NCPA - National Center for Policy Analysis

AARP: Advocacy Group or Crony Capitalists?

June 4, 2012

Last year Republican members of the House Ways & Means Committee issued an investigative report that calls attention to the lucrative business dealings of the American Association of Retired Persons (AARP), which purports to represent 40 million Americans over age 50 on such issues as Social Security and Medicare, says Fred Lucas, the White House correspondent for Cybercast News Service.

The critical question the report raised, and the question that concerns us still today, is this: is AARP a good-hearted advocate for 50-somethings, or does its revenue-generating interests dictate its policy positions?

  • From 1998 to 2010 it spent $198 million on lobbying, according to a report by the House Ways and Means Committee.
  • That puts it behind the U.S. Chamber of Commerce, the American Medical Association and General Electric.
  • Furthermore, AARP is a money-making powerhouse, with $1.565 billion in assets and revenue of $1.176 billion in 2010, according to its IRS Form 990 tax report.

The group's business dealings are of significant import here, as they likely had a corrupting influence in its decision to support the president's health care overhaul in 2010.

  • In supplementing their Medicare-provided insurance, seniors have two primary options: Medicare Advantage and Medigap Policies.
  • Medigap plans are private health insurance policies sold to fill gaps in "original Medicare" coverage.
  • By contrast, Medicare Advantage offers plans run by Medicare-approved private insurance companies, and enrollees are ineligible to purchase Medigap policies.
  • Medicare Advantage was cut by $500 billion in the health reform bill, which will boost demand for Medigap policies, thereby increasing premiums.
  • Essential here is AARP's lucrative contract with UnitedHealthcare Insurance to provide Medigap policies: the group receives 4.95 percent of seniors' premiums in the form of royalty payments.
  • AARP received $427 million from UnitedHealthcare royalty payments in 2009.
  • By cutting Medicare Advantage, health reform is expected to have the impact of reducing the program's enrollment by 50 percent, driving more dollars toward AARP's Medigap policy.

It is undeniable that such a large financial interest likely biased AARP's decision making.

Source: Fred Lucas, "AARP: Advocacy Group or Crony Capitalists?" Capital Research Center, May 2012.

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