Social Security and healthcare coverage challenges for American retirees

Social Security and Healthcare

In the United States, Social Security, along with private pensions and personal savings, form the traditional "three legged stool" of economic security for elderly and retired Americans. Already, many problems are emerging both the inadequacies of this system to provide for a person's needs. Similarly, there are also problems regarding the infusion of and generating funds for Social Security.

In the recent years, a fourth component has emerged as a necessary factor to human well being - health coverage. The growing need for health coverage not just among retired people but across the board as well are further taxing an already overburdened social insurance system.

This paper focuses on the problems of the current social insurance system with regards to providing comprehensive healthcare for all Americans.

It examines the need to incorporate healthcare not just for retired persons, but also for poor families whose needs may be as great. It then evaluates various solutions and restructuring plans being proposed to "save" Social Security.

Current orientation of Social Security

In the beginning, the social insurance system of the United States signed into law by President Franklin Delano Roosevelt in 1935 was a government-administrated pension plan. A fund would be established to cover the promises of pensions made to the current workers. Because of this, there would also be a long delay before any significant benefits would be paid (Scheiber and Shoven 1999).

By 1938, however, numerous amendments had changed this initial orientation.

The Social Security system was converted into an unfounded plan by liberals who were committed to alleviating the current poverty problems among the elderly. On the other hand, conservatives also supported the change, wary that Roosevelt's fund would lead to greater government intervention in the economy, under the guise of "social investment" (Scheiber and Shoven 1999).

Though significant revisions would be made throughout the 1950s through the 1970s, Social Security has retained the unfunded orientation it acquired in 1938. The benefits introduced during this year led to a program that was much larger than the simple universal pension plan funded by revenues generated from a government fund envisioned by Roosevelt and his advisors. In fact, the amendments made during the past few decades even expanded the benefits to be given by this program (Scheiber and Shoven 1999).

Most of the problems associated with Social Security today were therefore planted in the 1930s. The genesis of that plan implied that the $22,000 paid to the first beneficiary, Ida May Fuller, was a commensurate return to the $25 in payroll taxes paid by Fuller and her employer (Scheiber and Shoven 1999).

This orientation made Social Security a popular program, though not a secure one. Schieber and Shoven point out that the current problems should have been anticipated by those who enacted the 1938 changes. Decades later, Social Security is overstretched and is losing money. The authors further argue that the last cohort for whom Social Security is a good pension plan has retired. Instead, the contributions of the succeeding generations are unlikely to earn a return greater than that of government bond rates. Furthermore, it is also likely that all current cohorts of workers will continue to get diminishing returns (Schieber and Shoven). Additionally, many experts predict a complete shortfall by the year 2037.

Proposed Solutions

In these discussions, two problems emerge regarding the current social insurance system for the United States. First, unlike its European counterparts, the American Social Security system does not provide for universal health coverage. As a result, a growing number of Americans cannot afford much-needed medical treatment. There is thus a clear need to reform the current Social Security plan to provide health insurance for all those who need it.

Second, and related to the first, these provisions for health coverage must be made amid a fund in crisis, one that threatens to run out by the year 2037.

This paper makes several recommendations towards these twin goals. First, there should be recognition that the simple, income-based program is ultimately inadequate, because it does not take into consideration complexities like disability and health care programs. Second, despite current Generation X complaints that Social Security will run out before their retirement, the government should continue to mandate the compulsory participation in this program.

To help alleviate problems associated with health care, it is recommended that the purchase of catastrophic health insurance be made mandatory for all employees who earn a certain income, with consideration given for expenses such as mortgage payments and dependent children. This insurance should be enough to include all major health expenditures such as physician and hospital fees and prescription drugs.

To finance such a program, Graetz and Mashaw recommend a.5% increase in payroll taxes. This small increase, the authors argue, would be more than offset by expenditures related to a displaced worker or by the government footing the bill for a citizen's medical needs (Graetz and Mashaw 1999).

In conclusion, however, perhaps the greatest problem faced by the current social insurance system is the growing agitation against Social Security. Thus, despite the projected shortfall, there is a strong need to maintain Social Security. Part of the strategy is making this program responsive to everyone's basic needs - including health coverage.