Congress would come from cuts to Medicare Advantage, a supplemental program introduced along with the Part D prescription drug plan back in 2003.medicare

You’ve heard AARP promise to protect Medicare during the reform process. You’ve read their releases proclaiming that benefits would actually be increased for us old folks. I suppose there’s some truth to that, too. But AARP is willing to sacrifice Medicare Advantage benefits. The organization reasons that because only a quarter of the people on Medicare have enrolled in Advantage plans, it’s OK to throw us under the bus. Here’s an excerpt from an AARP newsletter I received today. Ironically, the item’s headline is “Safeguarding Medicare.”

Cutting government subsidies to private Medicare Advantage plans, in which just under 25 percent of beneficiaries (10.4 million) are enrolled, is …. controversial. Medicare currently pays an average of 14 percent more for people in these plans -about $1,100 a year per person more – than for those enrolled in the traditional Medicare program. And the latter actually contribute to the subsidies through their Part B premiums.

The subsidies allow the plans to offer extra benefits and/or lower costs, which attract beneficiaries to enroll. But those “enhanced benefits are funded by the taxpayers and all beneficiaries,” according to the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare finances. “This added cost contributes to the worsening long-range financial sustainability of the Medicare program,” the MedPAC said in a 2009 report. Also, it added, a portion of the subsidy is “used for plan administration and profits and not direct health care services for beneficiaries.”

Under the House bill, these higher payments would end by 2013, saving an estimated $172 billion over 10 years. If that happens, Medicare Advantage plans could cut the extra benefits they now provide to enrollees, raise their costs or withdraw from Medicare. Or the plans could become more efficient and/or accept less profit. The bill also provides bonus money to them for quality results.

AARP supports cutting the plans’ higher payments, even though AARP Services Inc. endorses a Medicare Advantage plan. “Gradually eliminating these excess payments will permit good plans to continue and put pressure on others to offer better value to their enrollees,” says John Rother, AARP’s executive vice president of policy. “That’s what fair competition is supposed to do.”

I think it’s naive to hope that the companies offering Advantage plans would react to the subsidy reductions by “becoming more efficient and/or accepting less profit.” I bet they will not only pass the cuts on to subscribers but pass them on with a vengeance. You know how it works:  the government adds a penny to the gas tax and customers are charged an extra dime at the pump.

I understand that in order to fix the system, somebody is going to have to foot the bill for the repairs. But I thought I heard candidate Barack Obama say he would finance health care reform by ending the Bush tax cuts to the wealthiest Americans. I figured only couples making $250,000 a year or more would end up paying for reform. I guess I should know by now not to put too much store in campaign promises.

For example, I figured American troops would be out of Iraq by now if we elected Obama. And I figured we could save a lot of money in defense spending because I didn’t see him as a stooge of the military-industrial complex. I didn’t see him as a pawn of Wall Street, either. I am dumbfounded by the administration’s eagerness to hand out trillions to the banking community, while targeting the $1,100 a year, or whatever, I save through Medicare Advantage.

And I sure didn’t think the Democrats would be so disloyal to their supporters – as in the stampede to abandon ACORN because a few rotten apples turned up in that organization, or in the way they treated Van Jones and so many others.

If anyone reading this blog knows something I don’t, please persuade me that I am wrong. Tell me I haven’t wasted my money subscribing to AARP all these years. And tell me I was right to vote for Obama and the Democrats. Tell me that they are champions of the underdog and not just another bunch of slick con artists. I need a lot of reassurance, folks. I am beginning to feel I’ve been had.

About the author


I am a Jamaican-born writer who has lived and worked in Canada and the United States. I live in Lakeland, Florida with my wife, Sandra, our three cats and two dogs. I like to play golf and enjoy our garden, even though it's a lot of work. Since retiring from newspaper reporting I've written a few books. I also write a monthly column for