Understanding Three Big Federal Programs

There has been a lot of discussion about some large US federal programs lately. If you watch the news, read the paper, or browse the Internet, you can hardly miss it. However, many Americans misunderstand Social Security, Medicare, and Medicaid. How can you have an opinion about these budget items if you do not know what they really are?

Take some time to learn a little bit about Social Security vs Medicare vs Medicaid!

What is social security? This is the US program that makes income payments to many millions of Americans. To qualify, recipients must meet the minimum requirements for having worked and contributed to the system, or they must be beneficiaries of people are. They must also meet age or disability qualifications. The traditional retirement age was 65 years old, but now that has been raised to 67 for many people who are still of working age.

For example, if you worked for the required amount of time, and contributed to the system, you should qualify for benefits. However, a spouse of somebody who qualified may also get benefits upon the death of the spouse.

Taxes to pay for the plan come from current worker contributions. Beneficiaries who are retired because of age or disability contributed to the system in the past, but their taxes paid for people who got benefits then.

To be clear, taxes you pay now are not really going towards your future benefits, but to current benefits. These current recipients were past contributors. Because of this, they have some right to feel entitled to their benefits.

What is Medicare? Medicare provides a basic health plan for qualified disabled people and senior citizens. The basic program only pays a portion of health costs, but it does cover things like doctors, hospital stays, and prescriptions. Many people supplement these benefits with private Medicare health plans too.

This is also paid for with taxes. It is probably fair to say that current taxes pay for current benefits. If recipients are retired, they have paid taxes in the past to support the care of past beneficiaries.

How is Medicaid different from these other programs? Medicaid is different. It is a federal and state shared program that provides health insurance for qualifying beneficiaries with very low incomes and few assets. These people might be disabled, children, pregnant women, etc.

Some people do collect from both Medicare and Medicaid. This is because they qualify for Medicare and Medicaid. An example may be a low income senior citizen who meets the qualifying criteria. Medicaid pays the tabs on a large percentage of US nursing care.Because Medicaid is a state and federal effort, it is paid for by state and federal tax money today. The federal government provides support, but the program is mostly run at the state level.

Why are these programs in the news now? The number of recipients of these three programs is very large and growing. Many millions of people depend upon these programs, but the costs for them is a very large slice of the federal budget. Most of these people have contributed to the system, and so they do feel a sense of entitlement.