Republicans Continue Attack on AARP for Conflict of Interest

Republicans Continue Attack on AARP for Conflict of Interest

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Leading Republican members of the House Ways and Means Committee said today that AARP stands to gain $1 billion in fees over the next decade from the increased insurance sales that will come its way through health care reform, which was backed by the nation’s largest senior citizen lobbying group.

The Oversight subcommittee’s report, issued in anticipation of Friday’s hearing into AARP finances, called the non-profit’s reliance on insurance revenue a clear conflict of interest /node/59734. Rep. Wally Herger, R-Calif., and Rep. Dave Reichert, R-Wash., called for an Internal Revenue Service investigation into AARP’s “significant financial interests in the business of insurance” and whether “the organization should continue to enjoy its tax-exempt status.”

Before launching into a few of the details in the report, which is a fascinating read since it lays out the internal workings of one of the world’s largest non-profits (full disclosure: I’m a member), it’s important to note that AARP’s structure is not unique. Many non-profits run for-profit subsidiaries to generate revenue for their charitable and lobbying activities. The Smithsonian’s or National Geographic’s television deals come to mind, or every museum’s gift shop.

Yet the scale of AARP’s insurance subsidiary’s dealings (it runs its own firm as well as forms partnerships with UnitedHealth Group and other insurers) is breathtaking. The Ways and Means report, based on publicly available documents, found that insurance royalties paid to the non-profit side of the 40 milllion-member AARP nearly tripled to $657 million between 2002 and 2009, which constituted 46 percent of its $1.4 billion in revenue.

Why the rapid growth? Besides selling Medicare Advantage and Medigap plans, AARP after 2003 began selling Medicare Part D drug plans. In fact, more people today are enrolled in AARP-branded drug plans (4.5 million beneficiaries) than are enrolled in either the organization’s Medigap (2.9 million) or Medicare Advantage (2.0 million) plans. The 2003 legislation that created Part D was backed by President George W. Bush and passed by a Republican-led Congress without increasing taxes to pay for it.

AARP argues that it keeps its insurance subsidiary’s activities at arm’s length from its non-profit and lobbying activities. The organization backed the Affordable Care Act, which sharply cut payments to Medicare Advantage plans and cut overall Medicare costs to help fund coverage for the uninsured. It also supported strict limits on the higher premiums that insurers could charge older (and usually sicker) Americans who get their coverage on the insurance exchanges after reform goes into effect – a position opposed by the insurance industry.

But the Ways and Means report dismissed that defense. The report called AARP’s support of limiting Medicare Advantage payments “a cut in Medicare to fund another entitlement program.” Moreover, it would likely drive more seniors to buy Medigap coverage from AARP. “Despite appearances to the contrary, AARP’s policy position aligns with its own financial incentives for selling health insurance,” the report said.

AARP board president Lee Hammond dismissed the committee’s report and welcomed the opportunity to defend the organization at Friday’s hearing. “AARP is most disturbed by the accusation that our support for any legislation would be done with revenue in mind,” he said in a prepared statement posted on the AARP website Wednesday afternoon. “AARP has long-maintained that we would gladly forgo revenue in exchange for lifetime health and financial security for all older Americans.”

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spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.