Medicare Bill Rewards Insurers and AARP

Employee Advocate – – January 15, 2004

“AARP stands to make billions” - Medicare Bill Study by Harvard Medical School and Public Citizen


Harvard Medical School and Public Citizen researched the new Medicare Drug Bill and found what many people had already suspected. Bureaucratic cost will increase; Insurers and AARP will reap rewards. The study will be published in Friday's International Journal of Health Services.

Health care bureaucracy was found to have cost the US $399.4 billion, last year.

Study author, Dr. David Himmelstein, said “The recent Medicare bill means a huge increase in administrative waste and a big payoff for the AARP. At present, Medicare's overhead is less than 4 percent. But all of the new Medicare money, $400 billion - will flow through private insurance plans whose overhead averages 12 percent. So insurance companies will gain $36 billion from this bill. And the AARP stands to make billions from the 4 percent cut it receives from the policies sold to its members.”

Dr. Steffie Woolhandler, a study author, said “Hundreds of billions are squandered each year on health care bureaucracy, more than enough to cover all of the uninsured, pay for full drug coverage for seniors and upgrade coverage for the tens of millions who are underinsured. U.S. consumers spend almost twice as much per capita on health care as Canadians who have universal coverage and live two years longer. The administrative savings of national health insurance make universal coverage affordable.”