What differentiates a social insurance program from a means-tested program?
Group of answer choices
a. A social insurance program provides benefits based upon immediate need, while a means-tested program extends benefits based upon age categories.
b. A social insurance program extends benefits only to the working poor, while a means-tested program extends benefits to everyone, regardless of social class.
c. A social insurance program provides benefits based upon demonstrated need, while a means-tested program provides benefits based upon lifetime contributions.
d. A social insurance program extends benefits to everybody, while a means-tested program only extends to benefits for the elderly.
e. A social insurance program provides benefits based upon lifetime contributions, while a means tested program provides benefits based upon demonstrated need.
The correct answer and explanation is:
The correct answer is e. A social insurance program provides benefits based upon lifetime contributions, while a means-tested program provides benefits based upon demonstrated need.
Explanation:
Social insurance programs and means-tested programs are both designed to provide financial support, but they differ in their eligibility criteria and purpose.
Social Insurance Programs: These programs are based on the principle of lifetime contributions. Individuals earn eligibility for benefits through the accumulation of work experience and payments into the program, usually in the form of payroll taxes. The most well-known example of a social insurance program is Social Security in the United States. People contribute to the program during their working years (through payroll taxes), and upon reaching a certain age or meeting other criteria (such as disability), they receive benefits based on their lifetime earnings and contributions. Social insurance programs do not assess an individual’s current income or wealth but focus on what they have paid into the system throughout their lives.
Means-Tested Programs: In contrast, means-tested programs determine eligibility based on an individual’s current income and assets. These programs are designed to provide assistance to those who have a demonstrated need, typically those whose income or resources fall below a certain threshold. An example of a means-tested program is Supplemental Security Income (SSI), which helps low-income individuals, including the elderly, disabled, and blind, regardless of their work history. The key difference here is that eligibility is determined by financial need rather than by lifetime contributions.
In summary, social insurance programs reward past contributions, while means-tested programs are focused on current financial need, aiming to assist those with limited resources.