Voucherizing isn’t in the dictionary, but it’s something to consider before casting your ballot this year. Vouchers are government-funded credit for individuals to spend in a specific private sector, such as health insurance or education. On the surface, vouchers are intended to increase competition between the private and public sectors to ultimately lower government spending and increase consumer choice. Within the complexities of actual policy, however, the effect of vouchers varies from helpful to devastating, depending on the existing circumstances. Voucherizing Medicare or primary schooling, for example, would be a disaster.
Medicare has been on the forefront of this year’s election because the costs of the program are rising. These rising costs are no fault of the Medicare program: The Baby Boomer generation is aging, people on average are living longer and health technologies are advancing in quality. Health expenditures are increasing for everyone and in all parts of the world; this is not a characteristic unique to Medicare. That’s why policy improvements must consider holistic solutions rather than only decreasing costs.
Mitt Romney’s plan for Medicare is to repackage current spending into “a fixed-amount benefit to each senior that he or she can use to purchase an insurance plan.” This is voucherizing. Senior citizens under this plan would receive a “fixed-amount benefit” (a voucher) that could be spent toward private insurance or toward Medicare. Under a simplistic model, this seems like a good idea: Increase choice while maintaining the Medicare option. In actuality, this would lead to a divergent system in which health insurance for the elderly becomes even more unequal. In addition, government debt would rise due to Medicare’s weakened bargaining power within the insurance market.
It’s important to remember that Medicare is essentially a large insurance company. Under the current system, Medicare is a large share of the health insurance market. When it comes to price-setting between Medicare and various medical providers, Medicare can use its large purchasing power to its advantage and obtain lower prices from the health providers. If Romney is elected and implements the voucher system, there will be immediate, negative changes for senior citizens and for future generations. Economic expectations for Medicare within the healthcare market will shift from a force to be reckoned with to a much less relevant entity under the voucher system. Because prices are driven by expectations of the future, Medicare will immediately lose its bargaining power and won’t be able to secure the prices it does now. Romney is claiming that current seniors won’t be affected, but this is false. With its loss of bargaining power, Medicare will either be more expensive (adding to debt) or some Medicare benefits will have to be diminished. Seniors who can afford higher quality insurance will be okay, but those who can’t will be left behind as Medicare loses its bargaining ability. And by the time our generation ages, the system would be further divergent. As people opt out for private insurance, Medicare will become more expensive or provide fewer benefits or both. Private insurance companies would be the only feasible option for elderly individuals, and because of the way these companies profiteer, elderly people would be subjected to the highest insurance premiums and the financial stress that Medicare was created to alleviate.
Voucherizing has also cropped up this year in education policy, with Romney supporting the V-word and Obama opposing it. The end result of divergence is the same, but the mechanism is different. Voucherizing primary schooling means that more middle-income and high-income families would switch to private schooling and our education system would become more socioeconomically (and therefore racially) segregated. This already happens to some extent—people choose where to live based on the neighborhood schools, and because schools are often funded by local taxes, constituent wealth and education funding tend to accumulate together. Areas with high concentrations of low-income neighborhoods have less tax revenue to apply toward schools. Add in vouchers, and the public school system will lose resources to private schools and primary education will abandon all semblance of equal opportunity.
There is no universal rule that vouchers are always negative. It is highly context-dependent. In the case of the uninsured non-elderly population, voucherizing makes some sense: It encourages being insured and therefore diversifies risk and reduces unnecessary hospital visits, which are often paid for by the government when someone is uninsured. In the cases of Medicare and education, however, voucherizing would eventually lead to a system that fails to protect those who rely on public options. In the end, we have to decide what we value. If we value the health of our seniors and the education of our youth, then we can’t let them be swept callously into the margin.
Rajlakshmi De is a Trinity senior. Her column runs every other Tuesday. You can follow Rajlakshmi on Twitter @RajDe4.