Function

• Medicare is the United States governmental insurance program that pays most health care costs for people age 65 and over. Because there are gaps in Medicare coverage, senior citizens are advised to purchase a supplemental private policy as well. This secondary policy may cover medications, doctor's appointments, outpatient surgery, ambulance costs, laboratory, radiology and certain hospital procedures.
  
  

Caution

• The supplemental policies provide for costs Medicare does not cover, but in many cases the AARP product is more expensive than similar coverage from competitors. Since AARP charges a royalty to insurance companies to use its name, these companies then essentially pass along that fee to their customers. Senior citizens are advised to shop around rather than simply trust the AARP name.
  
  

Controversy

• Sen. Charles Grassley, R-Iowa, issued a press release in late 2008 in conjunction with a letter he wrote to the organization, attacking AARP for marketing supplemental policies without informing seniors about payout caps and other limitations. In addition, many AARP members not yet old enough for Medicare coverage bought these secondary policies believing they were comprehensive, and later found themselves with huge medical bills. These were UnitedHealth Group policies that carried the AARP brand name, and paid fixed cash benefits for specific services--typically up to $5,000. AARP subsequently suspended marketing of certain supplemental plans while it had an outside party investigate the issue.
  
  

Specifics

• Health insurance policies are complicated and contain an enormous amount of information. Many people do not want to read the entire policy and may not understand its limitations even if they do read it. A large problem can occur when people trust a membership organization without researching the policies themselves. This is not only the case with policies that carry the AARP brand, but with all insurance policies. Medicare, for instance, may not cover a specific outpatient procedure, which the policyholder then expects the private secondary policy to pay. However, if the payout limit is $5,000, the consumer is left holding the bag if the procedure costs $10,000 or $20,000.
  
  

Significance

• A 2007 Harris poll found that AARP ranked as the third-most trusted group influencing U.S. politics and business, behind Consumer Reports and the American Red Cross.