Timothy P. Carney: AARP opposes Medicare bill which reduces its profits

The Washington Examiner, March 24, 2015

A major player in health insurance is resisting a bipartisan Medicare bill that would hurt the company’s bottom line. That’s to be expected. Here’s the odd part: The insurance giant is AARP.

AARP, formerly the American Association of Retired Persons, is most famous for its $16-a-year membership card that gets you discounts everywhere from the movie theater to the pharmacy. In Washington, AARP is known as the powerful seniors lobby — the organization has reported just under $200 million in lobbying expenses over the past 10 years.

But as AARP flexes its muscle on the current Medicare bill, it’s worth recounting AARP’s less public but more lucrative side: its insurance business. AARP officials insist that their lobbying agenda is solely in the interest of seniors, and not at all tied to its insurance business. Indeed, they point to past legislative fights where AARP opposed policies that could have helped its insurance business.

AARP boasts 38 million members, but that’s not where the group’s bread is buttered. Membership dues make up less than 20 percent of the group’s revenues. About half of the money AARP pulls in, according to its tax filings, is through “royalties” it gains by allowing its name and logo to be used in marketing other companies’ products. AARP’s royalties revenue was more than $650 million in 2009.

The biggest chunk of this royalty income comes from Medicare products, most importantly the so-called Medigap insurance plans. AARP Medigap insurance, a United Healthcare product, covers the costs that Medicare doesn’t cover, such as co-pays and deductibles. By buying a Medigap plan, a senior citizen can eliminate all out-of-pocket health-care expenses. This is called “first-dollar coverage.”