GOP Congressman Questions AARP Endorsement of Pelosi Health-Care Bill as Possible Conflict of Interest

By Christopher Neefus | November 5, 2009 | 10:30 PM EST

President Barack Obama, flanked by AARP Chief Executive A. Barry Rand and AARP President Jennie Chin Hansen, participates in an AARP tele-town hall on health care. (AP Photo/Haraz N. Ghanbari)

( - AARP, the American Association of Retired Persons, which endorsed House Speaker Nancy Pelosi’s (D-Calif.) version of the health-care reform bill Thursday, is drawing fire from a member of Congress who questions the motives of the nation’s largest senior citizens’ lobbying group.
Rep. Dave Reichert (R-Wash.) told that it is possible AARP could benefit financially from the passage of the bill, which includes $500 billion in cuts to Medicare and Medicare Advantage. According to Reichert, if the cuts to the programs result in reduced benefits, more seniors will have to purchase “Medigap” coverage, highly regulated private insurance that fills in holes in Medicare coverage.
UnitedHealth Group offers Medigap coverage branded with the AARP logo, on which AARP collects royalties. 

“I just think there’s a conflict of interest here,” Reichert said. “You can’t support a-half-a-trillion dollar cut (without) recognizing that, as a result of that cut, it will result in additional revenues for AARP.”

Medicare Advantage is insurance, partially subsidized by Medicare, for services that are not available through typical Medicare providers.

In making its endorsement Thursday morning, AARP said the House version of health-care reform (H.R. 3962) would help make coverage more affordable.

"We started this debate more than two years ago with the twin goals of making coverage affordable to our younger members and protecting Medicare for seniors," Jim Wordelman, Idaho state director for AARP, said in making the announcement.

"We've read the Affordable Health Care for America Act and we can say with confidence that it meets those goals with improved benefits for people in Medicare and needed health insurance market reforms to help ensure every American can purchase affordable health coverage." 

However, a representative from the group’s national office told that "nobody can really know" whether the nation's largest seniors' lobbying group would benefit from health-care reform until the law is enacted.

“We don’t know which of our members are in these (licensed) plans,” AARP Legislative Policy Director David Certner said in interview.  

Asked whether he knew what changes in coverage his membership would need, and whether AARP might gain financially from the passage of the House bill, Certner said: “What we don’t know and what, quite frankly, nobody knows, is how insurance companies will react to changes in their subsidies.”
“What we don’t know is how some of these companies may respond to some of the changes in subsidies because they make changes to their plans often on an annual basis, so we don’t know exactly how they will deal with the additional benefits that they currently provide Medicare Advantage with any change in subsidies,” he said. “I mean, nobody can really know that until the final bill is in effect and these companies have to react.”

Reichert, meanwhile, said it “concerns” him that AARP has “no idea” about the effect of the legislation.
Questions to AARP
The Washington congressman originally raised the claim of a possible conflict of interest in a Sept. 21 letter to AARP.
“Historically, AARP’s mission has been to enhance the quality of life for older Americans by delivering value to members through advocacy and service,” he wrote.
“However, I believe it does a disservice to the millions of seniors you represent to support massive cuts to their Medicare Advantage health plans without disclosing the potential monetary benefit to AARP of seniors’ lost coverage resulting in the purchase of AARP-sponsored Medigap plans,” the letter read. 

Based on that premise, Reichert asked the seniors group a series of questions, including how many Medigap plans sold nationally are marketed under the AARP label, how much is financially linked to AARP, and how much money in royalties AARP has made in the past decade licensing Medigap, Medicare Advantage, and various other types of insurance. 

In an Oct. 1 response, AARP Chief Operating Officer Thomas C. Nelson admitted that more than one in every four people in the U.S. with supplemental Medicare coverage had “AARP-branded” Medigap plans last year. 

“United has informed us that, as of the end of 2008, 9,618,221 people are enrolled in all Medicare Supplemental plans nationally . . . Of that total, 2,789,889 are in AARP-branded plans.” 

Nelson also said AARP made about $339.7 million annually between 1999 and 2008 on royalties from their licensed plans and products.
However, the company said it could not tell Reichert how many of its members were in Medicare Advantage plans because the “information on the AARP-branded plan is confidential and proprietary to the United HealthCare Insurance Company and AARP does not have permission to disclose it.” asked AARP how it could support cuts to Medicare and Medicare Advantage without understanding whether it would profit. 
“One, our advocacy drives our product, not the other way around,” Certner said. “We don’t, quite frankly, even know what the implication would be for insurance for products for AARP, and (2) AARP is involved in a number of different insurance products, as you may know. We brand (Medigap) plans but we also brand (Medicare Advantage) plans.”
“So we don’t know what the overall impact would be, but, quite frankly, from our advocate perspective, it’s not relevant. We don’t look at that. We advocate for our membership.”
Reichert laughs at that argument.,
“That causes me some heartburn,” Reichert said, “because I don’t know how you can support a half-trillion dollar cut and not expect that there’s going to be some reduction in benefits and an increased cost to our seniors.
“The statement is just like when the president says (that) if you like your health care, you can keep it -- the language and the rhetoric (don’t) match the actual action, the facts and the language in the bill.”
AARP, meanwhile, underscored that its royalties from health insurance contracts marketed under the AARP name have no bearing on its advocacy for the proposed health care reforms,
When asked Certner whether the organization board of directors was unconcerned with the amount of royalties that come in from different AARP-licensed plans, he responded: “When we make our policy decisions, it’s based on the best interests of our membership and the impact on our products is not a consideration in our advocacy and policy.”
But Reichert disputed that notion, as well.
“What we know is that in 1999, their total royalties amounted to 11 percent of their revenue, and today, it’s over 60 percent of their revenue, and 38 percent of that revenue comes from their health care royalties, and from United,” Reichert said. “I don’t want to wildly fling accusations, but I think that there seems to be, and appears to be, a conflict of interest that needs to be investigated a little bit further.”
AARP was criticized sharply earlier in the summer for holding town hall-style meetings to discuss President Obama’s health- care proposal, which some members saw as a tacit endorsement of Medicare cuts.
During an Aug. 4 meeting in Dallas, Tex., one member shouted out at AARP representatives: “Do you guys work for us or do we work for you?”

AARP also hosted Obama at its headquarters to answer questions of its members on health care on July 28. 

Reichert said that after sending his second letter, AARP called his office to request a meeting with him, which has yet to take place.