Originally known as the American Association of Retired Persons, AARP is the largest membership organization in the United States. Seniors rely on AARP for advice, product discounts, and lobbying efforts to advance the interests of older Americans. A recent article in Fortune asks whether some of AARP’s endorsements might further the organization’s own financial interest rather than the interests of its members.
As a nonprofit organization, AARP is entitled to raise revenue, provided that it spends its money in ways that advance a community benefit consistent with the organization’s purpose. AARP’s broad purpose is to enhance the quality of life for people as they age. To further that goal, AARP Services acts as “an advocate in the marketplace for the 50 and over population.”
Given the organization’s wide reach, AARP’s endorsement or approval can be a boon to businesses. When AARP earns royalties from endorsements, the endorsements also benefit AARP. As long as AARP bases endorsements on objective measures of quality rather than the amount of royalties it might earn, there is arguably nothing wrong with AARP earning revenues that it will spend on services to benefit its members.
Endorsements are more problematic when they involve Medicare providers, given AARP’s congressional lobbying for improvements in the Medicare system. In 2008, the Boston Globe reported that AARP “collects hundreds of millions of dollars annually from insurers who pay for AARP’s endorsement of their policies.” By 2020, AARP reported royalty revenues of more than $1 billion, most of which came from “health products and services.” For example, AARP has endorsed Medicare Supplement insurance plans offered by UnitedHealthcare. When its members purchase an endorsed plan, AARP earns a royalty.
Fortune interviewed a health policy analyst who once worked for AARP. The analyst questions whether AARP has a conflict of interest when it lobbies Congress about Medicare issues while it earns funds from healthcare companies that market services to Medicare patients.
As the analyst pointed out, AARP’s endorsement of travel packages does not raise the same concern as its endorsement of healthcare providers who could be affected by AARP’s lobbying. The fear is that AARP will not push aggressively for legislation that might improve care for older patients if the legislation might also reduce profits for medical care providers.
The Oak Street Health Controversy
Fortune reports that AARP endorsed a chain of medical clinics called Oak Street Health that operates in more than twenty states. Oak Street promises to offer “value-based care” by improving the quality of care while holding down costs. It claims to see patients an average of eight times per year, focusing on prevention of health impairments by screening patients for behavioral problems and advising them about dietary and housing issues.
Oak Street charges insurers a flat monthly rate per patient. Flat fees are part of Medicare’s controversial “direct contracting” pilot program. The program was recently revised in response to fears that it would lead to the privatization of Medicare.
As an AARP “partner,” Oak Street is allowed to use the AARP logo in its marketing. Oak Street announced that it is the “exclusive primary care provider to carry the AARP name.”
Shortly after the AARP endorsement was announced, Oak Street disclosed in a Securities and Exchange Commission filing that it received a demand for documents from the Justice Department relating to an investigation of a potential False Claim Act violation. Most False Claim Act violations involve healthcare providers who bill Medicare for services that were not provided or for inflated amounts.
Oak Street disclosed few details of the investigation but indicated that the requested documents related to free transportation that Oak Street provided to Medicare recipients and to Oak Street’s relationship with marketing firms. Oak Street expressed its belief that it was in compliance with the law.
How Carefully Did AARP Vet Oak Street?
AARP told Fortune that it was unaware of the Justice Department investigation when it endorsed Oak Street. That lack of awareness raises questions about how thoroughly AARP questioned Oak Street before deciding to endorse the company.
Ideally, nonprofit organizations that “partner” with for-profit businesses will conduct a careful vetting of the businesses to assure that they provide the best value for the nonprofit’s members. According to Fortune, however, AARP is not fully transparent about “how companies are vetted to determine they are worthy of the group’s coveted seal of approval.” AARP officials would not provide a detailed explanation of the decision to partner with Oak Street.
Oak Street might be a fine choice for older people who need healthcare. Medicare Supplement insurance plans offered by UnitedHealthcare might also be a wise choice for some Medicare recipients. Before making those choices, however, AARP members should realize that AARP earns substantial income from its endorsements. An AARP endorsement should not be the only factor that drives healthcare and insurance choices.