The announcement — made after several months of careful deliberation — did not come as a major surprise to House Democrats who opposed Medicare reform in 2003 and predicted, at the time, that the group would later profit from the drug benefit.
Lisa Davis, AARP’s director of public relations, said that the decision was in no way politically or financially driven. “Our existing supplemental programs may be negatively impacted,” Davis suggested, “but that’s not what we are about. We’re about positive social change.”
Rep. Pete Stark (D-Calif.) said, “AARP’s most recent actions confirm what we predicted when they first threw their weight behind the Medicare drug bill in 2003. They did so to improve their bottom line, not to help the 35 million seniors they claim to represent.”
Stark added that he hoped that AARP would not cave on Social Security: “While AARP signed off on privatizing Medicare, they have so far been outspoken opponents of the Bush Social Security privatization plan. As the debate continues, I hope AARP has learned from their mistakes in Medicare and stays true to their mission to protect a guaranteed Social Security benefit.”
AARP has been a major force in opposing President Bush’s plan to revamp Social Security.
“AARP has a history of providing insurance-related services, so [its decision to sponsor a drug plan] isn’t a surprise,” said Rep. Tom Allen (D-Maine). “I was very disappointed when they endorsed the president’s plan, and I still believe it won’t work in the long run, but it is the law and if they are willing to provide a plan in all 50 states I encourage them to do that.”
While Stark and left-leaning groups derided AARP, other Democrats, such as Rep. Henry Waxman (D-Calif.), downplayed the importance of AARP’s move. Rep. John Dingell (D-Mich.), who is the ranking member of the Energy and Commerce Committee, did not comment for this article.
In 2003, the Democrats, including Stark and Allen, harshly criticized AARP for backing the drug benefit. Eighty-five Democratic members of Congress, led by Rep. Lynn Woolsey (D-Calif.), signed a letter to AARP CEO Bill Novelli resigning their memberships or stating that they would not be joining the group in the future. “AARP’s misguided decision to embrace this legislation and sacrifice the future of Medicare must not go unchallenged,” Woolsey wrote.
Then-Senate Minority Leader Tom Daschle (D-S.D.) voiced concern that the group had a “substantial financial interest.”
Now, back in favor with some Democrats because of its position on Social Security, AARP moved cautiously forward with its involvement providing Medicare drug services.
Davis said the decision to become a prescription-drug sponsor in partnership with UnitedHealth “took a long look.” As the actual insurer, UnitedHealth was required to file a letter of intent with CMS to become a plan sponsor in February. At the time, and in the following months, AARP remained elusive as to whether it would endorse any particular plan, making its decision public only when the CMS deadline to become a sponsor arose.
UnitedHealth, through a business unit called Ovations, has worked with AARP in the past to provide mail-order pharmacy services and Medicare drug-discount cards. Currently, 2 million AARP members use services provided by Ovations and represent the largest clientele of the UnitedHealth subsidiary.
AARP receives royalties for working with UnitedHealth. In 2003, the group’s total income from health-related royalty fees was $184 million, an increase of more than $50 million since 2002. That figure represents income from all AARP health products, not only those offered in conjunction with UnitedHealth.
In 2003, two Harvard Medical School professors, David Himelstein and Steffie Woolhandler, argued that AARP would reap a significant amount of insurance revenue under the Medicare legislation. “If AARP’s partners were to capture even 10 percent of the new Medicare prescription drug coverage market, their premiums would amount to $40 billion, and the AARP’s profits would be $1.56 billion,” they wrote.
“This appears to be a significant conflict of interest, as AARP gets a fee for every patient that enrolls in these policies,” said Frank Clement, director of Public Citizen’s Congress Watch. “I would hope that that does not prevent AARP from supporting significant changes to the Medicare drug law that would limit the role of insurance companies and would reduce drug prices in order to make the benefit more affordable.”
“The Republicans rammed through a Medicare drug bill written by and for the drug industry, not Medicare beneficiaries,” said Rep. Janice Schakowsky (D-Ill.). “The only way to remedy this is to create a real, affordable Medicare drug benefit in Medicare and to require Medicare to negotiate for discounts on prescription drugs.”
Bob Cusack contributed to this article.