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Chapter 17 |
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The government is the major redistributor of income from one group to another. Transfer payments, which are direct payments in cash or goods to individuals as part of a social welfare program, now account for over half of all federal outlays. In spite of these payments, some 11-15 percent of the population have incomes below the poverty line, an official standard of income needed for "a decent standard of living." Over two-thirds of transfer payments are not means-tested and go to individuals above the poverty line.
Poverty in the United States
The official government definition of poverty focuses on the cash income needed to maintain a "decent standard of living." In 2004 the poverty line is about $19,000.
Most poverty is not long term. Although 11-15 percent of the population is in poverty, only about half of these will remain in poverty for more than five years. For the temporary poor, welfare is a “safety net” that helps them through hard times. However, the persistently poor are more likely to compose a permanent underclass which (with many individual exceptions) suffers high teen pregnancy, family instability, drug use, high crime, and other social ills which are both causes and effects of poverty.
Poverty and welfare dependency are much more frequent among female-headed households. Teenage motherhood usually predicts poverty, however the number of births per 1,000 women 15 to 19 years of age has declined in recent years. Federal survey data indicate that teenage girls are having less sex and making more use of birth control.
Most social problems such as poverty are centered in the nation's largest cities. This is due in part to the shift in the types of jobs available -- inner-city residents have fewer and lower-paying jobs available.
Social Welfare Policy
Today nearly one-third of the U.S. population receives some form of government benefits. More than half of all families include at least one person who receives a government check. Social welfare programs are divided into either social insurance or public assistance. Social insurance programs are those that require beneficiaries to make contributions to it before claiming benefits and the benefits are available regardless of personal wealth. Public assistance requires beneficiaries to show need.
Entitlements are government benefits for which congress has set eligibility criteria and everyone who meets the criteria is "entitled" to the benefit. Most entitlements were created during either the New Deal of the 1930s or the Great Society of the 1960s. Social Security began during the Great Depression and comprises two programs. The Old Age and Survivors Insurance program provides monthly cash benefits to retired workers and their dependents and to survivors of insured workers. The Disability Insurance program provides cash payments to disabled workers and their dependents. Social Security with 44 million beneficiaries is the single largest spending program in the federal budget. It is funded by a payroll tax on employers and employees. Unemployment compensation provides temporary replacement wages for workers who lose their jobs involuntarily and thus helps to stabilize the economy during recessions. Supplemental Security Income is a means-tested income assistance program that provides cash payments to the elderly, blind, and disabled. The Temporary Assistance to Needy Families program provides grants to the states to help needy families. States define those who are "needy" and sets benefit levels. Low-income households are provided coupons for food in order to meet minimal nutrition needs through the Food Stamps program. The Earned Income Tax Credit is a tax measure designed to help the working poor by provided a tax refund of payroll taxes. Medicaid is a join federal-state program provided health services to low-income Americans; most beneficiaries are the elderly and disabled.
Senior Power
Senior citizens are the most politically powerful age group in the population; although they only constitute 28 percent of the voting-age population, their rates of actually voting are higher than for many other groups. The American Association of Retired Persons (AARP) is the nation's largest interest group. As baby boomers (born 1945-1960) retire starting in 2010, senior citizens will become an even larger group.
Although designed to create a trust fund that would pay future beneficiaries, Social Security is now financed on a pay-as-you-go basis. In the past, this has meant that surpluses in Social Security receipts were available to lower the deficit and avoid increasing taxation. However, because current workers must pay for the benefits of current retirees and other beneficiaries, the dependency ratio becomes an important component of evaluating the future of Social Security. As the number of beneficiaries grows during the next twenty years the Social Security surplus will turn into a deficit whose burden will fall on the next generation. There is much speculation about whether Social Security will remain the political "untouchable" that it now is, or if Generation X voters will push for reductions in benefit payments and thus come into conflict with the AARP and senior citizens. The income of Social Security taxes currently exceeds payments to beneficiaries and thus has made its surplus a tempting way to hide federal budget deficits. Social Security is a political hot button, however, and is often referred to as needing to be "saved." Ideas to save Social Security include limiting cost-of-living adjustments or allowing investment of funds in the stock market.
Politics and Welfare Reform
The politics of welfare lies in the tension between the conflicting goals of helping the poor but also not encouraging dependency. By the 1990s, a number of factors brought welfare reform to the fore. One was general political trends toward conservatism. Another was the fact that as most women continued to work after childbirth, there seemed to be no special claim of welfare mothers to be able to stay at home. A third was the alarming increase in unwed motherhood, for which welfare payments seemed to be an incentive. As public opinion turned increasingly against support for welfare as epitomized by Aid to Families with Dependent Children (AFDC), Republicans campaigned to "end welfare as we know it," a policy theme also embraced by President Clinton.
