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Congressional Report Details AARP’s Financial Gain From Health Care Law

Organization Stands to Make One Billion Dollars in Insurance Royalties Over the Next Ten Years

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Washington, Mar 30, 2011 | comments

Washington, DC – Ways and Means Committee Members Wally Herger (R-CA), Dave Reichert (R-WA) and Charles Boustany (R-LA) today released “Behind the Veil: The AARP America Doesn’t Know,”  a new report exposing the conflict between AARP’s drive for profits, the best interests of its members and the organization’s tax exempt status.  The report, which is the culmination of more than a year-long investigation, concludes that AARP stands to make upwards of one billion dollars over the next ten years as a result of the new health care law through the sale of their endorsed-Medicare insurance products.  The Members have now turned over their findings to the IRS to determine if AARP has abused its tax-exempt status, and whether or not that status should be revoked.
 

KEY FINDINGS

  • AARP is in fact a large, complex and sophisticated organization with over $2.2 billion in total assets and had revenues in excess of $1.4 billion in 2009 alone.
     
  • AARP has four primary revenue sources: royalty payments (primarily from insurance companies), membership dues, publication advertising and grants (governmental and non-governmental). In 2009, AARP revenues from royalties were two and half times higher than its membership dues.
     
  • Since 2002, income generated from AARP membership dues has increased 32%, or $60 million. However, during this same period, income derived from AARP’s business relationships, primarily with insurance companies, has nearly tripled, increasing by $417 million.  Royalty payments from for-profit companies comprised nearly 46% of AARP’s revenue in 2009, while membership dues totaled just 17% of total revenues.
     
  • As a result of the new health care law, the Obama Administration estimates more than 7 million seniors will lose their current Medicare Advantage plans, resulting in a massive migration of seniors to Medigap plans.  AARP is the nation’s leading provider of Medigap plans and has a contract in which AARP financially gains for every additional Medigap enrollee.
     
  • Based on low, mid and high-range estimates, AARP stands to financially gain, over and above the millions of dollars they currently receive from United, between $55 million and $166 million in 2014 alone as a result of new Medigap enrollees stemming from the health care law’s cuts to MA, which AARP strongly endorsed.
     
  • Under the midrange estimate and under their current contract, AARP’s financial gain from the health care law could exceed $1 billion during the next 10 years. This is because AARP will see their royalty payments increase as seniors are forced out of MA plans and buy AARP Medigap plans instead.
     
  • Despite a massive increase in revenues, AARP’s cash and in-kind contributions to the AARP Foundation only increased 11% ($3.1 million) while cash and in-kind contributions to AARP’s Legal Counsel for the Elderly actually decreased 9% ($300,000) from 2004 to 2008 (the only years for which AARP provided data). Meanwhile, the AARP Foundation recently committed an estimated $14 million in each of the next three years to become the primary sponsor of NASCAR driver Jeff Gordon.
     
  • The AARP Foundation received government grants totaling over $97 million which comprised 81.9% of the Foundation’s total revenue in 2009.
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