For over 50 years, Medicare has provided recipients with a guaranteed set of health care benefits in retirement. At present, there are 55 million Americans who rely on this crucial program. But with an approach to transforming Medicare into a program that is more responsive to market signals, some policymakers have suggested a system of vouchers.

Under such an approach, Medicare beneficiaries using vouchers issued by the Department of Health and Human Services could apply them toward the purchase of any qualified private health plan operating in their area. Plans would qualify by providing a minimum benefit package and meeting other requirements (such as an annual open enrollment period) that would be stipulated by DHHS. This means that those beneficiaries choosing a plan with a premium lower than the voucher would receive cash for the difference from Medicare, while those opting for a plan with a higher premium (and more comprehensive benefits) would pay the extra amount from their own funds.

What do People Say about the Voucher System?

For many, the voucher system for Medicare will only hurt the hardworking Americans who have paid into the program their entire working lives, but the system would hit those near retirement the hardest.

A voucher system would replace current guaranteed benefits given by Medicare with a risky alternative. Under the said system, the federal government would substitute the guaranteed benefits package with a fixed dollar amount or the so-called defined contribution that beneficiaries would apply toward their health coverage.

Each Medicare beneficiary’s premium would be the difference between the government’s defined contribution (voucher value) and the cost of the insurance plan he or she chose. If the fixed dollar amount turned out to be not enough to cover the necessary health care costs, the beneficiary will have nowhere to turn. They would either have to dip into their own savings or go without medical care.

For many older Americans, Medicare provides important protection against economic insecurity. Without the guarantee of health care coverage, especially for older adults, the consequences are alarming. In addition, there are many of the current Medicare beneficiaries who have low income. This means that they will be at risk of catastrophic out-of-pocket costs under the voucher system. For instance, those with limited financial resources will be forced to enroll in less expensive health care plans under the new system. Such lower-priced plans might come with higher deductibles to make up for a lower monthly rate. The plan might include other cost-sharing requirements, and this would increase the risk of these lower-income individuals going without necessary care because they simply couldn’t afford it.

The Bottom line

Considering what the system has to offer, it simply is a step in the wrong direction. Sure, Medicare needs to be strengthened and solutions should be considered for the long term. But, rather than shifting to higher costs of care to those who can least afford it, it would be better to look at ways that will improve the program.