Republicans Challenge AARP's Tax-Exempt Status

April 1, 2011

Peter Overby

Download Story
Mario Tama
This isn't the first time AARP has come under fire. During the George W. Bush administration, Democrats were angry with AARP for its support of the president's Medicare drug plan. In 2003, senior citizens in New York City demonstrated against AARP's position.

AARP was in the congressional hot seat once again Friday.

Republicans on the House Ways and Means Committee said the senior group's lucrative operations resemble those of an insurance company, not a tax-exempt advocacy organization. Democrats, meanwhile, said the hearing looked like a witch hunt.

It seems as though someone on Capitol Hill is always mad at AARP. Not so long ago, it was Democrats who didn't like the group's support of President George W. Bush's Medicare drug plan.

This year it's the Republicans, angry that the group worked so hard to pass President Obama's health care law.

A Question Of Finances

The big question Friday involved AARP's finances. A report by two committee Republicans shows that in 2009, AARP got less than 20 percent of its money from member dues, and more than 45 percent from royalties, mostly on AARP-branded insurance coverage.

California Republican Rep. Wally Herger, one of the authors of the critical report, ran the hearing.

"The facts show that AARP is dependent on the hundreds of millions of dollars it receives primarily from insurance companies," he said.

That led Herger and other Republicans to a pair of conclusions. First, that AARP acts like an insurance company; and second, that its board thinks more about profit than the needs of its 37 million members.

AARP's CEO, Barry Rand, said at the outset that neither conclusion was accurate. "Quite frankly, we reject each of the conclusions drawn in this one-sided report," he said.

Rand said the branded insurance products don't set the agenda. "This is not something that we devise," he said. "All these insurance products come from our members and the 50-plus population who say, 'We have these needs.' "

'You're Raking In The Cash'

The report and the hearing made much of AARP's role in passing the health care law last year.

"AARP stands to gain an additional $1 billion over the next 10 years as a result of the Democrats' health care law," Herger said.

During the health care fight, AARP lobbied to undo one program it makes money on --Medicare Advantage, which pays insurance companies extra to add benefits to the standard Medicare coverage.

AARP endorses Medicare Advantage plans, but it makes much more money on Medigap insurance — supplemental policies that retirees are likely to buy if they go off of Medicare Advantage.

"How do you explain that to the seniors you're supposedly advocating for? And it looks like you're raking in the cash while they're losing benefits and paying more for coverage," says Texas Republican Sam Johnson.

But here's the policy argument against Medicare Advantage: Only one-quarter of Medicare recipients use it, but everyone pays for it in their Medicare premiums.

The other AARP officer at the hearing, President Lee Hammond, said that without Medicare Advantage, "Medicare would be strengthened."

Republicans were unmoved.

"Please, don't mislead our seniors," Kansas freshman Lynn Jenkins told Hammond and Rand. "Please don't use them as pawns to line your pockets on their backs."

A 'Political Witch Hunt'

While Republicans challenged the two AARP leaders, Democrats challenged the GOP majority.

"This is nothing other than a political witch hunt," said Georgia Rep. John Lewis. "The Ways and Means Committee is better than this."

If this was an oversight hearing for tax-exempt groups, asked Democrats, why did the committee majority single out just one? Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.