Social security and Medicare are two essential programs which help people in need and low social classes to survive and receive quality healthcare. The proposed social security may resemble private insurance, but it is fundamentally different. The driving principle of social security programs is concern for adequacy–that benefits meet the basic needs of persons these programs are designed to protect. The emphasis on social adequacy is consistent with societal goals directed at providing for the general welfare, protecting the dignity of individuals, and maintaining the stability of families and society. Another difference: people choose to buy private insurance; they are often forced to pay taxes for social insurance. Because of this feature, social insurance programs are not hindered by what economists call “market failure” even though these programs are structured to accept all, that is, to include persons who for such reasons as illness or advanced age would not be considered suitable for many private insurance plans. If the federal government decided to offer disability protection as part of social insurance, it would have two advantages over Insurance Company. First, it could pool the risk broadly because of its coercive powers. Because everyone would contribute to the plan, the government is assured of a large revenue base to meet the costs as well as a good balance between “good” and “bad” risks. Second, it could raise the taxes indefinitely. If costs rose, so could taxes, enabling the disability plan to maintain is solvency (Kotlikoff, 2007). Today, private insurance depends on a search for profit. But, as noted, a concern for adequacy–that benefits meet people’s basic needs–drives social insurance. The advantage of social insurance in this regard lies in the way that it helps to solve social problems; the disadvantage stems from a lack of limits that a market might otherwise set, though the political process, careful financing, and the linkage of benefit payments to payroll and other forms of taxation serve as a check. (Martocchio, 2002).
The two main groups affected by social security programs are local poor and disabled who would receive better social and medical support. Unlike in welfare programs, the right to benefits in social insurance programs does not require proving extreme financial need. Benefits are an earned right, not affected by savings or by total income from other sources. This adds to the dignity of social insurance beneficiaries and helps explain public support for social insurance programs. The lack of a means test also encourages workers to build savings and other forms of private protection as supplements to social insurance since their benefits will not be affected by their assets. As with other types of income, social insurance benefits are often countable for income tax purposes. But in fact, while there is no means test, many who benefit have little or no means (Kotlikoff, 2007; Martocchio, 2002)..
For employers, social security and improved Medicare programs will help to reduce spending on healthcare but improve working conditions. That creates a strong sense of entitlement and greatly limits the discretion that agencies have in awarding benefits. Equally important, because contributions are linked to benefit payments, workers and their employers have a personal stake in the financial stability of these programs. That personal stake helps to ensure financial responsibility when benefit increases and other program changes are being considered. They include a concern for social adequacy, a concern for individual equity, a right to benefits that is clearly defined by law, universal coverage, and a concern for stable financing. Social security, like private insurance, protects against losses from identifiable risks.
References
Kotlikoff, L. J. (2007). The Healthcare Fix: Universal Insurance for All Americans. The MIT Press; 1 edition.
Martocchio, Joseph J. (2002). Employee Benefits: Primer for Human Resources Professionals, 3rd Ed McGraw-Hill.