Chapter Nine
THE SOCIAL SAFETY NET

Public assistance and health care

The American economic system is based on private, free enterprise, and the "self-reliance" that writer and lecturer Ralph Waldo Emerson advocated is a virtue much valued by Americans. In fact, most make it a point of honor to take care of themselves. But government help in many forms is available to those who are temporarily or permanently in need. This chapter examines two areas in which aid may be provided: public welfare and health care.

HISTORY OF PUBLIC ASSISTANCE

Traditionally in America, helping the poor was a matter for private charity or local government. Arriving immigrants depended mainly on predecessors from their homeland to help them start a new life. In the late 19th and early 20th centuries, several European nations instituted public-welfare programs. But such a movement was slow to take hold in the United States because the rapid pace of industrialization and the ready availability of farmland seemed to confirm the belief that anyone who was willing to work could find a job.

The Great Depression, which began in 1929, shattered that belief. For the first time in history, substantial numbers of Americans were out of work because of the widespread failures of banks and businesses. President Herbert Hoover believed that business, if left alone to operate without government interference, would correct the economic conditions. In the meantime, he relied on state and local governments to provide relief to the needy, but those governments did not have enough money to do so. Most Americans believed that Hoover did not do enough to fight the Depression, and they elected Franklin D. Roosevelt president in 1932.

Within days after taking office, Roosevelt proposed recovery and reform legislation to the U.S. Congress. Congress approved almost all the measures the president requested, and soon the government was creating jobs for hundreds of thousands of people. They were employed in huge public works projects such as dam construction, road repair, renovation of public buildings, building electrical systems for rural communities, and conservation of natural areas.

Most of the programs started during the Depression era were temporary relief measures, but one of the programs -- Social Security -- has become an American institution. Paid for by deductions from the paychecks of working people, Social Security ensures that retired persons receive a modest monthly income and also provides unemployment insurance, disability insurance, and other assistance to those who need it. Social Security payments to retired persons can start at age 62, but many wait until age 65, when the payments are slightly higher. Recently, there has been concern that the Social Security fund may not have enough money to fulfill its obligations in the 21st century, when the population of elderly Americans is expected to increase dramatically. Policy-makers have proposed various ways to make up the anticipated deficit, but a long-term solution is still being debated.

In the years since Roosevelt, other American presidents, particularly Lyndon Johnson in the 1960s, have established assistance programs. These include Medicaid and Medicare, which are discussed later; food stamps, certificates that people can use to purchase food; and public housing, which is built at federal expense and made available to persons with low incomes.

Needy Americans can also turn to sources other than government for help. A broad spectrum of private charities and voluntary organizations is available. Volunteerism is on the rise in the United States, especially among retired persons. It is estimated that almost 50 percent of Americans over age 18 do volunteer work, and nearly 75 percent of U.S. households contribute money to charity.

AFFORDING THE AMERICAN WAY OF LIFE

The majority of Americans can live comfortable lives on the salaries they earn, without the support of a universal public-welfare system. These so-called middle-class Americans generally own their own homes and cars, spend some time each year on vacation, and can pay -- at least in part -- for a college education for their children. Most Americans set aside money in savings accounts to help pay major expenses; many invest in the stock market in hopes of earning a healthy return on their investments.

Most buy insurance, especially life and medical insurance, frequently with contributions from the companies for which they work. Many companies also have retirement plans by which they and their employees put aside money for their retirement pensions. When added to Social Security payments, pensions enable many retired Americans to live comfortably. On the other hand, for older Americans who require long-term care outside of a hospital, a nursing home can be very expensive.

In 2000, a family of four with a yearly income of $17,603 or less was considered poor by American standards; 11.3 percent of American families fell into this category. In addition to the benefits discussed above, many families below the poverty line receive welfare payments, sums of money provided by the government each month to those whose income is too low to obtain such necessities as food, clothing, and shelter. The most common form of welfare payment has been through a program called Aid to Families With Dependent Children (AFDC). Originally designed to help children whose fathers had died, AFDC evolved into the main source of regular income for millions of poor American families.

The total cost of all federal assistance programs -- including Social Security, Medicare, Medicaid, and various welfare programs -- accounts for nearly one-half of all money spent by the federal government. That is a doubling of the percentage that obtained in the 1960s.

THE DEBATE OVER WELFARE

Certain aspects of the American welfare system -- especially AFDC payments -- came under criticism in the 1980s and 1990s, and the system itself became an issue in national elections. Many middle-class Americans resent the use of their tax dollars to support those whom they regard (rightly or wrongly) as unwilling to work. Some critics argue that dependency on welfare tends to become a permanent condition, as one generation follows another into the system. Some people believe the system encourages young women to have children out of wedlock, because welfare payments increase with each child born. Other experts maintain that unless the root causes of poverty -- lack of education and opportunity -- are addressed, the welfare system is all that stands between the poor and utter destitution.

The charge that social programs tend to trap the poor in dependency and deny them the power to control their lives has led to the redesign of certain federal programs. For example, the government has been allowing tenants of public housing projects to buy the buildings and take over their management.

