Medigap Policies AARP Promotes Come with Hidden Charges
By Chris Jacobs
Why would an organization that claims to advocate for seniors support a bill that raided nearly a quarter of a trillion dollars from Medicare? As with most things in Washington, the answer comes by following the money.
In passing the inaptly named Inflation Reduction Act last year, Democrats reduced Medicare spending by more than $250 billion—most of which lawmakers used to fund climate pork, hiring 87,000 IRS agents, and other unrelated priorities.
At a time when Medicare faces insolvency in just a few short years, using the program as a slush fund to pay for unrelated spending exposes the hollowness of the Democrats’ supposed commitment to seniors. Yet, AARP eagerly supported the measure, quite possibly because the organization prioritizes its own finances over the needs and interests of its members.
AARP’s Gravy Train
AARP makes more than a billion dollars each year by selling products to its members. And by far, the most significant source of AARP’s “royalty” money comes from UnitedHealth Group, the nation’s largest insurer.
UnitedHealth doubly benefited from the legislation Democrats rammed through Congress last year. Provisions in the legislation permitting the federal government to dictate drug prices will lower health insurers’ expenses—even as they limit patients’ access to potential breakthrough drugs and therapies. Moreover, the law’s $64 billion in subsidies to insurance companies will benefit businesses like UnitedHealth that sell products on Obamacare’s Exchanges.
That AARP endorsed the raid on Medicare represents the latest episode in the organization’s sordid treatment of seniors. To generate its more than $1 billion in annual “royalty fee” income, AARP slaps a 4.95 percent surcharge on every Medicare supplemental insurance policy it sells. And while AARP claims to support transparency for health insurers, it fails to disclose this financial conflict of interest to members buying insurance, some of whom blindly—and incorrectly—place their faith in AARP’s endorsements. By withholding information from its members and the public, AARP has shown itself willing to violate its stated principles when doing so advances its financial objectives.
The Medigap surcharge demonstrates how AARP puts its bottom line ahead of its members’ interests. Simply put, AARP makes more money whenever its members pay more in premiums—a clear recipe for overcharging seniors. Yet Democrats, even while passing legislation that purports to reduce seniors’ drug costs, did nothing to rein in the way AARP jacks up insurance rates to pad its own bottom line. So much for the inflation reduction part of the Inflation Reduction Act.
Call to New Leadership
Because Democrats did nothing to investigate AARP while controlling Congress, the new House Republican majority should take the opportunity to examine its questionable business practices.
Congress has explored the organization’s practices in the past but never placed a sustained focus on how it overcharges seniors. With the AARP Leviathan growing larger than ever, action by lawmakers to expose and eliminate the organization’s gravy train from UnitedHealth would actually help seniors—unlike Democrats’ raid on Medicare.
Chris Jacobs (chris@juniperresearchgroup.com) is the founder and CEO of Juniper Research Group and the author of The Case Against Single Payer. A version of this article appeared in DC Journal on January 22, 2023. Reprinted with permission.