AARP's conflict of interest

We first mentioned this a couple of months ago, when the AARP lost 60,000 members in a month for backing ObamaCare and its cuts to Medicare and Medicare Advantage.  Dan Eggen at the Washington Post reports in more detail on the political connections AARP gets for its acquiescence on Medicare cuts and the potential financial advantages it sees in political support of the administration’s efforts to overhaul the health-care industry:

The group’s dual role as an insurance reformer and a broker has come under increasing scrutiny in recent weeks from congressional Republicans, who accuse it of having a conflict of interest in taking sides in the fierce debate over health insurance. Three House Republicans sent a letter to AARP on Monday complaining that the group was putting its “political self-interests” ahead of seniors.

GOP lawmakers point to AARP’s thriving business in marketing branded Medigap policies, which provide supplemental coverage for standard Medicare plans available to the elderly. Democratic proposals to slash reimbursements for another program, called Medicare Advantage, are widely expected to drive up demand for private Medigap policies like the ones offered by AARP, according to health-care experts, legislative aides and documents.

Republicans also question the high salaries and other perks given to some top AARP executives, who would not be subject to limits on insurance executives’ pay included in the Senate Finance Committee’s health reform package. Former AARP chief executive William Novelli received more than $1 million in compensation last year.

“We are witnessing a disturbing trend of handouts to special interests like AARP,” said House Republican spokesman Matt Lloyd, referring to Democratic negotiations over health reform. “In return, AARP is lobbying for a government-run health-care bill that will pad their own executives’ pockets at the expense of its own members and other vulnerable seniors.”

How important is the sale of insurance to AARP?  The group was formed 50 years ago for the express purpose of providing insurance to retirees, in the days before Medicare.  Today, over half of its $1.14 billion annual revenue comes from insurance premiums, royalties on credit cards, and so on.  They don’t carry the paper themselves; instead, they sell their name to a non-profit in exchange for a cut of the proceeds, which are tax exempt.

In a sense, then, AARP has a vested interest in Medicare Advantage cuts.  The MA program competes with their Medigap plans, which reduces their revenue.  Any cuts to MA will mean more customers for AARP, and a boost in revenue … at least until the government decides to cut out the middlemen, in exactly the same manner Congress is considering with student loans.

When AARP offers its endorsements and its recommendations, remember that it has its own interests in mind — and that those may not coincide with the interests of their membership.

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