A consensus in favor of more broad-gauged action came together in 1996. A new law overhauled welfare by replacing AFDC with the Temporary Assistance For Needy Families (TANF) Program, a system of state-run assistance programs financed by federal grants. The law also limits lifetime welfare assistance to five years, requires most able-bodied adults to work after two years on welfare, eliminates welfare benefits for legal immigrants who have not become U.S. citizens, and limits food stamps to a period of three months unless the recipients are working.

AMERICAN MEDICAL PRACTICE

Self-employed private physicians who charge a fee for each visit by a patient have been the norm for American medical practice. Most physicians have a contractual relationship with one or more hospitals in their community. They refer their patients as needed to the hospital, which usually charges according to the number of days a patient stays and the facilities -- X-rays, operating rooms, tests -- he or she uses. Some hospitals are run by a city, a state, or, in the case of hospitals for military veterans, the federal government. Others are run by religious orders or other nonprofit groups. Still others are run by companies intending to make a profit.

In the last 40 years, the cost of medical care in the United States has skyrocketed. Health expenditures rose from $204 per person in 1965 to $4,481 per person in 2000. One reason for rising health costs is that physicians are among the highest-paid professionals in the United States. As justification for their high incomes, they cite the long and expensive preparation they must undergo. Most potential doctors attend four years of college, which can cost $25,000 a year, before going on to four expensive years of medical school. By the time they have a medical degree, many young doctors are deeply in debt. They still face three to five years of residency in a hospital, where the hours are long and the pay relatively low. Setting up a medical practice can be costly too.

The new machines and technologies for diagnosing and treating illness also are expensive, and the technicians who operate them must be well-trained. Physicians and hospitals must buy malpractice insurance to protect themselves against lawsuits by patients who believe they have received inadequate care. The rates charged for this insurance rose sharply during the 1970s and 1980s.

PAYING MEDICAL BILLS

The United States has evolved a mixed system of private and public responsibility for health care. The vast majority of Americans pay some portion of their medical bills through insurance obtained at work. About five out of six American workers, along with their families, are covered by group health insurance plans, paid for either jointly by the employer and employee or by the employee alone. Under the most common type of plan, the employee pays a monthly premium, or fee. In return, the insurance company pays a percentage of the employee's medical costs above a small amount known as a deductible. Insurance plans vary considerably. Some include coverage for dental work and others for mental health counseling and therapy; others do not.

Another type of health care plan available to many workers is the health maintenance organization (HMO). An HMO is staffed by a group of physicians who provide all of a person's medical care for a set fee paid in advance. HMOs emphasize preventive care because the HMO must pay the bill when a person needs services that the HMO cannot provide, such as specialized treatment, surgery, or hospitalization. HMOs have grown in popularity and are widely viewed as a means of holding down medical costs. Some Americans, however, are wary of HMOs because they limit the patient's freedom to choose his or her doctor.

Meanwhile, American physicians have helped slow the increase in costs by reassessing the need for hospitalization. Many surgical procedures that once involved staying in a hospital, for example, are now performed on an "out-patient" basis (the patient comes to the hospital for part of the day and returns home at night). The percentage of hospital surgeries performed on out-patients increased from 16 percent in 1980 to 55 percent in 1993. Even when a hospital stay is prescribed, it is typically shorter than in the past.

MEDICAID AND MEDICARE

Although most Americans have some form of private health insurance, some people cannot afford insurance. They can get medical coverage through two social programs established in 1965.

Medicaid is a joint federal-state program that funds medical care for the poor. The requirements for receiving Medicaid and the scope of care available vary widely from state to state. At a cost of about $200 thousand million a year, Medicaid is the nation's largest social-welfare program.

Medicare, another form of federal health insurance, pays a large part of the medical bills incurred by Americans who are 65 and older or who are disabled, regardless of age. Medicare is financed by a portion of the Social Security tax, by premiums paid by recipients, and by federal funds. Everyone who receives Social Security payments is covered by Medicare.

One of the most troubling health care problems facing the United States has been providing care for those who cannot afford health insurance and who are not eligible for either Medicaid or Medicare. It has been estimated that one in seven Americans is without health insurance at least part of the year. They may be persons who are unemployed or have jobs without medical coverage or who live just above the poverty line. They can go to public hospitals, where they will get treatment in an emergency, but they often fail to obtain routine care that might prevent illness.

In 1996 Congress passed legislation designed to make health insurance more available to working families and their children. The law expanded access to health insurance for workers who lose their jobs or who apply for insurance with a pre-existing medical condition, and it set up a pilot program of tax-deferred savings accounts for use in paying medical bills. President George W. Bush has proposed several ideas to make health care coverage more available and affordable, including the expansion of medical savings accounts and legislation that would make it easier for small employers to pool together to offer their employees better health coverage options.

Although health care costs continue to rise, the rate of increase has leveled off in recent years. In 1990 health expenses increased 9 percent over the previous year, and by 2000 that rate had fallen to 4.6 percent.