We tend to think of AARP as representing the interests of retirees, though they start their recruitment campaigns when you are in your 50s. If anything should have disabused us of their role with regard to retirees it was their support for the very expensive and very flawed Medicare Part D program that saw many people with higher costs and far less coverage than they had been led to believe.
Now, the AARP is the subject of an investigation into other practices harmful to the well being of our older citizens.
Here are a few excerpts from the November 3, 2008 Letter from Senator Chuck Grassley to William D. Novelli, AARP’s Chief Executive Officer. The full letter provides many details only sketched here.
During the course of my inquiry, I learned that Ms. Kelly purchased an AARP Medical Advantage Plan (MAP) policy. It was this policy that M.D. Anderson refused to honor. The MAP policy as I understand it is a supplemental indemnity plan that pays a flat amount to plan holders for out-of-pocket health care costs, rather than a “major medical” health insurance policy that covers significant percentages or portions of health care costs. With supplemental indemnity plans, the plan holder is responsible for the difference between the flat amount and the costs charged by the healthcare provider. So, in the case of Ms. Kelly, she was required by M.D. Anderson to pay most of her medical costs up front and then AARP would pay her directly a maximum of $7,500 per procedure – a far cry from the hundreds of thousands of dollars that her chemotherapy and other treatment would cost.
It is apparent from interviews conducted with Ms. Kelly, and her congressional testimony, that she believed that, while the policy did not provide comprehensive coverage, it would cover much more than it ended up covering. Instead, when she was diagnosed with cancer, she discovered her policy was so inadequate that M.D. Anderson would not even accept assignment for any of the minimal cash payments that the plan would apparently provide. In light of this, I initiated an inquiry into why Ms. Kelly found herself in the circumstances that led her to testify before Congress. Set forth below are a number of my observations regarding the marketing of AARP health insurance products as well as a number of questions.
AARP made many claims made about the high quality of benefits and the value of the program, but according to Senator Grassley’s letter they were unfounded:
In contrast to the examples provided by AARP in this document, the cost of a surgery would commonly cost thousands more. For example, the cost of a typical surgery such as a laproscopic gallbladder removal on an outpatient basis can range from $6,000 to $13,000 and the cost of an inpatient surgical procedure like knee replacement can cost around $32,000. Nowhere in the “Let me tell you how your plan works!” document is there an example of a more realistic cost of a surgery and the amount the benefit would provide.
. . .
The representatives noted further that some of the products were underwritten, while others were not, and that even in the underwritten policies the underwriting was less stringent than what had been the industry standard. Finally, my staff learned from the AARP representatives that the plans had been sold through AARP telephone representatives and that a decision was recently made to utilize insurance brokers in the future.
The letter goes on to recount serious deficiencies of the program and call after call made by congressional staffers to AARP for information about its plan, each one received AARP responses that grossly overstated the benefits its plan provided.
Here is AARP’s response:
“Ensuring the protection and keeping the trust of our members drives all that we do at AARP.”
“Based on Senator Grassley’s letter we have launched a comprehensive review of the issues he raised. I have personally assured Senator Grassley that we are moving quickly to respond to his questions. We are also taking the following steps:
· We are engaging an independent expert to review the marketing and sales of the fixed benefit indemnity products and make recommendations as warranted; and
· AARP and UnitedHealthcare have agreed that the marketing and sales of these fixed benefit indemnity products will be voluntarily suspended as soon as possible, pending the conclusion of our review. Current members of the fixed benefit indemnity plans will continue to be served by the program.
“We have extremely high standards for the provider products that carry the AARP name. No one cares more about helping people stay healthy and secure as they age than AARP. Our organization was founded to serve older Americans and help them get access to the health care they need. That mission continues to drive this organization today through our public interest work, our membership services and our leadership in the marketplace.”