Social Security & Medicare

In 1935, President Franklin D. Roosevelt signed the Social Security Act with the initial intent of providing federal assistance to those unable to work.  At this time, the time of The Great Depression, over 50% of senior citizens lived in poverty.  It has been amended many times and currently stands primarily as the Old-Age, Survivors, and Disability Insurance (OASDI) program. It is funded by payroll taxes.  The IRS collects these taxes and entrusts them to the Social Security Trust Funds: Federal Old Age & Survivors Trust Fund, Federal Disability Insurance Trust Fund, Federal Hospital Insurance Trust Fund, and the Federal Supplementary Medical Insurance Trust Fund.  

The largest component of OASDI is the payment of retirement benefits.  Most employees see FICA (Federal Insurance Contributions Act) tax taken out of their paycheck at a rate of 6.2% (during 2011 & 2012 it was 4.2% as a part of the Middle Class Tax Relief and Job Creation Act of 2012 which I referenced in my post on the Economy).   Employers pay another 6.2%.  Self employed individuals pay SECA (Self Employed Contributions Act) tax at a rate of 12.4%.  For 2015, all salaried income up to $118,500 had a FICA or SECA tax collected.  Income above $118,500 is not taxed by FICA or SECA.  The program is largely self-sufficient.

People who have paid into FICA and SECA for 40 quarters of credit or more and meet a specified minimum income are considered fully insured and can start receiving social security retirement benefits at a reduced rate at age 62 and a higher benefit if they wait until 65, 66, or 67 depending on their birth date.

Medicare Health Benefits were added to Social Security in 1965.  In 1966, a FICA-Medicare Tax was added and currently stands at 1.45% of an employee’s income.  The employer pays another 1.45%.  Self-employed individuals pay 2.9%.

Under Medicare, the government contracts 30-50 private insurance companies to provide health insurance for Americans 65 and older who have paid into the system.  Some younger people with disabilities are also eligible for Medicare.

Clinton:  Concerning Social Security, Clinton is opposed to privatization, reducing annual cost-of-living adjustments, and raising the retirement age.

She points out two concerning facts that she would like to change concerning Social Security.  She says that the poverty rate for widowed women 65 and older is 90% higher than that of other seniors due to the loss of benefits when a spouse dies.  She wants to change how much social security benefits drop when a spouse dies.

Additionally, she believes that Americans should receive credit to their Social Security benefits when they take time out of work to serve as a caregiver.  Since benefits are calculated based on the top 35 years of an individual’s earnings, those who take time off to care for a child or an aging parent, receive a reduced benefit.  Clinton wants to change that.

Concerning Medicare, she will protect the Affordable Care Act which made preventive care available and affordable to 29 million Americans on Medicare.  She is opposed to Republican attempts to privatize Medicare which would drive up costs.  She also has plans for lowering prescription drug costs and for lowering out-of-pocket health care costs.

Trump:  Trump breaks with his party (and his running mate) on Social Security and Medicare and vows to preserve social security and Medicare without cuts.  He is opposed to raising the retirement age and opposed to reducing the cost of living calculations.  He basically wants to leave it all, as is.