The American Dilemma and How We Can Fix It

Posts tagged ‘AARP’

THE AARP AGENDA

I was approaching one of those milestone birthdays – you know, one of those ending in a zero.  It happened to be my 50th and several months before the actual day I had a new friend who didn’t want the day to go by unnoticed.

The American Association of Retired Persons as it was formerly called, began sending me solicitations to become a member of their organization.  A number of my friends were members and the cost to join was inexpensive, so I returned my invitation together with a check.

AARP efficiently returned an informative membership packet and I began receiving a copy of their bi-monthly magazine.  As it turned out, I was already getting the travel and hotel discounts that they offered from other sources, their offerings for Medicare health insurance supplements were not available to me because of my age and I found I could do better shopping on my own for auto and homeowner’s insurance.

The magazine which AARP publishes is very informative and I highly recommend it to people who do not have the time or are unwilling to make the effort to do their own research.  I have always preferred learning things on my own, comparing several sources so that I get a variety of views and then drawing my own conclusions.  So after perusing several issues, the remainder of my subscription went into the recycling bin unread.

At the end of my year’s membership, AARP sent me a renewal form which also went into recycling as have many solicitations that I received from them over the following years.  I have chosen not to renew my membership in AARP.

If you’ve watched any television recently, you will certainly have seen some ads for “AARP endorsed” Medicare supplement plans.  That is because the period between October 15th and December 7th is “open enrollment season” when seniors on Medicare can choose to switch or change their supplemental coverage for the following calendar year.

I admit that with my sometimes twisted sense of humor, when I hear “open enrollment season” I think of hunters going after our senior population, armed with bazookas to bring down their targets.  There is big, very big money in selling Medicare insurance supplements – a fact that is not lost on AARP.

As part of our regulatory system, both “for profit” and “not for profit” organizations must file financial statements with the Federal government.  What is required of “not for profits” is less than for their counterparts.  But reviewing these statements can still be informative.  So that’s what I did.

In the year ending December 31, 2011, AARP received more than two and one half times the amount of revenue from “endorsing” insurance products than it did from its membership fees – a rather staggering, $704 Million.  By anyone’s standard, this could hardly be considered chump change.  The vast majority of this income was derived from royalties paid by United Health Group based in Minnetonka, MN, but some of it was derived by its “affiliate programs” with other insurers who provide auto, homeowners and life insurance to AARP members.

If you can recall any of United Health’s ads for Medicare supplements, to promote sales of their products they include the phrase, “the ONLY Medicare supplement endorsed by AARP”.  The implication, of course, is that AARP wouldn’t “lend” its name to a product that it hadn’t thoroughly checked out in much the way that consumers used to look for the “UL” label on an appliance to make sure that Underwriters Labs, an independent organization, had thoroughly tested the product before passing on its safety.

There is a big difference between the UL seal on a product and the AARP endorsement of a Medicare insurance supplement.  Underwriters Labs provides an independent assessment of each product it reviews.  It is not compensated by any company for passing or rejecting their products.  AARP has a significant vested financial interest in promoting products by United Health because they receive a royalty for each one of these supplements which are sold.

United Health Group is a fine and reputable company.  It owns the largest portion of the Medicare supplement business with a 30% market share.  I am not suggesting that their products are in any way inferior to those offered by their competitors.  In fact, if I may cite one example in which government regulations have actually proven effective, it is the Medicare supplement business.

Our seniors can choose a “lettered” supplement which will pay part or all of the costs which Medicare does not cover.  The government has standardized these different options and each insurance company which underwrites them must offer the same government-specified coverage for that particular contract as does its competitors.  The only difference between them is the cost that a particular insurer charges and the service that the insured receives from the underwriter.

Considering that fact, an AARP endorsement, or lack of one, makes absolutely no difference to the consumer when they select a Medicare supplement.  It all comes down to the cost of the product and the service that they will receive should they need to file a claim.

According to the financial statement which AARP filed for calendar year ending December 31, 2011, of its $1.35 Billion in income which the organization recorded, more than 50% of it was derived from royalties from insurance contract sales.  In other words, AARP has a vested interest in making sure that there is no threat to its primary source of income – the royalties it receives from the sales of insurance contracts.

And that brings me, together with another item in its financial statement, to question its motivation in criticizing the Romney campaign for statements that they have made regarding Medicare and Obamacare.  Are these criticisms that have been leveled by an independent organization whose mission is to defend and protect our senior population?  Or are they self-serving statements made by a business, intent on protecting its own interests?

The other item in the financial statement which stood out to me was the income the AARP received from “grants”.  The amount that it recorded was $101 Million, and of this amount $92 Million came from the Federal government.

My friends in academia used to sweat bullets when it came time for their “grants” from Uncle Sam to be reviewed for renewal.  Although they may have lived in ivory towers, they realized that the individual who made the determination of continuing or stopping their grants had the power of financial life or death over them.

I would suggest that AARP is in much the same position as my academic friends.  If you combine the royalties it receives from the sale of Medicare supplements and the money it receives in grants, AARP is dependent on the Federal government and its programs for over 60% of its income.

Is it, therefore, any surprise, that AARP took Mitt Romney to task for challenging the administration on its healthcare programs calling his statements “false and misleading?”

As I head out with Gracie for our morning visit to the dog park, the old adage comes to mind.

“You don’t bite the hand that feeds you.”

Tag Cloud