Government Insurance Programs

Social insurance is insurance administered or supervised by the government. It provides benefits to the elderly and to unemployed, disabled, and sick workers and their families, and to families of deceased workers.

Social insurance programs are financed mainly by taxes paid by workers and employers. Participation in such programs is required for most workers. Benefits are paid to all people entitled to receive them, regardless of their need. Social insurance programs differ from public assistance programs, which are financed by general taxes and pay benefits according to an individual's need.

The major forms of social insurance in the United States are (1) old-age, survivors, and disability insurance (OASDHI)., (2) Medicare, (3) workers' compensation, and (4) unemployment insurance. Most other industrialized nations and many less developed countries also have social insurance.

1. Old-age, Survivors, and Disability Insurance
Old-age, survivors, and disability insurance pays benefits to retired workers and their dependents, to disabled workers and their dependents, and to the survivors of workers who die. Nearly all American workers are covered by the insurance. Benefits are based on a worker's average earnings and are financed by a payroll tax shared by workers and employers.

2. Medicare
Medicare is a health insurance program. It covers nearly all Americans 65 years of age or older and certain disabled people. Medicare consists of hospital insurance and supplementary medical insurance. Hospital insurance is financed by a payroll tax paid by workers and their employers. The insurance helps cover the cost of hospital, nursing home, and at-home care. Supplementary medical insurance is financed by premiums paid by people eligible to receive benefits and by general tax revenues. It helps pay doctor bills and other medical costs not covered by hospital insurance.

Many elderly people supplement their Medicare coverage with private insurance called Medigap insurance. Medigap insurance pays hospital bills, doctor bills, and other medical expenses that Medicare does not cover.

3. Workers' Compensation
Workers' compensation pays the cost of medical care for employees who are injured in a job-related accident or who contract a disease as a result of their job. Workers also receive compensation for lost income. In addition, the insurance provides payments to dependents of workers if death occurs. Employers pay the cost of the insurance.

4. Unemployment Insurance
Unemployment insurance provides cash payments for a limited number of weeks to workers who lose their job. It is financed by a payroll tax paid by employers.