WASHINGTON — In late 2003, when the Bush administration was struggling to get its Medicare prescription drug program through Congress, a timely endorsement by AARP helped turn the tide in its favor. But the program has become more than just a legislative victory for the influential lobbying group and its pro-senior-citizen agenda.
The private insurance plan carrying AARP's label is emerging as the leading choice of Medicare beneficiaries signing up for drug coverage. With at least 1.8 million members and counting, the AARP plan has the potential to generate royalty revenues amounting to tens of millions of dollars for the organization.
For The Record
Los Angeles Times Wednesday March 08, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 53 words Type of Material: Correction
Medicare drug benefit -- An article in Section A on Saturday about AARP's endorsement of a Medicare prescription drug insurance plan said the seniors' advocacy group "provides a range of services to its members, including tax preparation assistance and safe driver education." Membership is not necessary in order to use those AARP services.
Before this year, Medicare did not cover outpatient prescriptions. Now seniors can buy coverage through dozens of private plans -- 47 in California alone -- each with its own list of preferred drugs and coverage policies. Medicare pays about three-fourths of the cost of the insurance, and monthly premiums, averaging $25, cover the rest.
The success of the AARP plan is understandable in a market where seniors face new, often confusing, choices and many beneficiaries are unsure which to trust. But it has revived charges of a conflict of interest between AARP's roles as a public policy advocate and a private business enterprise.
"They can't have it both ways," said Rep. Pete Stark (D-Fremont). "It would be like Consumer Reports investing trust fund money in Chrysler and then promoting Chrysler cars. You can't claim to be a disinterested advocate if you're peddling insurance to make a profit and pay your overhead."
AARP spokesman Steve Hahn rejects such criticism. "There are no limos in the garage," he said. "Any money AARP makes will get plowed back into the services our members want."
AARP, a nonprofit organization, is the largest, most influential body in Washington representing seniors. It provides a range of services to its members, including tax preparation assistance and safe driver education.
To help finance its activities, the organization long has sold various types of insurance. It derives more income from its businesses than from the $12.50 annual dues paid by each of its 35 million members.
Medicare has not released a breakdown of drug-benefit enrollment by plan, but evidence suggests seniors have gravitated to a few plans -- either those bearing recognizable names such as AARP and Blue Cross-Blue Shield, or plans with very low monthly premiums, such as those offered by Humana.
