ABLEnews Extra

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     In the wake of an overwhelmingly negative reaction on the
     part of its members to the Clinton health plan as reported in
     the February 15, 1994 Of Note (ON9402B.*), the lobby's
     subsequent endorsement of Clintonite clones provoked sharp
     criticism from members of the AARP and Congress (ON9409B.*). 
     Jack Anderson's eye-opening expose provides further insight
     into the actions of the AARP's self-serving misleaders.

                         Selling Out Seniors

The nation's largest seniors group threw its endorsement to the
leading Democratic health care bills because it "wanted to make a
statement to our members that these are two good bills."

But the fine print of the health plan proposed by Senate Majority
Leader George J. Mitchell (D-ME) suggests that the high-minded
rhetoric of the American Association of Retired Persons papers
over the bottom line.

Tucked away in the 1,443-page Mitchell bill is a sweetener that
the seniors lobby may have found irresistible: a clause that
largely exempts mail-order pharmaceutical firms from the
stringent cost controls contained in a prescription drug benefit
for the elderly. Not coincidentally, the AARP owns a stake in one
of the country's oldest and largest mail-order prescription drug
companies.

If the Mitchell bill becomes law, this clause could mean extra
wealth for what's already become a cash cow for the nation's
largest advocacy group. 

"It certainly appears to line the pockets of the AARP
leadership," says one Republican health care staffer. "It's
flabbergasting how blatant this is, how a special interest
benefits from the Clinton-Mitchell bill." 

Officials at AARP strongly deny that their endorsement of the
Mitchell plan--the group also endorsed a similar plan in the
House proposed by Majority Leader Richard A. Gephardt (D-MO)--was
based on financial factors. "At no time in this debate, or any
previous debate, have we ever gone up [to Congress] and said this
would be good" for business, a senior AARP lobbyist told our
associate Jan Moller. "The board [of directors] looks at what's
good for the members, not what's going to be good for the
organization from a proprietary standpoint." 

The Mitchell health care bill, introduced this month as a
Democratic alternative to the defunct Clinton health plan, falls
short of what President Clinton and the AARP once claimed was
nonnegotiable--health insurance for every American. But that
didn't stop the AARP from ending months of speculation on
Congress and at the White House by endorsing the plan on August
11. Before the endorsement, AARP officials had stayed staunchly
nonpartisan, supporting various principles of health care reform
yet refusing to embrace any specific legislation.

An AARP spokeswoman says the eleventh-hour endorsement came
because legislation was moving towards the floor of the House and
Senate, and that the organization did not want to miss a
"historic opportunity" to provide affordable and comprehensive
health care.

Unlike the original Clinton plan, which relied on private
employers to foot much of the bill for expanding coverage, the
Mitchell plan relies heavily on a system of federal subsidies to
help individuals to buy private insurance. As further inducement,
the Mitchell plan would expand Medicare by adding the new
prescription drug benefit for the elderly.

To contain costs in this program, the Mitchell bill proposes to
limit the price that the government will pay for prescription
drugs. Yet mail-order drugs are specifically exempt from these
price controls.

According to the Mitchell bill, the government would rebate
seniors 25% of any extra costs seniors might incur by using mail-
order drug services like AARP's. In effect, this would help
preserve the significant market share in the prescription drug
business. A Mitchell spokeswoman says the retail-order clause
will provide greater choice and promote competition while still
saving the government money.

"So we are going to have price controls on everything else except
mail-order pharmacies," says Sen. Don Nickles (R-OK). "Mail-order
pharmaceutical would be given special treatment under this bill."

The prescription drug rift illustrates a fundamental paradox
within AARP: While its political clout is drawn from its 33
million members, much of its funding comes from affiliated
businesses such as the mail-order drug operation. Membership dues
accounted for less than one-third of AARP's $455 million
operating revenue in 1993, with the rest of its income deriving
from its variety of investments and business interests.

Although AARP does not own the prescription drug business, called
Retired Persons Services Inc., it receives a royalty of 1% on all
revenue in exchange for endorsing its products. AARP's leadership
also appoints four of the eight members of RPS's board of
directors. According to the AARP's annual report, the association
took in more than $30 million in royalties last year from all
sources.

If the Mitchell bill is good medicine for the health care system,
it will also be a shot in the arm for the AARP.

[AARP's Health Care Booster Shot, Jack Anderson and Michael
Binstein, op-ed, Washington Post, 8/25/94]

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