MERRITT: AARP’s Medicare Profits Roll on As Scandals Engulf Its Plans

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MERRITT: AARP’s Medicare Profits Roll on As Scandals Engulf Its Plans

Posted to Politics June 17, 2025 by Mark Merritt

As Republicans in Congress aim at wasteful government spending, they’d do well to scrutinize the nearly $1 billion in annual licensing fees that Medicare indirectly funnels to AARP. The group claims to advocate for seniors, yet it rakes in enormous sums of money from AARP-branded health plans that impose higher costs on taxpayers and older Americans. It’s a flagrant conflict of interest.

AARP collects 4.95 percent in royalty payments on every dollar spent to purchase its branded Medicare Advantage plans, which are administered by insurance giant UnitedHealthcare. That means the more these plans charge, the more AARP earns.

This perverse incentive structure helps explain AARP’s deafening silence amid federal investigations into the billing and marketing practices of its endorsed Medicare Advantage plans. AARP has made no meaningful effort to challenge or distance itself from these plans, despite credible allegations of fraud, denial of medically necessary care, and questionable use of taxpayer money. If AARP genuinely believes its public rhetoric against price gouging, then why endorse plans that embody the very practices it decries?

AARP-endorsed plans are disproportionately concentrated in Special Needs Plans (SNPs), an expensive and profitable segment of Medicare Advantage. Although only a small part of seniors qualify for SNPs, AARP’s plans enroll twice as many as their nearest competitor. Medicare pays insurers more for these plans, on the premise that they serve higher-need patients, yet independent analysis suggests SNPs are twice as profitable as standard plans without delivering better health outcomes.

The marketing tactics used to attract enrollees are equally suspect. Seniors are offered pre-paid “flex” debit cards worth up to $1,000 for groceries, cable and cell phones — benefits with tenuous, if any, connection to medical care. These cash-equivalent perks resemble bribes more than health benefits, incentivizing enrollment in plans that may later restrict access to necessary treatments. Troublingly, SNPs catering to low-income seniors have a denial rate for services that is twice as high as other Medicare Advantage plans. In other words, AARP-endorsed plans are using taxpayer-funded incentives to lure the most vulnerable seniors into coverage that is more likely to restrict their care.

These conflicts erode the only real value AARP claims to offer: trusted, independent endorsements. But AARP is no neutral advocate. Its long-standing partnership with UnitedHealthcare, the exclusive administrator of its branded plans, is at the heart of its billion-dollar business model. UnitedHealthcare handles the actual insurance while AARP collects licensing fees, essentially acting as a marketing agent under the guise of a nonprofit.

The relationship is not limited to the private sector. AARP’s policy positions and lobbying efforts often align closely with the Democratic Party. It supported the Affordable Care Act even though the law diverted more than $700 billion from Medicare to pay for new entitlements. It has backed government price-setting measures. In many respects, AARP functions as a de facto lobbying arm for UnitedHealthcare and Democratic lawmakers. Its annual lobbying budget runs into the tens of millions, while its public campaigns consistently support left-leaning legislation and oppose market-driven reforms.

What distinguishes AARP from other players in healthcare is not the scale of its influence but the absence of accountability. Every other entity in Medicare, from drugmakers to hospitals to insurers, delivers a tangible good or service. AARP delivers nothing but its name, extracting royalties that ultimately come from the wallets of taxpayers. It is the quintessential rent-seeker, profiting off a federal program without providing care or assuming risk.

Congress can and should put an end to this.

First, lawmakers could cap or prohibit endorsement royalties in taxpayer-funded health programs. These payments are a little more than marketing kickbacks. AARP would remain free to endorse plans, but would have to do so on the merits, not for a price. It would operate more like Consumer Reports, which refuses payment for endorsements, rather than a commercial broker cloaked in the language of service.

Second, Congress could stop overpayments for Special Needs Plans in Medicare Advantage. The plans should be paid more only when they improve patient outcomes.

Third, policymakers ought to eliminate insurers’ ability to offer flex cards through their Medicare Advantage plans. Seniors should choose plans based on their health benefits, not whether they offer debit cards for everyday expenses.

AARP already collects nearly $300 million yearly in membership dues. That’s more than enough to fund its publications, advocacy and operations. Its continued dependence on Medicare dollars is unnecessary and increasingly indefensible. It’s a billion-dollar cash grab at the public’s expense.