Medicare for All!
That is what we heard the Democratic Presidential Candidates screaming from the rooftops.
But what does that mean?
For that matter, where did Medicare come from?
The Social Security Act, signed into law by President Franklin D. Roosevelt in 1935, created Social Security, a federal safety net for elderly, unemployed and disadvantaged Americans. The main stipulation of the original Social Security Act was to pay financial benefits to retirees over age 65 based on lifetime payroll tax contributions. The Act also established the Social Security Board, which later became the Social Security Administration, to structure the Social Security Act and figure out the logistics of implementing it.
Tens of millions of people have received financial assistance through the Social Security Act since its inception. Still, the program was wrought with challenges from the start and has been a political hot topic for years, its existence threatened time and again.
Economic security has always been a major issue in an unstable, unequal world with an aging population.
Societies throughout history have tackled the issue in various ways, but the disadvantaged relied mostly on charity from the wealthy or from family and friends.
In the early 17th century, England established “poor laws,” acknowledging the government’s responsibility to care for its less-fortunate citizens.
The Pilgrims brought these laws with them to the New World. Eventually, colonial governments created new laws to care for the poor and destitute, deeming which citizens were worthy or unworthy of different types of assistance. Poorhouses or outdoor relief (where people were given monetary or other assistance to keep them out of a poorhouse) were common means of public assistance.
By the mid-19th century, conditions in poorhouses were often deplorable. Yet due to deteriorating economic conditions they were also packed to the rafters, and local governments struggled to keep up with the overwhelming need.
A large segment of American citizens received an early form of social security decades before President Franklin D. Roosevelt signed the Social Security Act.
Starting in 1862, hundreds of thousands of veterans disabled in the Civil War and their widows and orphans could apply for a government pension. In 1890, the law was amended to include any disabled Civil War veteran, regardless of how the disability occurred. In 1906, the law was amended again to include old age as a criterion.
Company pension plans came on the scene in 1882 when the Alfred Dolge Company (made felt shoes and slippers) created a pension fund for its employees. A handful of companies followed suit, but few employees received even a nickel. Most of the companies went out of business before the pensions could be distributed, or the pensions were never dispersed.
Prior to the Industrial Revolution, many people were farmers and managed to support themselves during hard times, and extended family often lived together on family farms and cared for one another as they aged or struggled.
The Industrial Revolution, however, enticed people to flock to cities for jobs that were often threatened by layoffs and recession, leaving many without a way to support themselves if they lost their job. The urbanization of American also found many people leaving their extended family behind to fend for themselves.
As sanitary and general conditions in America improved, the life expectancy of its citizens did, too. When more and more people grew older, many were unable to work or became sick yet still required care.
The Great Depression left millions of people unemployed and struggling to put food on the table. It struck the elderly especially hard and many states passed legislation to protect their elder citizens.
But most elder-assistance programs of the time were a dismal failure. They were underfunded, poorly run and, in some cases, flat out ignored by officials. Those seniors who received assistance only got about 65 cents a day.
As the depression raged on, government officials and frustrated private citizens alike moved to find ways to help struggling Americans and introduced plans to increase economic security. Most ideas were basically federal or state financed pension plans. Some included all citizens while others included only the elderly.
None of the plans became law; however, many had huge followings and initiated nationwide talks about how to care for the disadvantaged and the elderly.
Until Franklin D. Roosevelt became president, most social assistance plans in America were dependent on the government, charities and private citizens doling out money to people in need.
Roosevelt, however, borrowed a page from Europe’s economic security handbook and took a different approach. He proposed a program in which people contributed to their own future economic security by contributing a portion of their work income through payroll tax deductions.
Basically, the current working generation would pay into the program and finance the retired generation’s monthly allowance.
In June 1934, President Roosevelt created the Committee on Economic Security (CES) and tasked them with creating an economic security bill. Led by the first woman to hold a U.S. cabinet post, Secretary of Labor Frances Perkins, the CES drafted the Social Security Act aimed at giving people economic security throughout their lives.
The bill included:
• an old-age pension program
• unemployment insurance funded by employers
• health insurance for people in financial distress (Medicare)
• financial assistance for widows with children
• financial assistance for disabled individuals
After much debate, Congress passed the Social Security Act to provide benefits to retirees based on their earnings history and on August 14, 1935, Roosevelt signed it into law. This firmly placed the burden of economic security for American citizens on the federal government’s shoulders.
Social Security Cards
After signing the Social Security Act, President Roosevelt established a three-person board to administer the program with the goal of starting payroll tax deductions for enrollees by January 1, 1937.
To become eligible, workers completed an application at their local post office and received a national identity card with a unique, nine-digit identification number. Within eight days of rolling out the program, over one million workers had Social Security numbers.
Four months later, almost 26 million had enrolled despite most projected payouts being below poverty level. The Social Security card was—and still is—used to track workers earnings and benefits.
Medicare
On November 19, 1945, seven months into his presidency, Truman sent a message to Congress, calling for the creation of a national health insurance fund, open to all Americans. The plan Truman envisioned would provide health coverage to individuals, paying for such typical expenses as doctor visits, hospital visits, laboratory services, dental care and nursing services.
Although Truman fought to get a bill passed during his term, he was unsuccessful and it was another 20 years before some form of national health insurance – Medicare for Americans 65 and older, rather than earlier proposals to cover qualifying Americans of all ages – would become a reality.
