A Voucher-Based System for Medicare Is Not a Solution for Health Care

10/08/2012 08:53 am ET | Updated Dec 08, 2012

Turning Medicare into a voucher-based system is not a solution for our seniors or what ails our health care system in this country. With over 100,000 visits to Mount Sinai last year by Medicare beneficiaries, I am acutely aware and concerned about the changes that are being proposed to the Medicare system. The voucher model -- which essentially gives seniors a check and sends them off into the private marketplace -- is based on the notion that competition, facilitated by a free market, will bring down the cost of health care. Putting private insurers into the ring with traditional Medicare, it is presumed, will change the trajectory of overall health care costs, and solve our cost crisis. Unfortunately, the answer is not so simple.

There are three major reasons why private insurance simply cannot -- and should not -- compete with traditional Medicare. First, private insurance is fundamentally more expensive than the Medicare program. Private plans have significant overhead costs that the Medicare system does not, including stockholder profits, administrative costs, and marketing expenses. Medicare does not have these additional costs. Further, while reforms are still needed, the fact remains that the single payer Medicare system is extremely efficient. Indeed, 97 cents of every Medicare dollar goes to medical care. In contrast, only 80 cents on every dollar goes to medical care in the individual insurance market, where seniors would be taking their vouchers. Prior to the new health care reform law, the number was even lower.

The second major problem with the voucher-based system, and perhaps most concerning, is that it hurts those seniors who are already hurting the most. We must recognize that the voucher system is a fixed benefit plan. It is designed to control the government's contribution to Medicare. If health care costs continue to grow -- driven by numerous factors including the aging of the baby boom generation -- Medicare costs will inevitably grow at a rate taxpayers cannot afford. However simply setting the share that the government will pay through a fixed benefit voucher is one of the least humane ways to save the system. With this approach, the fixed voucher will simply "buy" less and less in the private marketplace.

As a result, the wealthy will supplement their vouchers to buy adequate insurance, while the average senior living on social security and perhaps a modest pension will likely not have the resources to purchase today's level of coverage. Lower-income seniors will find themselves with unaffordable copays and the inability to afford comprehensive health care. At Mount Sinai, we will see the effect first hand. Our hospital is located between the most and least affluent communities in New York City, and while many patients from the Upper East Side may be able to budget for these increased costs, those visiting us from lower-income neighborhoods will not be able to afford the care. This simply is not right. Medicare was never intended to provide two levels of care. Medicare was created to provide reliable, affordable, comprehensive care for our grandparents and parents after retirement. It was a safety net for all. Under a voucher system, that safety net may only catch a handful of seniors -- it is no longer provides piece of mind that we will all have healthcare in our golden years. With so many of our seniors already trying to make ends meet on Medicare and Social Security, we should not be dumping our debt on the most vulnerable.

This leads to the final concern with the voucher-based system. Changing the structure of an insurance benefit, as vouchers do, does not guarantee to change the trajectory of health care costs. We can only change the cost of health care by changing how we pay for it and what we pay for. Our health care system is shifting -- albeit slowly -- away from a fee-for-service approach toward a more value-based system. To date, the Medicare program is a leader on turning this tide by imposing penalties for hospital acquired infections and readmissions; bundling payments for episodes of care; and sharing savings with providers who actually lower costs for populations of patients who receive high-quality care, like in Accountable Care Organizations. These innovative practices are already starting to have an effect, and in the coming years, will be held up as examples that can be used throughout our entire heath care system to lower costs while not sacrificing care. There is nothing inherent in a voucher system that will encourage innovation, or change the trajectory of health care costs.

At some point, we must ask ourselves what kind of society we want to live in. Are we really ready to ration health care for our senior citizens, assuring that the less affluent receive less care? Are we really ready to give up on solving our health care cost crisis through innovation and ingenuity, and instead submit to naïve, blunt instruments that provide no long-term solutions? If not, we have to reject the voucher system and find more equitable ways to bend the Medicare cost curve. Addressing difficult issues such as obesity, dying in America, inefficient prescription drug management, organ failure, malpractice costs, and administrative inefficiencies are a much better way to reform the system, save money, and keep vital care available than a dramatic shift to a voucher program fraught with uncertainties, inequities, de facto rationing and other unintended consequences.