Medicare vouchers are a proposed change to the Medicare system that would involve giving beneficiaries funds, in the form of a voucher, that they can use to buy private insurance.

The voucher system, also called a “premium support” system, would allow greater flexibility to pick from a wide range of health insurance options.

This differs from the current system, where eligible beneficiaries receive insurance coverage through the federal government.

Today, individuals who want private insurance can enroll in a Medicare Advantage plan. However, these plans are all approved by the Centers for Medicare & Medicaid Services (CMS) and guarantee a certain level of care.

This article offers an overview of the proposed voucher system, along with the potential benefits and drawbacks.

Medicare is a popular topic of debate among policymakers in the United States. Medicare vouchers are one proposed change to this system.

With the current system, eligible beneficiaries must enroll in Medicare Part A and Part B with the federal government. In doing so, they are guaranteed coverage for most medically necessary inpatient and outpatient health services.

The concept of a Medicare voucher has been around for many years. This system would be an effort to privatize healthcare for older adults in the United States.

Rather than have set benefits, Medicare beneficiaries would shop for their own plans using funds supplied by the government in the form of a check. They could use this check to buy a plan through a private company or to buy Original Medicare. The result would be varying costs and benefits, depending on a person’s selection.

While proponents argue that a Medicare voucher system would afford greater freedom of choice, detractors argue that it could be potentially costly for individuals and negatively affect quality of care.

Any major change to Medicare could have implications on healthcare access, cost, and quality for millions of people in the United States.

Proponents of the voucher system believe it would save individuals money, promote marketplace competition, and improve choice:

  • Savings: If you choose a plan with a lower premium than the voucher amount, you would retain the difference in cash. However, if you buy a more expensive plan, you would need to cover any extra costs yourself.
  • Competition: The voucher system could foster competition among private insurers, potentially leading to lower premiums and better benefits.
  • Choice: A voucher system would give beneficiaries greater flexibility when selecting their insurance coverage.

Critics of the voucher system point out various possible flaws, including the potential for high costs and added complexity:

  • Costs: Under the voucher system, the government would establish a fixed cost for the vouchers. However, if the voucher amount does not keep pace with rising healthcare costs, it would lead to higher out-of-pocket costs for beneficiaries.
  • Guarantees: Today, older adults in the United States are guaranteed a certain standard of care once they reach the age of 65. The voucher system would remove these guarantees.
  • Complexity: Some say managing and implementing this system would lead to greater administrative complexity.
  • Adverse selection: If healthy individuals choose cheap plans and sick individuals choose expensive plans, it could destabilize the health insurance market. Insurance companies rely on healthy individuals paying into the system to help fund care for those with more serious health concerns.

Initial proposals to create a voucher system for Medicare predate the creation of Medicare Advantage (Part C).

Medicare Advantage was established in 1997 as Medicare+Choice with the passing of the Balanced Budget Act.

Medicare Advantage gives beneficiaries the flexibility to shop for private plans, but there are some significant differences between Medicare Advantage and the voucher proposal.

For one, you don’t receive a check to assist with the cost of Medicare Advantage. You must pay the Part B premium on top of any premiums associated with the Medicare Advantage plan.

Further, Medicare Advantage plans are all approved by the CMS and must provide at least the same level of coverage as Original Medicare. This ensures that all beneficiaries enrolled in Medicare receive adequate coverage while helping to fund the program.

Under a voucher system, plans would also need to qualify for coverage, but the coverage requirements wouldn’t be as strict.

The Medicare voucher system is a proposed change to the Medicare system. Under this system, beneficiaries would receive a monthly check for a fixed amount that they could use to buy a wide range of private or public insurance options.

For some, such a program may lead to cost savings and greater choice. However, it could also negatively affect cost and care.