Two Major Anniversaries This Summer

This summer celebrates two major anniversaries of events that have had a significant effect on the lives of millions of Americans. Both were controversial when they were enacted, but both have affected most Americans and have changed the entire landscape of the nation. 

On August 14, 1935, President Franklin D. Roosevelt signed into law the Social Security Act. That Act was and has become the signature Act of his New Deal and administration. The Social Security Act not only established the Social Security system, but also included provisions establishing unemployment compensation and the current federal welfare system that provides direct cash assistance to needy families, the aged, blind, and disabled. The first welfare payments began almost immediately and the first Social Security benefit payments began in 1940. 

The Social Security pension system, which only covered retirees, widows, and orphans, was based on a successful German system that was established in the 19th century by Otto Von Bismarck where workers paid into a fund that was designed to finance a government pension system for all workers. The German system used age 65 as the age for retirement and that was the age used for Social Security retirement. 

Since 1935, the Social Security system has been adjusted several times. In 1951, the fund was established for disabled workers and their dependents. Also, in 1951, the provision for reduced benefits for early retirement at age 62 was established. In 1972, Social Security benefits were indexed to the cost of living so benefits could keep up with inflation. In 1983, the Social Security tax rates were increased to their present levels as a means to build up a reserve for the anticipated retirement of the baby boom generation. 

Since the Social Security Act was passed in 1935, no doubt it has become one of the most successful and popular government programs. It provided a floor for those who are the most vulnerable in our country and provided cash assistance to those who have lost their jobs through no fault of their own as well as families and individuals who would have no source of income. 

The other major anniversary this summer is the 50th anniversary of Medicare and Medicaid. It was on July 30, 1965, that President Lyndon Johnson signed into law the Act creating Medicare and Medicaid. Both programs became effective one year later on July 1, 1966. It is difficult to imagine that back in 1965, most seniors and retired people were without any health insurance and dying from preventable diseases simply because they lacked the means to pay for necessary medical care. At the same time, people living in poverty were also dying from preventable causes for the same reason. 

Medicare was simple. It was financed through a Medicare tax that was added to the Social Security tax and linked to one’s Social Security account. When that person reached age 65 and had enough quarters of coverage under Social Security for retirement benefits, they qualified for Medicare. Since 1965, Medicare has been changed several times. In 1972, Medicare was expanded to cover those who had been receiving Social Security disability benefits for 24 months. In the 1980s, Medicare was expanded to include those with end stage renal disease (kidney failure and dialysis) and ALS (Lou Gehrig’s disease) regardless of age. In 2003, the Medicare drug benefit was added to the program. 

Medicaid was based on one’s income and assets. It was designed to be a joint federal and state program with the states establishing their own Medicaid program under federal guidelines. Unlike Medicare, which is an insurance program; Medicaid is a welfare program that is funded through general revenues with no specific tax to finance it. 

The greatest changes in Medicaid were the establishment of the Children’s Health Insurance Program (CHIP) in 1997 that covered all children under age 17 in households with incomes up to 300% of the federal poverty level and the expansion of Medicaid under the Affordable Care Act in 2010 (Obamacare). That expansion increased the eligibility for Medicaid to 138% of the federal poverty level and removed the restrictions that in order to become eligible one must be either over age 65, legally blind, totally and permanently disabled, or caring for dependent children in the home under age 17. As a result, many single adults, childless couples, and working poor now can qualify for Medicaid. 

Despite their critics, both Social Security and Medicare have never missed a payment of benefits since they were established 80 and 50 years ago. Despite the talk of Social Security and Medicare going broke, both programs are sound for the immediate short-term. Only minor fixes to both would keep both Social Security and Medicare solvent and functioning well into the 21st century. 

Try to imagine a world without Social Security, Medicare, and Medicaid. Without these programs, the United States would be a much poorer and less healthy country.