At first glance, it might not make much sense that AARP, formerly known as the American Association of Retired Persons, would be among the most vigorous of Obamacare advocates. The group bills itself as a non-partisan advocacy group that guards federal programs benefitting older Americans, and its 38 million members give it enormous clout: For years it has blocked common sense reforms to Medicare.
But AARP is not working in its members' interest by acting as a cheerleader for Obamacare. According to the Congressional Budget Office, the program slashes Medicare spending by $741 billion through 2022, and thus endangers access to care for seniors.
Viewed in proper context, however, AARP's aggressive advocacy for Obamacare makes a lot more sense. AARP isn't just a non-ideological group offering discounts and other services to senior citizens, it is also a health insurance powerhouse that rakes in hundreds of millions of dollars each year by loaning its name to help sell policies. In 2011 alone, according to a 2012 report by the House Ways and Means Committee, AARP's insurance business generated more than $400 million in revenue. Under Obamacare, AARP figures to hit the jackpot.
The law cuts $156 billion in payments to privately-administered Medicare Advantage plans, which provide benefits beyond those offered by regular Medicare. In 2013, 14.4 million Americans, or 28 percent of all Medicare beneficiaries, were enrolled in these plans, according to the Kaiser Family Foundation. Because of the payment cuts, premiums and out-of-pocket limits on the plans are expected to rise.
And insurers who issue Medicare Advantage policies are starting to trim their networks to comply with the law, meaning fewer choices of doctors and hospitals. These changes will deter seniors from enrolling in Medicare Advantage plans, thus increasing demand for other supplemental Medicare insurance, or Medigap.
Conveniently enough, AARP is a major marketer of Medigap policies. As a result, according to the House panel, “AARP stands to receive a financial windfall of at least $1 billion over the next 10 years.” No wonder Marilyn Moon, former director of AARP's Public Policy Institute, said "AARP will not be perceived as a truly independent advocate on Medicare if it's making hefty profits by selling products that provide Medicare coverage."
Allyson Funk, an AARP spokesman, told the Washington Examiner that her group “does not consider any potential financial ‘impact’ of policy options on AARP because they are not relevant to our policy decision-making process.” Any revenue received by AARP, Funk said, is re-invested in programs for the groups’ members. Funk further insisted that “AARP’s advocacy is based solely on the interest of our members and Americans age 50 and older."
On its website, AARP has argued that the idea that Obamacare cuts Medicare benefits is a “myth.” Apparently its bean counters turned a blind eye to the fact that the law cuts payments to hospitals and other providers. Outside experts, including the chief actuary of the Centers for Medicare and Medicaid Services, have predicted that Obamacare would reduce access for Medicare beneficiaries as providers drop out of the program. That may not be good news for seniors, but it's a happy day for AARP.