seats at the table

Insurance oligopoly at work

It's no surprise that the insurance and pharmaceutical industries have been instrumental in rewriting the US medical insurance program for seniors, Medicare. With deep pockets and big-league campaign contributions, they had seats at the table when the legislation was drafted, a privilege consumers and their advocates have been denied. That's what opponents charge that under the guise of a reform that will give oldsters less costly drugs and care, many now perceive the bill as giving a bonanza for big companies while both endangering the national economy and threatening the future viability of the system.

A few years ago, it would be taken for granted that the AARP would be on the warpath. That organization, formerly the American Association of Retired People, is the national association of Americans over 50. That group would be lobbying against the threat or at least trying to modify it. But, no, the AARP has actually endorsed the (as they admit) flawed program in large newspaper ads and refrained from criticizing the flow of public money that will enrich healthcare oligopolies, to the eventual grief of its own members.

Why? The answer, according to many observers, is the current AARP's cozy relationship with the insurance industry. The AARP sells health insurance to its members, working closely and profitably with the very same groups it might have an adversary position with. And it makes big money doing this, over $100 million a year.

According to an AP wire story from 11/20/03:

[Democratic leaders] are charging “possible conflict of interest' over AARP's relationship with insurers, who would be allowed to compete for Medicare business under the pending legislation, and other companies that market to AARP members health and life insurance policies and mail-order pharmacy service.

Royalties from such arrangements including deals with United HealthCare Insurance Co., Metropolitan Life Insurance Co. and Advance PCS pharmacy benefit manager accounted for more than a third of AARP's $636 million in revenues last year, according AARP's 2002 annual report.

AARP spokespeople claim that their policy decisions are not affected at all by their financial interests. Hmm…

The claim is that AARP is co-opting its own members' reasl interests to preserve their special relationship with the insurance industry's leaders. So not only is the insurance oligopoly allowed to loot the treasury, but it is throwing a few bones to the watchdog (the AARP) to keep it quiet.

Once again, an oligopoly has political and economic power that can't be ignored. It's not yet a matter of fixing prices; rather one of lowering the cost of doing business (with largesse from the government). And the members of the insurance oligopoly, of which AARP is now a member, have common interests with friendly competitors.

An article in the New Republic, “Medicare Reform: The Real Winners” (11/20/03) has it right:

As Louisiana Senator John Breaux, one of two Democrats who participated in the final negotiations, put it, “No one got everything they wanted.”

In fact, there's a long list of people — from insurance companies to prescription drug manufacturers — who got exactly what they wanted, and then some. Magically enough, they also happen to be groups that have spent a ton of money financing political campaigns and then lobbying the members they helped elect.

[Oligopoly Watch]

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