For the past several months, Phil Klein at the American Spectator has been following the AARP’s seemingly incongruous support of a health care reform plan that cuts $500 million from Medicare over the next 10 years. Yesterday, he alerted readers to a report released by the House Republican Conference looking at this issue in greater depth.

Because Medicare’s benefits are sparse, seniors by and large purchase supplemental insurance to pay for services that traditional Medicare won’t cover. As it turns out, the supplemental Medicare products (both Medicare Advantage and Medicare Supplement, aka “Medigap,” programs) that AARP promotes fund a significant portion of AARP’s operating expenses through “royalties and fees” – $652.7 million in 2008, to be exact.

The report points out that under health reform proposals currently being considered, Medicare Advantage stands to lose huge sums of money. With such massive cuts to the program, many Medicare Advantage companies are expected to close shop entirely, leaving seniors with fewer choices of supplemental plans. Never fear, AARP has another plan you might like… the one that pays them royalties!

Writes Klein:

If the House Democrats health care bill becomes law, the report argues, it would be a boon to AARP, because while Medicare Advantage plans will be required to pay out 85 percent of the money collected in premiums to claims made by policy holders, the requirement would only be 65 percent for the kind of Medigap policies sold by AARP.

Interesting that no reform plans on the table impose cuts to Medigap plans – or at the very least, more stringent regulations – particularly as Congress wrings its hands about how to save money and cut costs. Medicare’s budget will be eviscerated over the next decade, at a time when baby boomers will be retiring in droves. And one of the few outlets they can turn to in order to obtain supplemental insurance is… the very place that backed cuts to the program in the first place. Funny, isn’t it?

Looks like 60 Plus had it right – it really does seem to be the Association Against Retired Persons.