Essay on Social Security Act

One of the most effective federal government programs is Social Security. The Social Security system is entirely funded by taxes paid by American employees and for the past 83 years, Americans have been supported by Social Security. The development and administration of the United States’ Social Security program are examined in this study. This document discusses the Social Security program’s history, current organization and future projections.

The Social Security Act, passed by Congress in 1935, was a watershed moment in the history of law. This act imposed unemployment insurance and funding for state-run aid programs, as well as establishing an old-age insurance scheme. “The United States was a relative latecomer in covering its employed workers with compulsory old-age insurance, and perhaps for this reason it is not surprising that the United States program was largely inspired by continental European models, particularly the German example, in the 20 or more years preceding its adoption,” Hoskins (2010). Today, the Old-Age Survivors and Disability Insurance (OASDI) follows some of the same basic concepts as other old-age insurance systems. The Committee on Economic Security, which President Roosevelt created in 1934, would prove to be a difficult task. During the Great Depression, there was an increase in poverty among the elderly, prompting debate over the need for an old-age income program. “Many employees were unable to meet their daily financial requirements (e.g., housing and food), and most employees were unable to retire because they lacked the financial means to sustain themselves in retirement.” (Martocchio, 2011). President Franklin D. Roosevelt gave Congress notice that he intended to propose an all-encompassing social insurance policy. There was also a distinction between social insurance and social assistance, according to President Roosevelt and his Economic Committee.

Even though there have been many modifications to the details of Social Security benefits since 1939, the essential idea of benefit structure remains the same. Taxpayers contribute to the Social Security program through payroll taxes. When taxpayers pay Social Security taxes, the Social Security Administration uses the funds to pay benefits to those who have already retired, those who are disabled, survivors of employees who have died, and beneficiaries’ dependents (Social Security Administration, 2018). Any money that isn’t used will be deposited into the Social Security trust funds. “Social Security in the United States always featured components of individual fairness… It also had elements of social adequacy,” Thompson (1984). He goes on to say that higher-wage workers would receive larger benefits each month than lower-wage workers, and that the ratio of low-wage workers receiving benefits was higher than that of higher-wage workers. Earners with wages at the maximum taxed amount would receive only 34% of wages earned before retirement, whereas the average waged person would receive 58 percent of their preretirement earnings. Workers earning half as much as the average income, on the other hand, would receive 73% of their pre-retirement wages. When compared to Germany’s retirement system, where benefits are scaled directly to wages earned before retirement, and the Netherlands’ system, where Social Security pays flat-rate benefits regardless of recipients’ preretirement social insurance contributions, some see the US Social Security Program as a sweet middle ground. Mandatory private pension system should replace the existing social security system since the present system coerce workers and other employees to give out certain amount of their earnings to Social Security. The amount taxed is then used a form of payment to vulnerable in the society such as the citizens with disability, retired people, dependents of beneficiaries and survivors of employees who had perished. To some people such system seems unfair when their paycheck is deducted and paid to the vulnerable in the society.

Social security’s viability in 10 years since most of the 25 year-olds are likely are likely to develop disability issues before they reach age 65 years. While Social Security will continue to exist for future generations, the Social Security and Medicare Board of Trustees concluded in their 2003 annual report that the system will begin to run cash shortfalls in about 15 years, with the severity increasing each year. In order for Social Security to stay solvent, the program’s taxable payroll will have to be significantly increased (House Hearing, 2004). By leveraging the government bonds held in trust funds, Social Security may only provide benefits till 2040 which will also strain allocation of budget put by the government.

There should be long term put in time and future preparation should commence to ascertain success of the social security. Because its payments are guaranteed, Social Security is one of the programs that can sustain its worth. Altman (2009) sates that the program was meant to offer a foundation of economic support to help employees maintain their levels of life and avoid sliding into poverty once they stopped working. The rates would have to be replaced to around 70% of what they are now if workers are to preserve their quality of living for Social security to be a success (Altman, 2009). If the pre-retirement level of life is to be maintained, higher percentages are required for low-income workers and slightly lower percentages for the highest paid. The current Social Security replacement rate is insufficient to maintain preretirement standards of life.

The second suggestion is that the program be upgraded so that it can provide the finest insurance benefits possible. Updates to accommodate demographic and economic changes would be required as part of updating the program. To preserve the long-term stability of Social Security, progressive modification is required to avoid jeopardizing the values on which it was founded. Those who are enrolled in the program will receive less benefits than they were promised if nothing is done by 2037. Understanding how demographics are changing is critical to upgrading Social Security.

These suggestions will be most effective if they can see how they would boost President Roosevelt’s vision. There must be complete buy-in from all parties concerned. They must, for example, imagine what kind of country we want to be. To get it implemented, political parties would need to be reminded that if nothing is done, we will most likely be committing genocide against the poor. This is not a problem that can be ignored because Social Security affects everyone, regardless of their generation. It would be necessary to make the recommendation that the money that goes into Social Security be set aside rather than used as monies that are continually spent. More information regarding how Social Security will be impacted if nothing is done about its current state is needed. Increase the rate to around 70%, modernize the scheme to keep up with current times, and remove the taxable cap are all things that need to be addressed through education. When people are educated, they may make more informed decisions about which path to take.

