What’s at Stake in 2026: Medicare Premium Support

The mechanism by which people pay for Medicare has been the same since the program’s beginning over sixty years ago. Americans pay into the federal health care fund during their working years, and then they pay monthly premiums to access Medicare benefits once they enroll. Most people do not pay premiums for Part A coverage, and the Part B premium is calculated every year based on program costs (adjusted for higher-earning individuals based on income). Every Medicare enrollee pays these premiums or has their premiums paid for them by programs based on their limited income and savings.

People can choose to access their Medicare benefits in one of two ways: through Original Medicare, where their providers bill Medicare and the federal government or its contractors pay directly, or through Medicare Advantage, where Medicare pays private insurance companies to administer the benefits. Importantly, all people with Medicare are entitled to the same standard coverage regardless of whether they are enrolled in Original Medicare (OM) or Medicare Advantage (MA). All MA plans are required to cover at least the same set of medically necessary services that OM covers, though they may impose different cost sharing and rules.

A Proposed Premium Support System

Some policymakers have suggested that Medicare should save costs by moving away from the current structure, where beneficiary premiums represent a cost-sharing relationship with the government for a defined benefit, to a system where beneficiaries must purchase health insurance with a limited allowance—“premium support,” effectively a voucher—from the government.

Sometimes this is described as a natural outgrowth of the existing Medicare Advantage benefit. It is not. Premium support would be a complete restructuring of Medicare and signal the end of the program as we know it. The individual voucher amounts might not cover the full cost of coverage that is comparable to the current Medicare benefit package. And there would be no standard benefit package and no guarantee that the coverage a person buys with their voucher covers essential health services. Some proposed versions of the voucher system even incentivize the creation of insurance options that offer pared-down coverage appropriate only for healthier beneficiaries, worsening the inequity and overpayment problems caused by favorable selection.

Shifting Costs to Beneficiaries and Providers

Like proposals that seek to upend the Medicaid financing system and replace the federal-state match with fixed block grants, a premium support system can only reduce program costs if it shifts the financial burden of care or risk to individuals and providers. Independent, nonpartisan research has shown that a system that provides vouchers instead of a defined benefit with set cost sharing would result in higher and increasing premiums for beneficiaries and lower payments to medical providers, cutting away at access to care by paying more for less.

View the fact sheet: What Medicare Premium Support Means for Older Adults and People With Disabilities.

View the series: What’s at Stake for Older Adults and People With Disabilities.