STEVE INSKEEP, Host:

AARP is expanding its already considerable reach into the health insurance market. The group that represents seniors has signed deals with major insurance providers that would offer new types of coverage, including new plans for those age 50 to 64. But on Capitol Hill, there are concerns about a potential conflict of interest, as NPR's Julie Rovner reports.

JULIE ROVNER: They don't call it the American Association of Retired Persons anymore, since most of its members still work. Now the group wants to change the way health care is delivered to workers and retirees. It's signed new contracts with AARP's long-time insurance partner, United, and a newcomer, Aetna.

AARP's CEO, Bill Novelli, says the companies will get bonuses if they improve the health of AARP members who join the insurance plans.

BILL NOVELLI: And today we're announcing plans through which we will seek to improve people's health and quality of life by changing the marketplace.

ROVNER: And the companies have to meet targets for things like using plain language or reaching out to populations that have had trouble obtaining health care services. If they don't, the companies would have to pay penalties.

AARP officials expect to double enrolment in AARP-branded insurance over the next seven years. And the group expects to receive an additional $1.5 billion in royalties. Novelli says those funds go towards AARP's social and political agenda, which includes things like...

NOVELLI: A lot of consumer protection, with emphasis on low income and vulnerable people, driver safety programs, information and support for grandparents who are raising grandchildren.

ROVNER: But at the top of that agenda is health care reform. Starting with a bill being debated on the Senate floor today, it would allow the federal government to negotiate prices under the year-old Medicare prescription drug program.

AARP policy director John Rother says the bill is critical to the group's members.

JOHN ROTHER: One of our top priorities is to keep prescription drugs affordable. And we've seen prices go up double or triple the rate of inflation over the last few years. So we really need to have more pressure on prices to keep them reasonable.

ROVNER: That bill, however, has become caught up in a largely partisan tug of war. Democrats who say the Medicare bill was too generous to the drug industry want to show voters they can act. President Bush and Republicans, on the other hand, say the program is working well and should be left as is. AARP sided with Republicans when the law originally passed. Now it's siding with Democrats to change it.

And its new contracts are making AARP's politics even more awkward. As part of its deal with United Healthcare, AARP will become the largest single sponsor of private Medicare health plans under a program called Medicare Advantage. Yet the group is lobbying to reduce payments to those Medicare plans, which analysts say are being overpaid by the government. Novelli denies there's a conflict.

NOVELLI: AARP believes inflated payments to Medicare Advantage plans are unfair and fiscally irresponsible. Congress should ensure that traditional Medicare and Medicare Advantage compete on a level playing field.

ROVNER: But others like former Minnesota Republican Senator Dave Durenberger, who now runs a health care think tank, aren't sure how long AARP can keep its business and consumer interests separate.

DAVE DURENBERGER: You know, it's like bowling. You only bowl one ball at a time, you know. Can they throw this ball with their right hand and another one with their left hand? I'm not sure they'll be able to pull that one off.

ROVNER: Even current allies like House Democratic Caucus Chairman Rahm Emanuel say AARP's latest step further into the insurance realm gives them some pause.

RAHM EMANUEL: The question will be, when their principles about Medicare drug prices, reimportation, runs into their business practices - so which goes? Business practice? Or principles?

ROVNER: AARP officials, however, say they've heard those concerns before, and they just plan to just keep doing what they've always done - just more of it.

Julie Rovner, NPR News, Washington.

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