News Flash! AARP Supports Health Care Reform

Now isn’t that curious? Their 40 million person membership is made up of folks over age 50 - a large percentage of whom are eligible for Medicare. I understand the need for Medicare reform, but AARP’s support for health care reform goes beyond supporting Medicare. I suspect they are supporting health care reform that will result in a cost shift away from their members and to the younger and healthier population.

Let’s focus on one aspect of their support of the Legislation which passed in the House last week – community rating. The Bill would not permit rating based upon medical history by health insurance companies. Older people have more medical history (generally speaking). Medical history chronicles usage and helps insurance companies evaluate risk. A good health risk should cost less because there is less history. A high risk should cost more for the same reason.

Age rating provides an adjustment for pooling, but medical rating adds a metric to encourage good behavior by us as individuals. Studies suggest that as much as 70% of health costs are lifestyle related. Shouldn’t we retain features that encourage good behavior? Needing less medical service is good because less usage (out of need) means less cost.

If concern is over the unhealthy paying too much, most states already have reformed pricing practices that prohibit insurance companies from charging too much. In this way and other ways, health insurance companies already do pool risk. This means they don’t charge as much as they might need to any given risk. To offset losses from the high risk group, they charge more than required on a low risk individual or group. This is pooling or spreading of risk.

Is AARP’s goal to have its members pay less? Probably so. But should the outcome result in those under age 50 paying more? Why not support legislation that reforms and improves Medicare?

Mark Alder, President, Herbruck Alder - malder@herbruckalder.com - www.herbruckalder.com