1. The Social Security Act, adopting in 1935, called for workers to make payroll
ID: 2718903 • Letter: 1
Question
1. The Social Security Act, adopting in 1935, called for workers to make payroll tax payments, which were then pooled to pay retirement benefits to primary workers. Survivor benefits (paid to spouses and dependents of the primary worker) and disability benefits were added later, in 1939 and 1956, respectively. The first benefit payments were made in 1940, after the great depression in which many suffered due to lack of savings and bank failures. This was at a time many people still lived in rural parts of the country and had limited access to financial services that allowed for safe steady returns on savings. Now, financial services are readily available to anyone; it has never been easier to save for retirement. Since the social security system is based on having current worker pay payroll taxes to fund payments to retired workers, some have argued that the Social Security system is not sustainable given the unbalanced demographics, with far more retired people who are supposed to receive benefits than younger workers who are paying in.
a. In your opinion, has social security outlived its usefulness? That is, are some of the original justifications for the Social Security system still relevant or have conditions changes such that there is less of a social need for Social Security.
b. If, by the time you retire, social security benefits have been significantly reduced or eliminated completely, would you be bothered. Why? If you know that this is very likely now (at the start of your working career), does this bother you? Why? How might you behave differently?
2. In your own words, answer the following questions: What is a Managed Care Organization (MCO)? What is a Health Maintenance Organization (HMO)? What are capitation payments? What are the incentives of an HMO in terms of providing low cost care? Are there any adverse incentives for an HMO to cut costs by cutting quality? How might these adverse incentives be mitigated?
Explanation / Answer
a)
For the program to make sense, it has to apply its benefits to those who are truly needy, not to those who will pay their greens fees with the money.
How is someone who presently works at modest wages expected to feel knowing that a big part of their federal taxes gets paid out in benefits to a class of people who live well above the mean standard of living already? The current Social Security program has outlived its usefulness and in no way resembles the program envisioned by President Roosevelt 70 years ago. Move to take money out of Social Security to form private accounts will lead to massive new government debt. Diverting money to private accounts won't improve Social Security's long-term solvency problem but will make it worse. A small but important point of clarification: In 2042 (by the latest projections), Social Security will need to pay out more in benefits than it takes in through payroll taxes, and the trust fund of surpluses that is currently being built up will be exhausted. Even then, if the system isn't changed, it would still be able to pay out benefits at more than 70 percent of the promised levels. AARP doesn't think that 70 percent is good enough and that Congress needs to make changes now to ensure that Social Security will still be able to pay out 100 percent of promised benefits for the foreseeable future.
According to economists the benefits now scheduled for future generations under current law are not sustainable given the projected path of payroll tax revenue, and they are empty promises.
The bold "Willy Sutton" approach to Social Security and Medicare financing is reflected on a specific proposal for fixing Social Security, except that it would have to include personal accounts, with a cost expected to be between $1-trillion and $2-trillion, and that it would not include raising taxes.
b)Yes definitely i would be bothered if social security benefits have been significantly reduced or eliminated completely.The social security benefits are primary source of cash after you retire ,one totally depends on them if you have no major source of cash after retirement.If a am a low income worker then i would definitely need to see that social security benefits are there to meet my needs.Yes i would be bothered to see that social security benefits have been significantly reduced or eliminated ,I would start saving for my retirement if such is the case.
2)Managed Care Organization (MCO) is an organization that combines the functions of health insurance, delivery of care, and administration. Examples include the independent practice association, third-party administrator, management service organization, and physician-hospital organization. Health Maintenance Organization (HMO) is an organization that provides health coverage with providers under contract. A Health Maintenance Organization (HMO) differs from traditional health insurance by the contracts it has with its providers. Capitation Payments are agreed upon in a capitation contract by a health insurance company and a medical provider. It is a fixed, pre-arranged monthly payment received by a physician, clinic or hospital per patient enrolled in a health plan with a capitated contract. HMO contracts allow for premiums to be lower, which results in the health providers of having the advantage of having patients directed to them but these contracts also add additional restrictions to the HMO's members.
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