House Republicans seek IRS probe of AARP

  • By Ricardo Alonso-Zaldivar and Stephen Ohlemacher Associated Press
  • Wednesday, March 30, 2011 4:31pm
  • Local NewsNation / world

WASHINGTON — AARP lobbied for the new health care law and now it stands to profit, Republican lawmakers charged Wednesday as they called for the IRS to investigate whether the powerful interest group representing millions of older Americans should be stripped of its federal tax exemption.

Th

ree veteran GOP representatives released a report that estimates the seniors lobby could make an additional $1 billion over 10 years on health insurance plans whose sales are expected to pick up under the new law. They also questioned seven-figure compensation for some AARP executives.

“Based on the available evidence, substantial questions remain about whether AARP should maintain its tax-exempt status,” said the report, released by Reps. Dave Reichert of Washington, Wally Herger of California and Charles Boustany of Louisiana.

AARP said profit had nothing to do with its support for President Barack Obama’s health care overhaul, which expands coverage to nearly all Americans, a goal that the organization has long pursued.

“Our decision to support health care reform was in no way, shape or form influenced by revenue considerations,” said spokesman Jim Dau. Polls show that seniors are more likely to oppose the new law than younger people, partly because the coverage for the uninsured will be financed by slowing the growth of Medicare spending.

The three Republican lawmakers are members of the influential Ways and Means Committee, which writes tax law. Boustany leads the oversight subcommittee, and Herger is in charge of the health panel responsible for Medicare.

“We believe AARP operates in direct opposition to their senior membership,” Herger said at a Capitol Hill press conference.

The dual nature of AARP has raised questions before.

The business side of the organization runs money-making enterprises. The most lucrative involves “branding” a series of health insurance plans for seniors and older adults with the AARP name, akin to the Good Housekeeping seal of approval.

The public policy side is a civic organization that acts as a watchdog over Social Security and Medicare, representing the interests of some 40 million members and consumers generally. Boards overseeing the business branch and the tax-exempt social policy side have overlapping directors.

Royalties from licensing the use of AARP’s name earned $657 million for the organization in 2009, or 46 percent of its total revenue, according to publicly available records. Health insurance plans with the AARP brand accounted for most of that.

“During this investigation it became very clear that despite its privileged tax-exempt status, in many cases, AARP represents a for-profit entity, in fact, an insurance company,” Boustany said.

Medicare Advantage membership is projected to decline under the law because of cuts in federal payments to the private insurers, who were previously receiving more, on average, than it cost the government to provide care for seniors in traditional Medicare.

That would create a bigger demand for Medigap insurance, as seniors returning to traditional Medicare look for protection from its coverage gaps. And AARP sponsors the largest Medigap plan.

The report says AARP could stand to make a “windfall,” conservatively estimated at $1 billion over ten years. That estimate, however, comes with several assumptions which may or may not pan out.

“The real overarching question here that I think that seniors across this country should be asking AARP is, who are you working for? Really? Where is your heart? Are you with the seniors of America?” Reichert said. “Or are you out to make money for AARP?”

AARP questioned the scenario laid out in the report, saying it was on record as opposing overpayments to the private Medicare Advantage insurance plans well before the recent health care debate.

The report was also critical of AARP’s executive compensation and travel policies. In 2009, then-CEO William Novelli received $1,647,419 in total compensation, including $350,000 in severance.

The lawmakers are asking the IRS to investigate whether AARP’s activities are “primarily motivated by political or profit interests, instead of benefits to its members.” They called for an examination of whether AARP’s executive compensation is reasonable for a not-for-profit group.

AARP could also earn royalties under the health care overhaul by sponsoring medical plans in new state-based insurance markets that are still in the works. A spokesman said no decision on that has been made.

The Ways and Means Committee has scheduled a hearing Friday on AARP’s structure and finances.

Online:

AARP report: tinyurl.com/wamAARPreport

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