REMAKING MEDICARE - THE VOUCHER MYTH

There is growing enthusiasm for transforming Medicare into a voucher s ystem. Advocates claim vouchers would increase the health care choices available to Medicare beneficiaries, reduce the regulatory burden on the federal government, and promote the benefits of fair market compet ition. In addition, some analysts contend vouchers are the only feasib le solution to Medicare's short-term financing problems and the long-t erm ''crisis'' of the retirement of the baby-boom generation. The auth or argues against these claims. Vouchers would not work as advertised by proponents because of the limitations of risk-adjustment methods an d unrealistic assumptions about consumer choice. Moreover, the elderly and disabled Medicare population is ill-suited to cope in a competiti ve insurance system. Implementation of vouchers would therefore pose a threat to both the health of beneficiaries and the stability of the M edicare program. The implications of this analysis for Medicare reform are discussed.