The AARP name has become a marketing juggernaut among baby boomers, with the group’s nearly 38 million members receiving offers for AARP-branded health, life and auto insurance, and discounts on cellphones, travel, car rentals and even pet insurance.
One of its most popular branded products is the high-end AARP MedicareRx Preferred plan, insured by UnitedHealth Group Inc., UNH 0.30%increase; green up pointing triangle and it carries the highest premiums among all national stand-alone Medicare drug plans. For many boomer retirees, some experts say, its price has gone up so much that the retirees should consider moving to a less-expensive policy.
The plan has 1.74 million members and a 9% share of the market for Medicare drug coverage called stand-alone Part D—second only to a much lower premium plan with 3.36 million enrollees, Aetna’s SilverScript Choice.
The AARP plan does cover a higher percentage of both branded and generic drugs than its top four national rivals. And unlike many plans, it doesn’t have a deductible, meaning beneficiaries don’t have to pay an initial $480 in drug costs before coverage kicks in.
But the steady rise in its premiums—now at $99 a month, up 64% since 2016, and 30% higher than the next-highest comparable plan offered by Humana Inc.—was highlighted by the Kaiser Family Foundation in a report last November on trends in Medicare drug plans.
To be sure, AARP’s plan is part of a larger trend, say experts. Some of the biggest Medicare drug plans on the market have seen big price increases in recent years—and seniors should take a close look at their plans, AARP or not, to make sure they aren’t paying unnecessarily high premiums, the experts say. But AARP’s plan stands out because it charges the highest premiums among plans available nationally—while carrying a significant market share and the clout of the AARP brand name.
Such Part D stand-alone drug plans are part of a vast Medicare system providing government-subsidized healthcare for seniors age 65 and older, and younger adults with long-term disabilities, with Part A providing hospital insurance and Part B covering physician visits and other outpatient services.
One large and fast-growing segment is Medicare Advantage, sometimes called Part C, which offers managed-care plans with a wider menu of benefits including drugs, vision and dental, often at a low premium, but with more restrictions on doctors and eligible treatments.
Part D stand-alone drug plans are generally purchased by people in traditional Medicare who want to add the Medicare drug benefit.
Under Part D, launched in 2006, the federal government pays about 75% of beneficiaries’ drug costs through insurance plans whose premiums and coverage vary widely. It represents about 11% of Medicare spending. Stand-alone Part D plans have 23.1 million members, while the Medicare Advantage plans have 25.8 million Part D beneficiaries.
AARP—originally an acronym for the group’s former name, the American Association of Retired Persons—notes that it doesn’t literally sell or manage the insurance plans, but only licenses the use of its name by separate companies that it vets and approves for “high standards of quality and customer service.” More broadly, AARP is an advocacy group for its over-50 members, providing them with programs, events and information.
United, which has a leading 23% share of both Part D plan types, says two of its three AARP-branded drug plans are priced at or below the national average of $40 a month. Rate increases, the company says, are driven mainly by higher drug costs and changes in use patterns—namely, seniors needing more drugs as they age.
Overall, premiums for part D stand-alone plans have remained relatively flat, rising just 2.6% since 2016 and 5.3% in the past decade, according to Kaiser. One reason for this is that new plans are steadily being added at low premiums that attract new members, and then—as United said of its own plans—premiums rise as the members age and need more drugs.
Some critics argue that another dynamic is at work in premium increases. A report in June by the Medicare Payment Advisory Commission, known as MedPAC, noted that some drug-plan sponsors will “raise premiums more for established plans because their enrollees are unlikely to switch plans.” The group, which provides research and advice to Congress, said that Humana raised the monthly premium on one of its plans to $76 from $53 in just four years, then merged it with a lower-price $28 plan into a new plan with a $58 premium. The premium for that plan bounced back to $77 in 2022. The report didn’t mention any AARP-branded plans.
Those in the lower-premium Humana plan were “cross-walked” into the new plan and “were facing a pretty steep premium increase,” Kaiser’s Dr. Cubanski says.
