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:
A social insurance program is designed to provide benefits based on an individual’s past work history or contributions, such as payroll taxes or other similar systems. These benefits are not determined by an individual’s current financial need. Instead, they are a form of entitlement for those who have contributed to the system during their working years. An example of a social insurance program is Social Security in the United States. Workers contribute through payroll taxes, and upon retirement or disability, they receive benefits based on the amount they contributed over their lifetime.
On the other hand, a means-tested program is designed to provide benefits only to individuals or families who meet certain income and asset criteria, demonstrating a need for assistance. These programs are typically aimed at those with low income or insufficient resources. Eligibility is not determined by past work history but by current financial need. Examples of means-tested programs include Medicaid and Supplemental Nutrition Assistance Program (SNAP) in the U.S., where assistance is based on an individual’s financial situation at the time of application.
The fundamental difference lies in how eligibility is determined. Social insurance programs are based on past contributions, while means-tested programs focus on current need, often requiring applicants to prove they have limited resources. This distinction helps governments target resources efficiently, providing assistance to those who need it most.