Whom Does AARP Serve?

 Kimberley Strassel at the Wall Street Journal.

Company managements have conflicting interests with respect to those of their shareholders and the former impinges on the latter when it comes to management's decisions. This kind of conflict is widespread, including, as KS shows, at AARP.

------------------------------------

It’s been a decade since that infamous liberal ad showing then vice-presidential nominee Paul Ryan pushing granny off a cliff. Don’t expect a similar accusation today against the conflict-of-interest known as the AARP, no matter that the seniors’ group deserves it.

The AARP, which claims to advocate policies that serve the interests of tens of millions of retirees, has gone all in for the giant tax-and-spend deal announced last week by Sen. Joe Manchin and Majority Leader Chuck Schumer. The group’s particular focus is the provision that would allow the federal government to “negotiate” Medicare drug prices and cap annual increases to inflation—though it is more than happy to also swallow the legislation’s tax hikes and climate spending.

The lobby has fanned out across Washington to pressure Congress for passage and called on its members to blitz their representatives and senators. It’s been running expensive ads that defend Mr. Manchin and demagogue the drug industry, which just worked miracles in the pandemic. “Congress has a historic opportunity to deliver relief” from “inflation” and “Big Pharma,” one spot says. By negotiating prices it will “put money back in the pockets of seniors.”

Left unsaid is that it may also put money in the pocket of AARP. Ask yourself why a group that claims to represent older Americans is plumping for a provision that will take the greatest toll on seniors. The bill would empower the secretary of health and human services to single out 10 to 20 of Medicare’s priciest drugs each year and to penalize any pharmaceutical company that doesn’t accept the government’s proposed price. That’s not a “negotiation”; it’s a gun to the head. The proper term is “price controls.”

A University of Chicago study late last year analyzed a House price-control plan and found it would reduce research dollars by $663 billion over the next 17 years, resulting in 135 fewer drugs. It estimates a loss of 331 million years of life—31 times the hit from Covid at the time of the study. A newer study from consultancy Vital Transformation finds that if this scheme had been in effect over the past decade, only six of 110 currently approved therapies would have made it to market.

Most devastated would be the people AARP claims to represent. Nearly 90% of adults 65 and older take at least one prescription medication. More than half report taking four or more. The AARP’s price controls would mean horrific hits to research in cancer, Alzheimer’s, Parkinson’s, you name it. This isn’t the Inflation Reduction Act. It’s the Lowering Life Expectancy Act.

The AARP and Democrats are bragging that “negotiations” will result in $288 billion in “savings”—another brazen bit of deceptive language. The money won’t be “saved” but rather siphoned from drug research and used to cover other spending in the bill. That includes climate dollars, but also $64 billion to extend ObamaCare insurance-premium subsidies.

That’s a huge boost for insurers, including UnitedHealth Group, for which AARP is now essentially a marketing arm. The seniors group for years has been selling AARP-branded Medicare Advantage and Medigap plans, for which they get royalty payouts. According to public filings, AARP took in more than $1 billion from royalty payments in 2020, and past disclosures suggest at least 65% of that comes from its United Health relationship. These royalty amounts now significantly dwarf what AARP receives from membership dues.

To the extent inflation price caps on drugs pad insurers’ profits, that’s a win for UnitedHealthcare. To the extent ObamaCare subsidies keep those insurance plans rolling, that’s a win for UnitedHealthcare. To the extent the drug companies are taking a hit, thereby sparing for some further time funding decreases to Medicare Advantage, that’s a win for UnitedHealthcare. Anything that’s a win for UnitedHealthcare is good for its partner, AARP.

AARP will insist it is working purely for its members’ interests, but this conflict makes it impossible to know its true motives. That conflict is front and center every single time the lobby engages in a Washington healthcare fight. Yet the media uniformly closes its eyes to the problem, and treats the AARP’s endorsement of legislation as a gold seal of approval.

Add in that it’s increasingly unclear how motivated the group is by partisan politics. AARP was caught a decade ago operating as an extension of the Obama White House, toiling to help pass ObamaCare over the opposition of most members. Now it’s laboring to land the country with another inflationary spending blowout, paid for by research dollars tapped from future medicines for those same senior citizens. Is this for the benefit of older Americans? Or for the benefit of Democrats?

AARP may be too attached to its royalty dollars to give up its financial conflict. But its refusal to do so strips it of any authority on the question of what is best for seniors. Keep that in mind next time one of those pricey AARP ads pops up on the television.