Medicare has been under the responsibility of the US government since 1965 as social health insurance program. Medicare was created to ensure that elderly individuals have access to affordable health insurance. Additionally, the program benefits persons with kidney illnesses and acute disability. Prior to the creation of Medicare, elderly people and other vulnerable groups had little access to affordable health insurance. Furthermore, they were barely able to pay it .Many Americans have been wisely insured for their health thanks to Medicare. In general, Medicare differs significantly from other commercial insurers that operate profitably. Part A, B, C, and D, are the four portions of Medicare. Part A is designed to address the health of persons who are admitted to hospitals, whereas Part B is designed to meet the medical needs of outpatients. The United States federal government is responsible for compensating persons who have private health insurance under part C. Many people (almost 70%) who have enrolled for medical insurance coverage are, nevertheless, covered by standard Medicare. The remaining 30% are enrolled in the ‘Medicare Advantage’ program. Part D, on the other hand, covers the prescription of pharmaceuticals to patients who do not reside in hospitals and is primarily carried out through private provisions and Medicare advantage plans (Aaron, Lambrew & Healy, 2008).

Furthermore, many elderly and sick people benefit from this health insurance coverage. Furthermore, poor people who can no longer afford healthcare can now obtain treatment for free or at a reduced cost. Those who have signed up for Medicare are responsible for half of the healthcare costs, with the remaining half covered by insurance. Medicare is financed through a revenue tax paid on both employees and employers. Part A of Medicare is primarily funded by revenue taxes (Aaron, Lambrew & Healy, 2008). Part B and part D of the Medicare are funded by premiums collected from persons who have registered for Medicare and income from general funds. Medicare spending has risen dramatically over the years and is expected to continue to rise. Increasing healthcare expenditures, on the other hand, has resulted in financial constraints. This has prompted policymakers to propose recommendations for ways to reduce Medicare spending. Therefore it is critical to comprehend Medicare’s provisions in order to make the most of it. The United States’ federal government has enacted a number of legislative reforms in an attempt to keep Medicare expenses under control. Legislators have proposed a premium support plan in this context. By limiting the value of receipts and linking their increase to inflation, this method will minimize the cost.

People, on the other hand, expect the receipts’ worth to be low when compared to other health-related expenses. The other proposed premium assistance option would keep standard Medicare but would not be indexed to inflation (Andersen, Rice & Kominski, 2007). On the other hand, several techniques have been devised to raise the age of those eligible for Medicare. As the population ages, the proportion of employees and retirees will inevitably rise, necessitating the reduction of programs for the elderly. Increasing the age at which a person becomes eligible for Medicare would save a lot of money, which would help vulnerable populations acquire insurance coverage. As a result of the coverage policy, producers who distribute medicines to hospitals must provide a 20% return on their average prices. Poor people and the elderly will be eligible to free Medicare coverage. Furthermore, the government will obtain medications for them. (Blumenthal,2004). The government would be able to gather and repurpose a significant amount of money for the health of American residents as a result of this while private insurance plans are predicted to decline as people are subjected to needless and expensive treatments. Unnecessary fees are one of the primary causes of growing medical expenditures. Legislators have proposed that insurance coverage be limited to 50 percent of the total cost (United States Government, 1993). Furthermore, due to high administrative expenditures, healthcare is costly. The amount of money spent on administration and healthcare services is governed by some policies. Individuals have also spent a significant amount of money on health services (85 cents every premium dollar) as a result of such policies.

Medicare benefits provide inexpensive healthcare to millions of elderly and people with disabilities in the United States, therefore recipients are frequently concerned about the program’s future. There have been several concerns about Medicare’s future viability in recent decades, both in terms of financing the program and ensuring that its responsibilities are covered. These concerns not only raise the question of how long Medicare can continue in its current form, but they also raise the question of whether Medicare will still exist in 2050. (Olshansky et al, 2009). According to current projections, Medicare will run out of money for hospital insurance by 2026, and other elements of Medicare aren’t far after. Medicare appears to be on its way to insolvency sooner rather than later, owing to shifting economies and the aforementioned higher life expectancies of Americans. When you combine this with decreased birth rates in the present generation in the United States, it appears that considerable reforms will be required to get the program back into a stable state of solvency.

One approach to do this is to make those who receive Medicare benefits pay higher premiums, which would be combined with higher FICA income taxes deducted from workers’ paychecks. Another strategy to address the issue is to promote competition among healthcare providers in order to reduce costs. This can be accomplished by requiring greater openness and providing Medicare recipients with additional covered treatments, such as telehealth. It may be able to keep Medicare afloat for the time being by lowering costs while rising taxes, but the program as a whole may need to undergo much more drastic adjustments in the future.

Medicare is a vital part of the American health-care system, covering one out of every seven people. Medicare, like Social Security, is a social insurance program that offers health coverage to people regardless of their income or health. People pay into Medicare throughout their working lives so that when they turn 65, they and their spouses would be covered. Medicare is funded primarily through three sources: payroll taxes, general revenues, and beneficiary premiums.

References

Andersen, R. M., Davidson, P. L., & Baumeister, S. E. (2007). Improving access to care in America. Changing the US health care system: key issues in health services policy and management. 3a. edición. San Francisco: Jossey-Bass, 3-31.

Aaron, H., & Lambrew, J. M. (2009). Reforming Medicare: Options, Tradeoffs, and Opportunities. Brookings Institution Press.

Olshansky, S. J., Goldman, D. P., Zheng, Y., & Rowe, J. W. (2009). Aging in America in the twenty‐first century: demographic forecasts from the MacArthur Foundation Research Network on an aging society. The Milbank Quarterly, 87(4), 842-862.

Blumenthal, D., Moon, M., Warshawsky, M., & Boccuti, C. (Eds.). (2004). Long-Term Care and Medicare Policy: Can We Improve the Continuity of Care?. Brookings Institution Press.