By Phil Kerpen
For years the major health care policy debates in Washington and state capitals have been distorted by the fact that one of America’s best known and trusted advocacy organizations, AARP, has functioned largely as a lobbying and PR front for the country’s biggest health insurer, UnitedHealth. Yet elected officials continue to see and hear their advocacy messages as representing millions of seniors – who are famously reliable voters – with a serious corrosive impact on the ability to advance meaningful free-market health reforms.
Even during this pandemic, with the whole world hoping that the biopharmaceutical industry can discover and deliver breakthrough cures and vaccines at record speed, AARP continues to bang the drum for government price controls. In fact, after the pandemic arrived in America AARP sent a letter advocating for Nancy Pelosi’s draconian price control plan, which would threaten drugmakers with a tax of 95 percent of their gross revenues if they don’t accept government set prices.
When governments set the price of such things as cutting-edge drugs needed innovations and investments dry up. A new cure now costs an average of $2.6 billion to bring to market. If government policy makes it impossible to recover those costs and earn a return on capital, as Pelosi’s bill would, seniors would suffer from a shortage of new cutting-edge treatments and potential cures for diseases like Alzheimer’s, cancer, diabetes – and of course from any new emerging pandemic, like the one we face now.
Why would a seniors group favor undermining the discovery of new cures seniors need?
A forthcoming report by Juniper Research (commissioned by American Commitment) explains this seeming paradox. Chris Jacobs explains how AARP – which somehow maintains a tax-exempt charitable status – has raked in an astounding $11 billion from its sales and marketing activities over the past decade, with revenues climbing from just under $200 million in 2001 to over $900 million in 2018.
Most of that revenue comes from UnitedHealth, which from 2010 to 2017 sent AARP a staggering $4.2 billion. That includes a record $627 million in 2017 – after which AARP stopped specifically disclosing how much it takes in from UnitedHealth. This is the same UnitedHealth that brought in record profits this quarter that, ironically, has come during a deadly pandemic.
The lion’s share of that windfall is from the sale of Medigap policies, for which AARP collects a nifty 4.95 percent off the top for lending its name and exclusive endorsement. Calling their vig a royalty instead of commission, they claim, sidesteps all of the rules and regulations for brokers and insurance sales. In fact, AARP recently defeated an Ohio lawsuit by arguing, successfully, that their relationship with their members “is not one of ‘trust or confidence'” and that membership “does not ‘transcend an ordinary business’ relationship.”
With all that money flowing, AARP’s policy positions almost always align with UnitedHealth’s business interests. Start with Obamacare. Despite overwhelming 14-to-1 opposition from its members, AARP’s executives supported it – and got rewarded with a very convenient carve out: Medigap policies, the AARP/UnitedHealth cash cow, are still allowed to exclude enrollees with some pre-exiting conditions.
Pelosi’s price controls bill also unambiguously benefits insurers and pharmacy benefit managers (PBMs) like UnitedHealth’s OptumRx subsidiary despite the non-partisan CBO research finding it would stifle the innovate drugs seniors rely one.
As Milton Friedman and other prominent economists have explained: “American consumers would get the short-term windfall of lower prices, but they would end up unnecessarily suffering and living shorter lives because promising new therapies would be delayed or not even developed.”
And last year AARP pushed to block a Trump Administration Medicare reform that would have applied big discounts to seniors’ prescriptions directly at the cash register at their local pharmacies, protecting the discounts that are currently pocketed by PBM middlemen like UnitedHealth.
AARP calls its lobbying outfit “AARP Advocates”; lawmakers on the receiving end of their messages should ask: for whom?
Mr. Kerpen is the president of American Commitment and the Committee to Unleash Prosperity.
By Phil Kerpen