Government Insurance Programs
This article will focus on government insurance programs. The article provides a description and analysis of the main types of government social insurance and risk insurance programs including government health insurance, government unemployment insurance, government urban housing credit and insurance, government terrorism insurance, government crop insurance, and government flood insurance and risk mitigation program. The advantages and disadvantages associated with different types of government insurance programs will be discussed. In addition, the issues associated with employer-paid health insurance mandates will be addressed.
Keywords Crop Insurance; Flood Insurance; Health Insurance; Risk Mitigation; Social Insurance; Terrorism Insurance
U.S. government insurance programs address social problems and protect people and institutions from risk. Examples of social insurance programs include Social Security, disability insurance, survivor insurance, unemployment insurance, and Medicare insurance for those individuals aged 65 and older. In 2005, social insurance programs accounted for 37 percent of federal government spending (Feldstein, 2005). According to the Congressional Budget office, about half of fiscal year 2013 federal spending was on Medicare, Medicaid, the Children’s Health Insurance Program, and Social Security. Examples of risk insurance include federal deposit insurance, terrorism insurance, crop insurance, and flood insurance. As of 2006, the federal government, and federal-sponsored institutions, have made or guaranteed loans for mortgages, education, agriculture, and business of almost $1.5 trillion and insured nearly $7 trillion in earthquake, flood, hurricane, deposit, and terrorism risk. Ultimately, government insurance programs are both financial and social programs (Kosterlitz, 2006).
The private insurance industry is limited by its own willingness and ability to finance risk, in the case of natural catastrophe or terrorism insurance, or invest in or subsidize the needs of a particular people such as the elderly or the poor, in the case of health insurance for the poor and elderly. In many areas of life, with great risk or expense, the government must subsidize or develop an insurance program that addresses and meets the need or addresses the problem rather than relying on the private insurance industry. For example, the government recognizes the need for flood insurance but, in most flood-prone areas of the United States, no comprehensive flood insurance is available from private insurers. The federal government responded to this problem by creating the National Flood Insurance Program. The Nation Flood Insurance Program works with private insurers and individuals to mitigate flood risk and provide guaranteed financial support (Freeman, 2004).
All government insurance programs suffer from the problem of moral hazard. Moral hazard refers to the risk that the presence of a contract will affect the behavior of one or more parties. In the public and private insurance industry, coverage against a loss, in some instances, increases the overall risk-taking behavior of the insured individual and leads to carelessness with personal property or personal health. In the government-citizen relationship, moral hazard refers to the scenario in which citizens do not reduce the risk of their behavior if the federal government bears the costs of insuring the behavior. When citizens cannot or do not reduce their risk, insurance costs rise. The private insurance industry addressed the problem of moral hazard by restricting benefits through co-pays and deductibles. The federal government, with the mandate to provide equal rights under the law, works to reduce preferential or discriminatory practices in its operations, including insurance programs. In government insurance programs, once eligibility criteria are met, citizens will receive a largely-uniform package of benefits. This non-discriminatory approach to government insurance programs puts government insurance programs at great risk for the problems associated with moral hazard (Freeman, 2004).
This following section provides a description and analysis of the main categories of government social and risk insurance programs including government health insurance, unemployment insurance, urban housing credit and insurance, terrorism insurance, crop insurance, and flood insurance and risk mitigation program. The advantages and disadvantages associated with different types of government insurance programs will be discussed. In addition, the issues associated with employer-paid health insurance mandates will be addressed.
Government Social Insurance
The government offers both social and risk insurance to citizens. Social insurance addresses social problems and risk insurance helps insurers and citizens mitigate the risk and bare the expense of high-risk activities and ventures. In some instances, insurance programs can be classified as both social insurance and risk insurance. For example, federal housing insurance, aimed at promoting and supporting urban housing, addressed the social problem of declining home ownership in urban areas of the United States and reduces the loan-risk for many private insurers who have partnered with the government to provide urban home loans and mortgages.
Government Health Care Insurance Programs
The federal government's main health care programs, Medicare and Medicaid, were established in 1965. Congress enacted Medicare and Medicaid to ensure that poor and elderly Americans would not be denied access to health care. In 1965, the Social Security Act, passed in 1935, was amended to provide government-financed medical care for at-risk segments of the population. Title XIX of the Social Security Act was passed to create a Federal and State entitlement program to fund medical assistance for certain individuals and families with low incomes and resources. Medicaid is the largest source of medical and health-related services for America's poor (Carlstrom, 1994).
Federal and state governments have different roles and responsibilities in the Medicaid system. The federal government is responsible for ensuring standardized and uniform insurance requirements. State governments are responsible for implementation and administration of the program. Medicaid benefits, eligibility, services, and payment can and do vary by state. Individual states establish their own eligibility standards; determine the type, amount, duration, and scope of services; set the rate of payment for services; and administer their own program.
The Medicaid program provides healthcare insurance for the following groups: Children under age 6 whose family income is at or below 133 percent of the federal poverty level (FPL); pregnant women whose family income is below 133 percent of the federal poverty level; supplemental security income (SSI) recipients; recipients of adoption or foster care assistance; and all children born after September 30, 1983 who are under age 19, in families with incomes at or below the federal poverty level. The Medicaid program provides healthcare insurance for the following groups at the discretion of individual states: Infants up to age 1 whose family income is less than 185 percent of the federal poverty level; institutionalized individuals eligible under a special income level set by each state; individuals who would be eligible if institutionalized, but who are receiving care under home and community-based services waivers; aged, blind, or disabled adults who have incomes above those requiring mandatory coverage but below the federal poverty level; recipients of state supplementary income payments; working-and-disabled persons with family income less than 250 percent of the federal poverty level; and uninsured or low-income women who are screened for breast or cervical cancer by the Centers for Disease Control.
State Medicaid programs must offer medical assistance, basic services, and optional services. The basic services covered by Medicaid include the following: Inpatient hospital services; outpatient hospital services; prenatal care; vaccines for children; physician services; nursing facility services for persons aged 21 or older; family planning services and supplies; rural health clinic services; home health care for persons eligible for skilled-nursing services; laboratory and x-ray services; pediatric and family nurse practitioner services; nurse-midwife services; federally qualified health-center services; early and periodic screening, diagnostic, and treatment services for children under age 21. Optional services, determined by individual states, provided by Medicaid include the following: Diagnostic services; clinic services; intermediate care facilities for the mentally retarded; prescribed drugs and prosthetic devices; optometrist services and eyeglasses; nursing facility services for children under age 21; transportation services; rehabilitation and physical therapy services; and home and community-based care to certain persons with chronic impairments.
Medicare, which is implemented and overseen by the U.S. Department of Health and Human Services, is a health insurance program for people age 65 or older; people under age 65 with certain disabilities; people of all ages with renal disease. Medicare includes three main elements: Hospital insurance, medical insurance, and prescription drug coverage. An individual's Medicare hospital insurance is, in a...
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