The Welfare Reform Act of 1996 abolished the AFDC in favor of a system of block grants to states, which were still obliged to spend at least 75 percent of the funds previously spent on AFDC. A two-year limit was placed on continuing benefits, with a 5-year lifetime total. (But states can exempt 20 percent from time and work requirements). Cash benefits could only be given to unwed parents under 18 if they lived with an adult and attended school. Women already on welfare could not receive increased payments if they bore more children (the "family cap"). Many long-term recipients across the country have now exhausted their two-year time limit. In virtually all states, families that have exhausted their time limit are given extensions or declared permanently exempt due to disabilities.
It is unlikely that the United States will return to a system of welfare as we used to know it, however there is continued debate over additional reforms including subsidized day care, increases in the minimum wage, additional medical care for the poor, and expansions of food stamp programs.
President George W. Bush has established an Office of Faith-Based and Community Initiatives in the White House to allow churches, synagogues, mosques, and charities to receive federal grants to assist them in providing food, job training and counseling, substance abuse programs, and other aid. Public opinion is generally in support of this type of public policy but critics worry that government-funded faith-based organizations promote religion and violate the No Establishment Clause of the First Amendment.
Health Care in America
Most advanced democracies provide guaranteed access to medical care. The United States is an exception. Moreover, compared to these democracies, the United States spends more of its GNP on health care, yet has a higher infant death rate and a lower life expectancy.
Most of the leading causes of death today are linked to heredity, personal habits and lifestyles and the physical environment - factors over which doctors and hospitals have no direct control. Thus there is the argument that the best contribution to better health is to be found in altered personal habits and breakthroughs in technology.
About 85 percent of Americans have health insurance, but this includes Medicare and Medicaid. The government pays 43 percent of all health care costs today, even without comprehensive national health insurance. Another 40 percent is paid by private insurance, leaving 17.2 percent which has to be paid directly by patients. The 15 percent of Americans with no health insurance number 42 million. Another serious problem is the gaps in insurance that occur for many Americans due to unemployment and job shifts in any given year. When confronted with serious illness, the uninsured may well be obliged to impoverish themselves before becoming eligible for Medicaid. In terms of the elderly, Medicare does not pay for care beyond 60 days of hospitalization and 100 days of nursing home care (if sent from a hospital). The AARP has lobbied strongly but unsuccessfully to add long-term nursing home care to Medicare. Also, Medicare currently does not pay for prescription drugs and prescription drugs are more costly in the U.S. than anywhere else in the developed world.
Because health care costs have continued to increase faster than the rate of inflation, strong pressures have emerged to control the costs of health care. Cost control policies have been implemented both by the government and by the insurance industry. Both encourage the expansion of health maintenance organizations (HMOs), which charge clients a fixed fee for total health services (as listed by the HMO) and which profit from any cost reductions in services. Critics claim HMOs have too much incentive to ignore patients' needs and limit patient options.
Medicare is a two part program designed to help elderly and disabled patients to pay acute-care health costs. Hospital insurance or Part A helps pay the cost of hospital inpatient and skilled nursing care. Anyone sixty-five or older is eligible for Part A benefits. Part A is financed mainly through a 1.45 percent payroll tax. Supplemental Medical Insurance or Part B is an optional add-on that covers 80 percent of covered doctor and outpatient charges. Small monthly premiums are deducted from Social Security benefit checks. Medicare has sought to reduce rising costs in three ways:
1) original Medicare or fee-for-services now allow patients to choose any specialist but at a higher co-payment.
2) managed care plans - patients join an HMO that receives the patient's monthly Medicare premiums for an insurance plan that covers most of the same items covered by Medicare, however, patients must see only HMO doctors
3) Medicare plus Medigap - patients remain in Medicare and can choose their own doctors but purchase separate "medigap" plans from a private insurer to cover the cost gaps in Medicare.
Politics and Health Care Reform
Health care reform centers on two problems: controlling costs and expanding access; these two problems are inter-related as expanding access will increase costs.
Liberals have long sought the creation of a national health insurance system which would provide a list of services from doctors, hospitals and nursing homes no matter of their wealth or employment. The government would be the single payer of health care costs through increased taxes. Patients might also pay some share of the costs. Such plans have failed to gain popular support among the American public.
Another idea that is popular would be to extend universal coverage through mandatory employer-based insurance combined with government subsidies to cover the costs for those living below the poverty line. While the majority of American employees are covered by employer-based plans, these vary greatly.
The Kennedy-Kassebaum Act of 1996 was passed with bipartisan support for guaranteeing the "portability" of health insurance from job to job. A new employer's health insurance plan can no longer deny a new employee health coverage due to pre-existing conditions. A Patients' Bill of Rights has also been proposed, guaranteeing such things as seeing specialists without HMO approval.
In 2004 Congress passed a bill to add prescription drug coverage to Medicare -- an idea long battled over in Washington because of costs. The bill leaves many gaps in coverage and does not allow the government to negotiate down the price of drugs with the pharmaceutical companies. Prescription drugs are most costly in the United States than anywhere else in the developed world, but drug companies claim the profits are used for research into developing new drugs.
Interest group battles over health care policy are powerful and many groups have a stake in any proposal concerning reform of the health care system:
Chapter Objectives
After mastering the concepts in this chapter, you will be able to:
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