AARP and United Healthcare Group

United we stand, divided we fall.

Watchword of the American Revolution

October 12, 2012 -  I was present in Minneapolis at the creation of United Healthcare Corporation in 1977. I was editor of Minnesota Medicine from 1975 to 1990.  

In that position, I conducted an interview with  Richard Burke, first Chairman of UnitedHealthCare Corporation, which appeared in my 1988 book And Who Shall Care for the Sick? The Corporate Transformation of Medicine in Minnesota under the title of “Magnus Opus.”

I did not realize what a “Magnum Opus” United it would become. 

But even then, it was clear what Burke’s strategies were.

1)      Win market share by offering innovative health plans with low premiums, comprehensive benefits. 

2)      Narrow the list of hospitals with which United would deal by guaranteeing large numbers of patients in exchange for fee discounts. 

3)      Narrow the list of physicians by dealing only with those doctors who were most “cost-efffective” – i.e, ddin't  burden the plan with expensive services for patients.

4)      Cut the cost of physician expenses by redistributing income from high-cost specialists ito less-well paid primary care physicians. 

5)      Implement the strategy quietly in steps to leave HMOs in control of the system with the power to control hospitals and physicians.

This strategy has antagonized hospitals and physicians alike.   But no matter.  Burke’s strategies worked. In 1987, Burke sold $12 million of his United stock, peanuts compared to the $1.1 billion United CEO collected in stock options upon his resignation as United CEO in 2006.

These facts attest to how big an Opus United has become:

·         Revenues, $101. 8 billion

·         Net income, $5.14 billion

·         Total assets $67.7 billion

·         Total equity, $28.3 billion

·         Employees, 99,000

·         Customers, 70 million 

·         Corporate rank, #22 in United States

·         Number #1 employer in Minnesota

The master strokes for United’s marketing  plan came when it signed deals with AARP to sell AARP’s Medicare supplement (Medigap) policies and when it joined with AARPs to back Obamacare. 

By doing so, AARP, a non-profit organization with 38 million members, became, in effect, a cash-cow subsidiary of United. AARP derives some $670 million of its total of $1.1 billion in revenues from royalties to United.  In essence, AARP is an insurance company.

Both AARP and United  gain from implementation of Obamacare policies, which cut $716 billion out of Medicare to pay for the $1.9 trillion cost of  Obamacare and, in the process,  make seniors more dependent on Medicare  supplement. 

Small wonder then, that an AARP audience booed vice-presidential candidate, Paul Ryan, spoke about his plan for Medicare premium support (voucher) policies that would detract from the present sweet deal between AARP and United.

According to Sen. Jim DeMint (R., S.C.),  those very same $716 billion Medicare cuts will give the AARP a windfall of $1 billion in insurance profits, and preserve another $1.8 billion that AARP already generates from its business interests.

Tweet:   AARP and United Healthcare will profit from implementation of Obamacare because it will increase demand for Medicare supplement policies.