Krugman: AARP Bought Off

NYTIMES -- This is a good bill that will help every Medicare beneficiary," wrote Tom Scully, the Medicare administrator, in a letter to The New York Times defending the prescription drug bill. That's flatly untrue. (Are you surprised?) As the Center on Budget and Policy Priorities points out, the bill will force millions of beneficiaries to pay more for drugs, thanks to a provision that cuts off supplemental aid from Medicaid. Poorer recipients may find previously affordable drugs moving out of reach.

That's only one of a number of anti-retiree measures tucked away in the bill. It contains several Trojan horse provisions that are clearly intended to undermine Medicare over time — it will allow private insurers to cherry-pick healthy clients in selected cities, and it will heavily subsidize private plans competing with traditional Medicare. Meanwhile, the bill prohibits Medicare from using its bargaining power to cut drug prices; drug company stocks have soared since the bill's details became public.

But as Jonathan Cohn points out in The New Republic, drug and insurance companies got exactly what they wanted: no efforts to limit prices, generous subsidies and lots of additional business. For example, insurance companies that offer an alternative to Medicare will not only be able to pick and choose their customers, but will also get 30 percent more per client than the government spends on the average Medicare recipient.

So do AARP executives support this bill because they hope to share in the bounty? Maybe, but it probably runs deeper than that. Once an advocacy group becomes as much a business as a service organization, its executives are likely to start identifying more with industry interests than with the groups they are supposed to serve.

Medicare "reform" appears likely to be another triumph for the coalition of the bought-off — a coalition that, sadly, includes AARP.

Center For American Progress -- According to a new report by Public Citizen, the group – which purports to be a seniors advocacy group – in fact has "become a business deriving a large portion – about 60% - of its annual revenue from selling insurance products, such as Medigap supplemental drug insurance policies; selling mail-order prescription drugs; and offering prescription drug discount cards." Membership dues, in contrast, comprise "only 29% of AARP's total revenues." Right now, the group pulls in at least $161.6 million a year in insurance-related income; the "AARP would stand to gain many millions of dollars in new income under the Republican Medicare bill." For example, if the AARP, "with 35 [million] members, captured just 5 percent of the new $400 billion Medicare prescription drug market over the next 10 years, it would collect an additional $20 billion in insurance premiums."

The LA Times writes that there's a big expectations gap, as "analysts say many seniors will find that the plan fails the what's-in-it-for-me test." President Bush led many seniors to believe they were getting health care benefits similar to those held by their elected representatives: "Every member of Congress gets to choose a health-care plan that makes the most sense for them...If choice is good for members of the Congress, then choice is good for America's seniors." However, what seniors will actually get from the bill is nothing like that: A) the prescription drug benefit doesn't kick in until 2006; B) the "donut" effect kicks in, leaving seniors responsible for all expenses after $2,250 in drug costs until expenses reached $5,100, leading more seniors paying more for drugs in 2007 than they did in 2003; C) even with the substantial $71 billion subsidy/bribe to employers to keep seniors in retirement coverage plans, "roughly 2 million seniors would likely lose it anyway" and D) there are no provisions containing the underlying cost of prescription drugs. (Click HERE to see American Progress's analysis of the Medicare bill.)

Leaders in Congress so far are ignoring the wishes of average Americans by refusing to back down to the powerful drug lobbyists and allow reimportation of inexpensive drugs from Canada . While versions of the reimportation bill have passed both the House and Senate, the conference report leaves it out. That has many conservative lawmakers threatening to withhold their votes and some state lawmakers threatening to buck the federal government.

USAToday -- although the bill was originally "intended to cost no more than $400 billion over 10 years...tax breaks for businesses and individuals will drive the figure higher." And according to Congressional Budget Office director Douglas Holtz-Eakin, " it would cost between $1.7 trillion and $2 trillion in the second decade." The expense will be disproportionately paid by poorer Americans.

This week eighty-five lawmakers, led by Rep. Lynn Woolsey, renounced "their current or future membership in AARP," saying "There is no reason that an organization that purports to protect the needs of the elderly should accept a plan that will undermine Medicare."

Today's Progress Report was the source of most of this on Medicare but also contain information on the $140 Billion Dollar Energy Bill cost, who's winning the war on terror and much more.