A Terrible Purchase: AARP's Endorsement
of Republican Medicare Bill Is No Surprise
by Ted Marmor and Jacob C. Hacker
November 29, 2003
First Published in Tom Piaine.com

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Has the 37 million-member AARP become the American Association of Republican Politicians, as it was recently depicted by The New York Times cartoonist Jeff Danziger? Is its CEO, William Novelli—who once penned a book foreword for Newt Gingrich—a closet GOP operative? Has the organization been co-opted by the health insurance industry, on which it relies for a sizable share of its operating funds?

All these criticisms and more have followed the AARP’s stunning—but for those who have followed the organization’s recent evolution, unsurprising—endorsement of the Republican-crafted Medicare bill even before its details had been made public. And all of the complaints carry some weight. The AARP has cozied up to Republicans, which just a few years ago were lambasting the organization they now laud. And it has long had close ties to health insurers: Indeed, the organization’s huge membership base was built on the provision of low-cost supplemental insurance for Medicare beneficiaries.

Yet the true scandal of the AARP’s stance is not that it is making money off insurance or befriending the GOP. It is that it is betraying its members’ interests in the name of a wholly wrong-headed pragmatism. The most striking feature of the AARP’s embrace of the Medicare “reform” bill is just how unpopular the plan is with the very constituency the AARP ostensibly represents. In a recent poll, less than a fifth of older Americans approved of the legislation, and the best bet is that even fewer will approve of it once its grim effects become clear.

In short, the AARP is providing cover for a bill whose underlying realities are starkly at odds with Medicare’s bedrock principles—and entirely belied by the reassuring rhetoric of Republican leaders, who insist the bill is designed to bolster Medicare. This is the Big Lie tactic—saying something repeatedly to make it seem true. But every knowledgeable analyst knows that the drug benefit in the bill is weak and convoluted, and that the rest of the monstrosity has little to do with fixing Medicare and everything to do with crippling it.

The sad truth is that this Medicare reform legislation is what Republican critics of the New Deal and the Great Society have lusted after for decades: a major step down a road that breaks up the risk pool of Medicare beneficiaries and fragments the common interests that have given Medicare such political stability and protection. All this means less, not more, generous coverage down the line and less risk sharing between the healthy and the sick, and between the rich and the poor.

All of which makes the AARP’s stance even more puzzling. Why is the AARP supplying political cover for a bad bill that a majority of their constituents will surely hate? And why is it working so hard to disguise what is actually going on through the massive publicity campaign it has already financed?

To answer that question requires knowing a bit more about the organization. The AARP was originally a buying cooperative for health and life insurance. (It was also originally the American Association of Retired Persons; now, it is simply an acronym—a telling illustration of its new hollowness.) Though founded well before Medicare’s enactment, it had little to do with the program’s birth. Yet it gained immensely from the program: In the years after Medicare’s passage, it signed up (and made) millions by becoming the broker of choice for health insurance—known as Medigap—that supplemented Medicare’s incomplete policy. Today, this means that, unlike many consumer organizations, the AARP has trivial membership dues. It also means that that the AARP has always faced tensions between its commercial sources of funds and the common interests of its diverse membership.

In the recent past, the AARP managed those tensions reasonably well. Yet it also increasingly reflected the limits of Washington’s inside-the-beltway mentality. In l987-88, the organization supported Medicare reforms that would have provided real protection from catastrophic expenses. But it went along with a financing plan that imposed all the cost of the legislation on the elderly themselves; then failed to explain its position; and then was startled when the legislation was revoked within a year.

Still, the Medicare catastrophic debacle reflected bad political judgment, but decent aims. In 2003, we have the apparent reverse: seemingly shrewd political judgment and substantively terrible legislation. And therein lies the true source of the AARP’s stance. Desperate to be politically relevant again in a political climate hostile to many of the goals that its members hold most dear, Novelli and the AARP chose to play the inside Washington game rather than do what most of its members would have regarded as desirable. They presumed that 2003 was the last chance for any substantial drug benefit for Medicare. They took for granted the argument that the Democrats will not have significant margins in Congress in the foreseeable future, let alone enjoy control of the White House and Congress simultaneously. In Washington, you have to “deal” if you want to “play.” And that is precisely what Mr. Novelli and his board decided.

They should not have, for their own interests and for the interests of the nation. Even judged on the ill-conceived terms that Novelli and his board set out, the predictions they made are hardly foolproof. Had this bill failed, the best guess is that Americans would be debating prescription coverage in the summer of 2004—and if nothing happened in 2004, in 2005. The AARP of all organizations should know the power of this issue.

And while the AARP says that it will work to make the bill better once it is implemented, the historical record as well as the convoluted structure of the bill itself suggest this would not be easy. Medicare, after all, was supposed to be a first step toward national health insurance, but once it passed, implementing the legislation and controlling its runaway costs consumed Washington for years. But the current 684-page legislation makes the original Medicare bill look as simple as a children’s book. With private insurers and the government scrambling to implement a bill so unworkably complex, constructive steps forward are unlikely to gain a hearing or enjoy a secure foundation. If there were an appropriate effluent tax on legislative messes, our national budget would be back in the black. As it is, AARP’s members should turn instead to time-tested method of democracy and throw out leaders who have so dismissed their constituencies’ concerns. Novelli and his board thought any deal was good. They were wrong. No deal is far better than the bad one just passed.

Ted Marmor is Professor of Public Policy at the Yale School of Management and the author of The Politics of Medicare (Aldine de Gruyter, 2nd.ed., 2000)

Jacob S. Hacker is Peter Strauss Family Assistant Professor of Political Science at Yale and a fellow of the New America Foundation. His most recent book is The Divided Welfare State (Cambridge University Press, 2002). This article first appeared in Tom Paine.com.



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