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Pulling It Together: Medicare, Medicaid, and The Multiplier Effect

We are witnessing a battle in Washington right now about the future of health care’s two big public programs, Medicare and Medicaid. It’s a budget battle, it’s an ideological battle, it’s a partisan political battle, and while it might not always be obvious following the debate, it’s a high stakes battle for people. In 2011, over a hundred million low-income, disabled, and elderly beneficiaries will be served by the two programs.

Many of the proposals being discussed are not entirely new. Premium supports and vouchers for Medicare have been proposed many times in the past dating back to the Reagan years, and the idea of converting Medicaid to a block grant has been around in one form or another for decades. Each debate in each era has unique attributes (the rise of the tea party, the size of the deficit and the game of chicken surrounding the debt ceiling seem to be big factors now), but over time we have learned a few things about proposals to make large scale changes in health care’s two big public programs. Big public programs that distribute benefits to lots of people are hard to cut. They are even harder to restructure in fundamental ways. They are somewhat easier to expand because people welcome new benefits, although paying for new benefits is often a real challenge.

There are varying reasons why these big health programs have such staying power. They serve a lot of people (48 million on Medicare this year and an estimated 69 million on Medicaid during 2011, including 9 million people covered by both programs, known as dual eligibles).  They deliver benefits people greatly value. Their beneficiaries often have political clout, especially Medicare beneficiaries because seniors are much more likely to vote than the rest of us are. They can have influential constituencies, especially the providers, pharmaceutical companies and other suppliers who depend on both programs. There are elected officials and advocacy groups in Washington who are deeply committed to the purposes of both programs (just as there are elected officials who would like to dismantle them).

But there is another source of the staying power the two programs have which has not received much attention. Their base of support is much broader than we realize.  I call it the “multiplier effect.”

In thinking about how much the public values a program, you have to consider not just the people on the program itself, but also the experiences of their family members and friends. And, you have to look at experiences over time, because you or a family member or close friend may have had a positive (or negative) experience on a program ten years ago or more that shapes your view of it today.

Think about how you would assess the value of a program or evaluate a proposed policy change such as premium support or a block grant. You might not be a program beneficiary yourself, but if it benefited your kids or a parent or a close friend, or if you believed it threatened benefits critical to their health, that would shape your view of the program and what policy changes might or might not be acceptable to you whether or not you were personally affected. Alternatively, if a family member or close friend had a bad experience on a program that could influence your view as well.

Now, with the multiplier effect in mind, let’s do some math.  Among the nonelderly in 2006, at least 57% have participated in Medicaid sometime during the previous two decades or lived with someone who participated in Medicaid during that period. (We use 2006 and go back two decades because these are the only available data). When you look at a program like Medicaid this way, you discover that more than half of the American people have been touched directly by the program or indirectly through someone they have lived with and care about. These numbers don’t count relatives outside of the household or friends because we do not have data on that. The 57% number, which comes from our analysis of the University of Michigan Panel Survey of Income Dynamics, paints a similar picture to a recent finding from our tracking poll. We found that 51% of the adults reported that they or a family member or friend had at some time received help from the Medicaid program, with most reporting a positive experience (not surprisingly, the biggest problem reported was finding a doctor).

The multiplier effect for Medicare should be obvious, but it also helps explain why the program is nearly sacrosanct. Because Medicare is a universal program for people over age 65 (and people who are disabled), nearly everyone will eventually be on Medicare.  In 2008 (the most recent year we have data about the family status of Medicare beneficiaries), there were about 75 million children of Medicare beneficiaries, plus about 4 million spouses who were not themselves on the program. That is in addition to the 48 million current beneficiaries. So counting the multiplier effect for family members (and excluding friends), Medicare touched the lives of more than 125 million Americans that year, not the 48 million we normally think about. And this definitely understates the effect.  For example, many Medicare beneficiaries have grandchildren who are involved in their lives. The multiplier effect can also apply to parts of programs. For example, the 8 million people under age 65 who are covered by Medicare because they are disabled may have children and parents who are concerned about Medicare.  We know that Medicare beneficiaries are resoundingly positive about the program and protective of it. The reach of the program and its base of support is much broader than we think.

Many factors influence public reactions to policy proposals, including ideology, partisan affiliation and media coverage. But personal experiences – and those of people you care about and trust – can powerfully affect how people view a major change in a public program like Medicare or Medicaid. So, when you think about the reaction to a big policy proposal like premium support for Medicare or a Medicaid block grant (or other big programs like Social Security), remember to look beyond the narrow constituencies and voting blocs and multiply, because that’s what voters will be doing.