Shawn has a masters of public administration, JD, and a BA in political science.
Social Insurance Defined
Representative Smith is holding a town hall meeting as part of her campaign for reelection. At the meeting, one of her constituents raises the issue of social insurance programs. Representative Smith expected the question because social insurance programs, or entitlements, are always a hot-button issue during an election year. Many of her constituents don't understand what social insurance is and confuse it with public assistance.
Social insurance is a set of insurance programs that are administered by a government. Just like private sector insurance, they provide benefits upon the occurrence of certain insured events. For example, unemployment insurance provides benefits if an insured person becomes unemployed. Additionally, just like private sector insurance programs, only citizens that contribute to a social insurance program are eligible to receive benefits from the program. Social insurance benefits are funded in the United States through payroll taxes.
Representative Smith explains to the town hall participants that it's important to note that social insurance programs are not poverty or public assistance programs because the entitlement to benefits is not necessarily based upon need. In fact, some beneficiaries of Social Security retirement benefits are very wealthy. Benefits are based upon contributions made to the program by citizens and the occurrence of qualifying events. On the other hand, public assistance programs, such as food stamps, are based upon need.
Major Federal Programs
Nearly all of Representative Smith's constituents are covered under at least some part of the federal government's social insurance programs. In fact, you'd be hard pressed to find an individual who is not covered by at least one of these programs at one point in their lives.
The federal government's social insurance programs are authorized pursuant to the Social Security Act of 1935, as amended. Programs include Old Age, Survivors, and Disability Insurance (OASDI); Medicare; and unemployment insurance. The programs are often collectively referred to as the Social Security program. Let's take a look.
The Social Security Act provides for Social Security Old Age, Survivors, and Disability Insurance benefits (OASDI). These benefits consist of monthly payments to qualified beneficiaries who have retired upon reaching a minimum age, are disabled and unable to work, or are qualified families of deceased wage earners. Benefits are not needs-based. Instead, a wage earner and her family is qualified so long as the wage earner has been employed for a minimum amount of time and made contributions to the Social Security system through payroll taxes.
Ally, Beth, Carl, and David are all receiving Social Security Old Age, Survivors, and Disability Insurance benefits. Ally receives a monthly retirement benefit because she is retired and has reached the minimum age to receive benefits. She'll receive a monthly retirement benefit until she dies, as long as she remains retired.
Beth and Carl are entitled to survivor benefits. Beth is a widow who has reached retirement age. She was a homemaker for her entire life but receives Social Security survivor benefits based upon her deceased husband's contribution to the Social Security system. In fact, even divorced spouses may qualify for survivor benefits under certain circumstances. Carl is ten years old. He receives Social Security survivor benefits until he is 18 (up to 19 if he is still in high school) based upon his deceased father's contributions.
Finally, David is eligible for disability benefits under Social Security Disability Insurance (SSDI). Individuals like David, who become unable to work because of a disability and expect to be disabled for at least 12 months before reaching the minimum retirement age for retirement benefits, may be eligible to receive SSDI payments. Disabled workers must have worked and paid into the Social Security program for a minimum amount of time to be eligible. This minimum amount of time depends upon the age of the worker at the time of becoming disabled.
Ally not only qualifies for old age retirement benefits but also Medicare. Medicare is a social insurance benefit added to the Social Security program in 1965 and is funded by a payroll tax. Medicare provides healthcare benefits for eligible participants. Most people who are at least 65 years of age are eligible, as are younger people suffering from certain disabilities, such as kidney failure.
Medicare benefits are divided into four parts:
- Medicare Part A covers inpatient hospital care, hospice care, and skilled nursing facilities.
- Medicare Part B is a supplemental insurance program that can be purchased by Medicare recipients to cover physician services, outpatient hospital services, lab tests, physical and occupational therapy, and home healthcare. It's funded by premiums paid by beneficiaries as well as general tax revenues.
- Medicare Part C, which is also called Medicare Advantage, is an optional alternative to Medicare Parts A and B. Part C involves private sector Medicare plans, such as health management organizations, preferred provider organizations, or traditional fee-for-service plans. The government pays a fixed fee to the plan for each Medicare participant enrolled.
- Medicare Part D is the newest addition to Medicare. It provides coverage for prescription drugs.
The Affordable Care Act
During the tenure of President Barack Obama, numerous expansions have been made to Medicaid program. This expansion was made through the Affordable Care Act (ACA), commonly known as Obamacare. One of the key goals of the ACA was to make sure that as many people as possible had access to affordable healthcare. Prior to the ACA being implemented, there were roughly 46.5 million people without health insurance. The ACA tried to make healthcare more accessible by providing subsidies for health insurance premiums and by implementing cost-sharing reductions.
As a result of the ACA, more than 20 million people received health insurance in the period between 2010 and 2016. The law was considered highly controversial due to the individual mandate. The individual mandate enforced that you had to pay a fee equal to 2.5% of your annual household income in case you had the money to pay for healthcare, but choose not to do so. For most households, this meant paying almost $700 annually. While Congress repealed the individual mandate when Republicans won control of Congress after the 2016 election, the attempt to repeal the ACA was not successful. One of the main reasons for the popularity of the ACA was ensuring that health insurance companies could no longer deny people with pre-existing conditions access to healthcare.
Eugene is also one of Representative Smith's constituents. Unfortunately, Eugene lost his job recently due to a plant closing. Fortunately for Eugene, he is eligible for unemployment benefits. Unemployment benefits offer temporary payments to eligible people who have lost their jobs. Each state administers its own program subject to federal standards and approval from the Secretary of Labor.
While Eugene is eligible for unemployment insurance, not everyone is. All states generally require that an individual have worked a minimum amount of time and earned a minimum amount of wages before becoming eligible for unemployment benefits. Moreover, an individual must not have left employment voluntarily without good cause. In other words, if you quit just to quit or quit for no good reason, you will not be entitled to unemployment benefits. Of course, benefits don't last forever. Benefits usually end after 26 weeks unless the federal government extends the coverage due to severe economic downturns.
Let's review what we've learned. Social insurance is a set of insurance programs that are administered by a government. Unlike public assistance programs, eligibility for social insurance benefits is not based upon need. In the United States, federal government social insurance programs are generally funded through payroll taxes.
Social insurance programs in the United States include Old Age, Survivors, and Disability Insurance benefits, Medicare benefits, and unemployment benefits. OASDI benefits provide monthly payments to eligible retirees, families of deceased wage earners, and people that have become disabled and unable to work. Medicare provides healthcare benefits for people 65 years and older and people suffering from certain medical conditions. Finally, unemployment benefits provide monetary benefits to unemployed individuals for a period of time as they seek new employment.
Once you've finished with this lesson, you will have the ability to:
- Define social insurance and understand how social insurance programs are funded
- Describe three types of social insurance programs: OASDI, Medicare, and unemployment insurance
- Recall who qualifies for each type of social insurance program
- List the four parts of Medicare benefits
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