Katrina and Yuval discussed Paul Ryan’s performance at the AARP convention last week, where Ryan was booed for advocating the repeal of Obamacare. What a lot of people may not know is that the AARP has an incredibly large financial interest in the health law.
According to an analysis by Representatives Wally Herger (R., Calif.) and Dave Reichert (R., Wash.), Obamacare’s cuts to the Medicare Advantage program, by driving seniors out of that program and back into traditional Medicare, could earn AARP over $1 billion over the next ten years, because AARP makes nearly half a billion dollars per year collecting royalties from supplemental Medigap policies sold by private insurers. Those Medigap policies are primarily sold to seniors in the traditional, government-run Medicare program.
In other words, AARP is poised to make billions thanks to Obamacare’s cuts to Medicare Advantage. As it is, the interest group makes almost twice from its Medigap royalties what it gets in membership dues. So it’s no wonder that AARP supported Medicare cuts that would be unpopular with seniors: Its own financial interests won out.
Democrats considered reforming the Medigap system instead of cutting Medicare’s payments to hospitals and doctors. But AARP fought those reforms, and they were left out of the bill. A separate analysis by Senator Jim DeMint (R., S.C.) calculates that keeping Medigap reform out of Obamacare saved AARP another $1.8 billion over ten years. That’s a total of $2.8 billion, with billions more in future profits.
Furthermore, AARP’s Medigap plans were exempted from nearly all of Obamacare’s key insurance regulations, such as its restrictions on insurer operating margins; bans on exclusions of preexisting conditions; and caps on executive compensation.
I’ve written more about the topic here. The report at Jim DeMint’s website is worth reading in full.
— Avik Roy is a senior fellow at the Manhattan Institute and the author of The Apothecary, the Forbes blog on health-care and entitlement reform. He is a member of Mitt Romney’s Health Care Policy Advisory Group. You can follow him on Twitter at @aviksaroy.