Skip to content

Herger Opening Statement: Hearing on AARP’s Organizational Structure and Finances

April 01, 2011

When Dr. Ethel Percy Andrus founded AARP in 1958, Medicare did not exist.  Dr. Andrus understood that seniors needed access to health insurance and found a solution.   What began as an organization that filled a need not yet met by society has grown and evolved over the last 50 plus years into AARP, Inc. and its affiliated entities.  With the establishment of Medicare in 1965, health insurance became widely accessible to seniors. 

However, AARP kept on with its reported mission:

•  To promote independence, dignity and purpose for older persons
•  To enhance the quality of life for older persons 
•  To encourage older people “To serve, not to be served”

These are unquestionably laudable goals.  However, as we will discuss today, Mr. Reichert, former Congresswoman Ginny Brown-Waite and I took a closer look into AARP over the last 18 months, reviewing nearly every publicly available document, and the facts suggest that AARP has strayed from its core mission.  The facts show AARP no longer operates like a seniors’ advocacy organization; instead it more closely resembles a for-profit insurance company.  In 2009, AARP raised 46% of its revenue from royalty payments, versus just 17% from membership dues. While questions have indeed been raised in the past about AARP’s reliance on royalties, the amount of these payments has nearly tripled just over the past decade.
AARP asserts that their policy positions are made by its all volunteer Board of Directors, which is separate from its business interests.  The facts show otherwise. 

In 2010, the entire Board of the AARP Insurance Plan, which collected and processed $6.8 billion in insurance premiums in 2009, also served on the Board of Directors of AARP, which makes policy decisions.  The AARP Insurance Plan funneled millions of dollars to AARP, Inc. in 2009.

The facts show that AARP is dependent on the hundreds of millions of dollars it receives primarily from insurance companies and could not continue to operate in its current fashion without this revenue.  AARP revenue from membership dues totaled $246 million in 2009, just barely enough to cover its employee compensation and legal and accounting fees.

AARP’s decision to endorse more than one-half trillion dollars in Medicare cuts to pay for a new entitlement program seemed to directly contradict its mission.  This became more disconcerting when

Medicare officials warned that the Medicare cuts were so severe that seniors’ access to care could be jeopardized. Medicare officials also revealed that the health care law will result in a migration from Medicare Advantage to Medigap plans that could force as many as 7 million seniors to give up a plan they know and like.  

What does this have to do with AARP? Well, it turns out that upon a close examination of AARP’s Medicare insurance businesses, the facts show that

AARP had a unique financial incentive that was not transparent to seniors, the public, or Members of Congress during the health care reform debate.  As a result of the unique contractual relationship between AARP and UnitedHealth Group, AARP stands to earn $1 billion dollars over the next 10 years as a result of the Democrats’ health care overhaul, on top of the hundreds of millions of dollars in insurance royalties that they currently collect.

This is just one of a number of shocking details contained in a report issued earlier this week by Mr. Reichert and me, many of which will be discussed today.
I would now like to recognize Mr. Reichert, who has been a driving force in this investigation, to make a brief opening statement.