Chapter 19
DOMESTIC
POLICY
2
Providing Affordable
Health Care for All

Health care a central theme of Barack
Obama's presidential campaign
 About 16 percent of U.S. 2007 GDP spent on
health care
 Over 60 percent of all personal bankruptcies in
2007 due to medical costs
 About 16 percent of population uninsured
during a portion of 2007 and 2008
 Many denied due to arbitrary definition of preexisting condition
3
Domestic Policy Making

More than half of government expenditures
made on Social Security, health care,
education, and immigration
 Many designed to address economic inequality
 To evaluate, must address questions involving
conflicts between freedom and order and
freedom and equality
 State and local governments must also have
capacity to carry out national programs
4
The Development of the
American Welfare State
 Most controversial purpose of
government promotion of social and
economic equality
 Conflict between freedom and equality
 Most modern nations welfare states
 Social welfare policy based on concept
governments should provide for basic
needs of members
5
A Human Tragedy
6
The Great Depression

Initiatives related to the New Deal and the
Great Society dominated national policy until
reforms in 1980s and 1990s
 Extended protective role of government

The Great Depression longest and deepest
setback of U.S. economy in history
 Began with stock market crash Oct. 24th, 1929
and ended with start of WWII
 One in four workers unemployed; more
underemployed
7
The New Deal
 Franklin Delano Roosevelt, accepting
nomination at Democratic Presidential
Convention:
“I pledge you, I pledge myself to a new deal
for the American people.”
 Were programs imaginative public policy
or source of massive government growth
without matching benefits?
8
The New Deal’s Two Phases
 First phase aimed at boosting prices and
lowering unemployment
 Civilian Conservation Corps (CCC)
 Second phase aimed at aiding “forgotten
people”
 Social Security program
 Despite programs, poverty and
unemployment persisted until WWII
9
The Great Society
 President Lyndon B. Johnson re-elected
in 1964 with landslide
 Used support to promote Great Society
programs to combat political, social, and
economic inequalities
 Vital element was War on Poverty
 Economic Opportunity Act (1964) designed
to end poverty in 10 years
 A hand up, not a handout
10
Retrenchment and Reform
 Despite Great Society’s programs,
poverty declined but did not disappear
 Ronald Reagan used presidency in early
to mid 1980s to re-examine social
welfare policy
 Shifted focus from economic equality to
economic freedom
 Questioned whether government alone
should look after less fortunate
11
Retrenchment and Reform

Reagan’s policies abolished some programs
and redirected others
 Felt state and local governments could provide
social services more efficiently than national
government
 Congress blocked some cutbacks, but overall
spending on social welfare programs fell to
mid-1970s levels

George H.W. Bush’s presidency continued
President Reagan’s approach
12
Retrenchment and Reform
 President Bill Clinton’s proposals aimed
at reforming system while protecting
basic fabric of safety net
 President George W. Bush’s
administration greatly expanded welfare
benefits for seniors with Medicare drug
program
13
Social Security
 Government social insurance
programs
protect individuals from various kinds of
loss, regardless of need
 First example was workers’ compensation
 Social security and Medicare also social
insurance programs
 These programs examples of entitlements
14
Origins of Social Security
 Social insurance programs began in
Europe as early as 1883
 In U.S., needs of elderly and unemployed
left to private organizations and
individuals until Great Depression
 In 1935, President Roosevelt signed
Social Security Act
15
Social Security Act
 Act had three approaches:
 Social insurance for elderly and disabled,
and unemployment benefits
 Grants-in-aid to the states to help destitute
 Federal aid to the states to provide health
and welfare services
16
How Social Security Works

Most people think of retirement benefits
when thinking of Social Security
 Program provides other services

Contributions not set aside for individuals
but used to fund “pay as you go” system
 Program began with more paying into fund
than taking out (nine workers to one
beneficiary)
 Today’s program closer to three workers for
each beneficiary
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Will Social Security
Remain Solvent?
Baby boomers begin to retire in 2010
 Current projections show fund exhausted by
2037

 Politicians face dilemma: lower benefits or raise
taxes to fund program?

Current workers’ benefits will be paid by future
participants
 Solvency depends on growth of base
 What happens when birthrate falls, unemployment
rises, mortality declines, and/or economy falters?
18
Figure 19.1
Day of Reckoning
19
Who Pays? Who Benefits?