In 1960, President Dwight D. Eisenhower approved legislation to allow Social Security benefits for disabled workers and their dependents.
President John F. Kennedy made his own unsuccessful push for a national health care program for seniors after a national study showed that 56 percent of Americans over the age of 65 were not covered by health insurance. But it wasn’t until after 1966 – after legislation was signed by President Lyndon B Johnson in 1965 – that Americans started receiving Medicare health coverage when Medicare’s hospital and medical insurance benefits first took effect.
On July 30, 1965 President Lyndon B. Johnson made Medicare law by signing H.R. 6675, an amendment to the Social Security Act of 1935, in Independence, Missouri. Former President Truman was issued the very first Medicare card during the ceremony. In 1965, the budget for Medicare was around $10 billion
• In 1966, Medicare’s coverage took effect, as Americans age 65 and older were enrolled in Part A (in hospital) and millions of other seniors signed up for Part B (Outpatient). Nineteen million individuals signed up for Medicare during its first year.
• In 1972, President Richard M. Nixon signed into the law the first major change to Medicare. The legislation expanded coverage to include individuals under the age of 65 with long-term disabilities and individuals with end-stage renal disease (ERSD).
By early 2019, there were 60.6 million people receiving health coverage through Medicare. Medicare spending reached $705.9 billion in 2017, which was about 20 percent of total national health spending.
Back in1977, it was already clear Social Security was in financial peril.
President Ronald Reagan created a commission to examine how to keep Social Security in the black.
In 1983, he signed legislation which gradually increased the retirement age to 67, taxed Social Security benefits and provided Social Security benefits to federal workers.
After taking office in 2001, President George W. Bush appointed another Social Security Commission with its top priority being Social Security reform.
No revolutionary changes were made to keep the program solvent long-term. Still, the Bush administration extended disability benefits and food stamps to qualified immigrants and their children, eliminated wage credits for the military and expanded Medicare prescription drug coverage.
President Obama‘s administration temporarily reduced the Social Security tax rate from 6.2 to 4.2 percent in 2011 and 2012. The move helped ease financial strain on American workers but did little to stop the risk of Social Security going into future debt.
The Social Security Act has provided Americans with much-needed financial help when they need it most. For many of America’s most vulnerable, it’s the only source of income they have.
Still, despite attempts to keep it solvent, Social Security faces a major long-term shortfall. The retirement age to receive full benefits continues to increase and many beneficiaries are claiming benefits much later in life to receive maximum payouts, often at age 70.
Despite the program’s pitfalls, most Americans want Social Security to continue and consider it a retirement lifeline, according to a National Academy of Social Insurance survey.
So now let’s tackle some of the big myths about Social Security.
. . . participation in the Program would be completely voluntary
There was no provision in the Social Security Act of 1935 (nor has there ever been any provision) for the payment of Social Security payroll taxes (now commonly known as FICA, from an acronym for the Federal Insurance Contributions Act) to be voluntary.
Since the inception of the Social Security program, the law has required that payroll taxes for persons working at jobs covered by Social Security “shall be collected by the employer of the taxpayer by deducting the amount of the tax from the wages as and when paid.”
Next:
. . . participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program
Social Security taxes were never limited to the first $1,400 of annual income, nor was there any provision in the Social Security Act of 1935 to permanently fix the tax rate at 1%. The Social Security Act of 1935 set the original rate at 1% of the first $3,000 of annual income, with provisions to gradually increase that rate to 3% over the next twelve years.
These figures have been adjusted many times over the years. Under the Federal Insurance Contributions Act, as of 2005 participants pay 6.2% of the first $90,000 of their income (with their employers contributing a like sum) into what is commonly known as OASDI (from an acronym for Old Age Survivors and Disability Insurance, the official name of the basic retirement benefits portion of the Social Security program).
Next:
. . . the money the participants elected to put into the Program would be deductible from their income for tax purposes each year
The original Social Security Act of 1935 specifically stated that Social Security payroll taxes were not to be allowed as income tax deductions.
Now folks, here is the big one:
. . the money the participants put in goes to the independent “Trust Fund” rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other Government program.
The Social Security Trust Fund was established in 1939 to receive monies collected for Social Security through payroll taxes. The monies in this fund are managed by the Department of the Treasury; they are not, nor have they ever been, put into the “general operating fund.”
However, and this is a huge however, whether the Social Security Trust Fund can truly be said to be “independent” is problematic.
The Social Security Act specifies that the monies in the fund may only “be invested in securities backed by the full faith and credit of the Federal government,” such as treasury bills, treasury notes, and treasury bonds, as well as special issue bonds.
So, essentially, the government can “invest” Social Security funds by lending them to itself, then spending that money on programs not related to Social Security.
The government “pays back” this money when the Social Security program redeems the bonds, but critics of the program contend Social Security will eventually fall into deficit by 2018, and the Treasury won’t have the necessary cash on hand to redeem the bonds and pay back the fund.
So, the monies paid into the Social Security trust have never been “put into the general fund.” The requirements for how the Social Security Trust Fund is to be financed and invested have not changed since the fund’s inception in 1939.
Now folks, I hope our talk this morning has provided some answers. However, the only conclusion I can draw from the analysis of the past history of Social Security and Medicare, is that the last person I want running a Medicare for All program, is the federal Government.