Humana says it communicated with members of the lower-cost plan during the fall 2019 plan election period about the plan changes and their ability to switch to a different plan at Humana or another insurer. The new plan offered a greater number of less-expensive drugs, known as Tier 1, and the plans’ combination followed Medicare rules, Humana says.
At a MedPAC meeting to discuss Medicare drug plans in April, one MedPac commissioner, Stacie Dusetzina, associate professor of health policy at Vanderbilt University’s medical school, criticized plans that repeatedly raised premiums, without citing any by name.
“You know, it’s like a bait-and-switch for the beneficiary,” she says. “You pick a plan based on a low premium, and it just keeps going up.”
Erin Trish, co-director of the Schaeffer Center for Health Policy and Economics at the University of Southern California, is currently researching whether the higher premiums for such “enhanced” drug plans offered by AARP/United and Humana are worth it. She believes they don’t offer “increases in coverage commensurate with the premium increases over the last decade.”
A less-expensive AARP plan launched at $15 a month in 2013 has risen to $40 a month, Kaiser says; a third AARP plan launched in 2017 at $22.45 has risen to $29.
The Inflation Reduction Act enacted in August puts future caps on both Part D premium increases and enrollees’ out-of-pocket costs. But Kaiser reports indicate that as of 2020, the out-of-pocket cap might have applied to less than 5% of enrollees.
Bruce Pyenson, a risk-and-actuarial consultant, says the high premiums for the top-line AARP plan may encourage seniors to switch into lower-premium or zero-premium Medicare Advantage plans that include drug coverage. Medicare Advantage plans are generally more lucrative for the insurers because they encompass far more spending per enrollee.
In comments for this article, United made that very pitch about the usefulness of Medicare Advantage plans for retirees. The plans are “available in most markets for seniors who desire part D coverage without a monthly premium.”
AARP, a nonprofit, receives royalties from United for both plan types. In 2020, it reported royalties from all sources of $1 billion, dwarfing its $300.7 million in member dues.
Although AARP says it doesn’t play any role in selling the insurance plans, its staffers meet twice a year with a dozen top Medicare-plan brokers to hear updates from United on plan changes and get feedback from the brokers on customer experiences. Charles Tinsley, an insurance broker in Cape Girardeau, Mo., says he has seen the feedback have a positive effect on customer service since he joined the agents group in 2019.
Dianne Savastano, a Medicare consultant at Healthassist in Manchester-by-the-Sea, Mass., says that—based on her analysis of specific drugs, dosages and different pharmacies—she recommends the high-price AARP plan for about one-fifth of her clients, generally those who need more-expensive drugs.
Ms. Savastano estimates that a patient in Manhattan buying six commonly prescribed drugs would pay 37% more annually using the top-line AARP plan than the $815 price for the cheapest of 19 eligible plans. Two other AARP plans would also be more expensive, by 24% and 70%. The hypothetical annual savings with the least-expensive plan: $193 to $570.
Such possible savings are why Medicare drug-plan beneficiaries should compare plans as their drug needs change over time, says Heather Leddick, who coordinates the State Health Insurance Assistance Program (SHIP) at the New York State Office for the Aging. The annual window for switching Medicare plans runs from Oct. 15 to Dec. 7.
Price comparisons can be made on Medicare.gov by anyone who knows the drug names and dosages. And a national network of counselors who can assist in this research is available through SHIP at 1-877-839-2675.
Tricia Neuman, head of Medicare research at Kaiser, says she spent some time last year helping her sister’s mother-in-law sort through options on Medigap and Part D drug plans and found different plans that could have saved about $2,000 out of $6,000 in annual spending.
In the end, her relative opted to stay put. Kaiser estimates that only 30% of Medicare beneficiaries shop around annually.
“As people grow older, they tend to think, ‘I’ve got a system and it works, and I’m comfortable,’ ” Ms. Neuman says. “They feel the juice isn’t worth the squeeze.”