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FINANCIAL NEWS

Is Medicare considered an entitlement program?

The federal government offers struggling Americans various forms of financial support, which can be divided into contributory and non-contributory programs.

Update:
¿Puedo inscribirme en Medicare si ya recibo beneficios del Seguro Social?

Entitlement programs are designed to offer a safety net of support mechanisms to ensure that people in the United States are protected financially. The programs are essentially rights granted to American citizens, and to certain non-citizens, by federal law.

Medicare is one of the best-known entitlement programs in the US, but there are many more. Federal initiatives like Medicaid, Social Security, unemployment benefits, and a suite of welfare programs are also entitlement programs.

They can be divided into contributory and non-contributory programs, based on how eligibility for the financial support is calculated.

What is the difference between contributory and non-contributory?

While all citizens are, in theory, able to take advantage of entitlement programs, eligibility can vary. Contributory entitlement programs require the claimant to have ‘paid in’ to the program beforehand, typically in the form of payroll taxes.

Social Security retirement benefits are an example of a contributory entitlement program, because recipients must have contributed to the program during their working life to be entitled to the support at a later date.

Non-contributory entitlement programs do not require the recipient to have made any payments before getting the support. These programs are often referred to as the ‘social safety net’, designed to support low-income, unemployed and vulnerable Americans. Often termed ‘welfare programs’, non-contributory entitlement programs include the Supplemental Nutrition Assistance Program (food stamps) and Pell Grants.

However welfare programs are not necessarily easier to claim and they come with additional eligibility requirements. Welfare programs are typically designed to support low-income Americans; such as Medicaid, which provides health insurance to those who may not otherwise be able to afford it.

To ensure that only low-income individuals receive the support, there is often a maximum earnings or income threshold to exclude wealthy people.

Covid-19 brought about one-time entitlement programs

Many of the entitlement programs have been around for decades, forming the structure of financial support available. However the economic hardship brought about by covid-19 force government to implement a raft of new programs, many of which are considered one-time entitlement programs.

At various points in the pandemic the federal government issued stimulus check payments to individuals with annual earnings of less than $75,000, a form of targeted financial support. Likewise the Paycheck Protection Payments (PPP loans) offered to businesses ensured that small companies were able to weather the storm and remain solvent during the tough covid-19 restrictions.

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