Medigap is among a variety of products branded through an AARP for-profit subsidiary, ranging from insurance and restaurant discounts to credit cards. The contribution of these products to AARP’s bottom line has grown dramatically in recent years, reaching 52 percent of revenue last year, according to federal tax records.
AARP executives have a personal financial incentive to boost the group’s revenue because annual bonuses for employees are determined in part by AARP’s “gross revenues,” according to federal tax records. They show, for example, that Rand received $140,156 in “bonus and incentive compensation” last year, about 15 percent of his total compensation of $938,553.
AARP officials said that revenue accounts for only about 5 percent of the bonus calculation and that other factors, such as serving members and promoting social change, are far more important. A person familiar with the group’s operations said the percentage was higher in the recent past. “Revenues are very important. You have to make your numbers,” said the person, who spoke on the condition of anonymity to discuss internal matters.
Not a new fight
Proposals to revise Medigap were seriously discussed during 2011 negotiations between Obama and Boehner over the debt ceiling and the federal deficit, according to people familiar with the talks. A White House document, recently reported by The Washington Post’s Bob Woodward, shows that Obama’s final offer included a willingness to make a number of Medicare cuts, including “limitations” to supplemental insurance coverage such as Medigap.
Those talks collapsed, resulting in a more limited deal to raise the debt ceiling. As part of that bipartisan agreement, Congress created a “supercommittee” charged with creating a plan to rein in the debt.
Writing in October 2011 to the supercommittee, Rand argued against changes to Medicare and Medigap. “These proposals fail to take into account that people choose these policies because they provide certainty and health security — the peace of mind that even if they have a health crisis or frequent, ongoing health care needs that they will be able to manage financially,” he wrote. He did not mention AARP’s dominant role in the Medigap market.
Lobbying records show that during the same period in 2011, AARP was lobbying Congress and several federal agencies on Medigap changes, along with a variety of other “health issues.”
AARP said Medigap proposals accounted for a very small part of its lobbying effort.
“This was one paragraph in one letter among dozens of pieces of correspondence we send to Congress every year,” said Jim Dau, an AARP spokesman. “There were no phone calls, e-mails or robo-calls generated on Medigap proposals. It is not and was not a lobbying priority.’’