A clearer way to think about Medicare vouchers

The idea of vouchers has long appealed to conservatives who want to preserve government funding for a popular program while increasing individual autonomy. The best example is school vouchers. Rather than assigning students to free state-run schools, government would provide a voucher to each family that could be used for the school of their choice –whether public or private. There are certain downsides to this approach –for example, it may undermine funding for public schools or lead to re-segregation. But in principle it can work since most students cost roughly the same to educate and the cost is predictable from year to year.

Proposals to apply the voucher principle to Medicare financing strike me as somewhat¬†disingenuous. Paul Ryan’s idea is to give Medicare recipients a voucher that they can use to purchase private insurance. Supposedly this would provide Medicare recipients greater autonomy and the opportunity to purchase the type of insurance they want. Insurance companies would supposedly be competing hard for the business of each enrollee.

I grant the possibility that a recipient might be able to find a plan that is a better fit for his or her individual circumstances. But the value of this choice pales in comparison with the reality that people who are sick or with pre-existing conditions are virtually uninsurable. No insurer will enroll them at anything approaching the Medicare voucher rate without being forced to do so by the government, using the same kind of rules that are central to ObamaCare (and the Massachusetts health care reform law for that matter). A seventy year old in excellent health may be able to find a good plan for the $10,000 or so they may receive as a voucher. But realistically someone with a heart condition is going to cost more like $50,000 and a current cancer patient could be $500,000.

So if we’re going to go down this voucher path, why not be pure about it and think about using the voucher for medical care directly rather than for insurance. Give each Medicare recipient the $10,000 or so that’s spent on average per recipient today and let them use that money to pay their own medical bills. If they are parsimonious and stay healthy let them keep the difference. Sick or not smart with health care spending? Their problem.

Doesn’t sound realistic, does it?

So let’s stop pretending that vouchers are some great tool to give autonomy to the individual. They only work if combined with heavy handed, socialistic regulation of the insurance business. It may surprise you, but the Ryan plan appears to include such provisions.

If that’s the case, maybe we should be talking about why Ryan relies on a key tenet of ObamaCare to make his plan work, and whether he and Mitt Romney would keep in place provisions of the Affordable Care Act that prohibit medical underwriting even while they eliminate the coverage mandates that make such provisions financially feasible.

September 7, 2012

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