Congress established automatic cost-ofliving adjustments (COLAs) for Social
Security in 1972
 Changes in payments and wages subject to tax
tied to Consumer Price Index (CPI)
 Stagflation in 1970s jeopardized fund solvency

President Reagan and Congress agreed to
painful solution in 1983: increased taxes and
reduced benefits
20
Social Security Reform
 Changes in 1983 protected Social
Security but future still a concern
 Majority of adults (61%) in 2009 poll believe
program will not have enough funds to pay
for benefits throughout their retirement
 In 2000 and 2004, both Republicans and
Democrats proposed reforms that involved
private investment of payroll taxes
 President Obama opposes privatization
21
Public Assistance

Public aid to individuals with demonstrated
need
 Some refer to programs as welfare
 Not all are programs for the poor

Social Security Act has categorical assistance
programs





Old age assistance for needy elderly
Aid to the needy blind
Aid to needy families with dependent children
Aid to the totally and permanently disabled
These programs have become entitlements
administered by the states
22
Poverty in the United States
 Since 1960s, poverty level calculated as
three times cost of minimally nutritious
diet for given number of people in a
family for a set time
 Critics believe calculation not accurate
because changes in other costs have
lowered proportion of income used for food
 Measuring poverty one way to measure
public policies’ effectiveness in promoting
equality
23
Census Estimates in 2008
 39.8 million, or 13.2 percent, of
Americans live in poverty
 19.0 percent of persons under 18 live in
poverty
 9.7 percent of people over 65 live in
poverty
 One in two poor Americans live in a
family with a woman head of household
24
Figure 19.2
The Feminization of Poverty
25
The Poverty Level
 Poverty threshold determines number of
people who live below threshold amount
 Poverty guideline income level at which
a family is eligible for government help
 Some believe factors other than income
should be used to determine poverty
 Use of poverty as indicator reflects
ambiguities in notion of equality
26
Welfare Reform

Original poverty programs lacked work
incentives
 A 1994 poll showed 59 percent of Americans believed
welfare recipients taking advantage of system

Personal Responsibility and Opportunity to
Work Act reforms enacted in 1996
 Designed to “end welfare as we know it”
 Abolished Aid to Families with Dependent Children
(AFDC)
 Replaced AFDC with Temporary Assistance to Needy
Families (TANF)
27
Features of TANF

Adult recipients must be employed within
two years
 States have burden of job creation
Families can receive no more than five years’
benefits in a lifetime
 Control of welfare program design and
implementation devolved to states

 Federal support via block grants totaling $16.5
billion a year
 Economic stimulus plan added $5 billion
28
Figure 19.3
Families on Welfare, 1955-2008
29
Status of TANF
 Reauthorized in 2006 and being
reexamined in 2010
 Questions remain about program
 How did system fare in 2008 recession?
 To what extent should states be able to
consider job training and education as work?
30
How Have Recipients Fared?
 The number of families on welfare has
declined
 Large numbers of those formerly on
welfare have found work
 Many jobs do not have good benefits and
involve long commutes
 Many families still living below or close to
poverty level
31
Recession Raises Questions
 To what extent do recipients maintain
eligibility for other programs?
 What happens to TANF benefits if
recipient loses their job?
 What happens to program as states shift
money from job training to benefits as
more need arises?
32
Health Care
 U.S. only major industrialized nation
without universal health care
 Many programs exist, providing a
patchwork quilt of care
 Medicare
 Medicaid
 Children’s Health Insurance Program (SCHIP)
 And now, President Obama’s health care bill
33
Cost and Access
Most agree U.S. health care system needs
fixing
 Two main issues: cost and access
 Access issues include:

 Nearly 47 million people (16 percent) had no
health insurance in 2008
 Many more under-insured
 Numbers vary by age, race, and income
 Supply of physicians does not meet demand
34
Figure 19.4
Poverty in the States
35
Cost and Access
 Health care sector significant part of U.S.
economy
 In 2008, $2.4 trillion spent on health care,
more than 16 percent of GDP
 Fastest growing sector: prescription drugs
 As proportion of GDP, U.S. spends more on
health care than other nations with more
comprehensive care
36
Dealing with Cost and Access
 Any reforms must democratize health
care and control ballooning costs
 Dilemma of balancing greater equality of
coverage with a loss of freedom of choice in
markets for health care and doctors
 Private sector already addresses this
balance in many ways, but also seeks to
limit risk
37
Medicare
 Social Security Act amended in 1965 to
include Medicare for those over 65
 National health insurance first proposed by
President Truman in 1945
 Medicare program had two components:
 Part A for hospitalization
 Part B for physician’s fees
 Program has expanded over years to
cover other services
38
Medicare
Compulsory insurance funded by payroll tax
and premiums deducted from Social
Security
 Participants can also purchase private sector
Medigap plans
 Medicare Prescription Drug, Improvement,
and Modernization Act passed in 2003

 Private sector companies provide competing
plans for seniors to choose from
 Cost of program continues to increase faster
than rate of inflation
39
What are the differences between
Medicare Parts A, B, C and D?
Medicare Part A, Hospital Insurance;
Medicare Part B, Medical Insurance;
Medicare Part C (Medicare Advantage), which was formerly known
as Medicare + Choice; and
Medicare Part D, prescription drug coverage.
Generally, people who are over age 65 and getting Social Security
automatically qualify for Medicare Parts A and B. So do people who
have been getting disability benefits for two years, people who have
amyotrophic lateral sclerosis (Lou Gehrig's disease) and receive
disability benefits, and people who have permanent kidney failure and
receive maintenance dialysis or a kidney transplant.
Part A is paid for by a portion of Social Security tax. It helps pay for
inpatient hospital care, skilled nursing care, hospice care and other
services.
Part B is paid for by the monthly premiums of people enrolled and by
general funds from the U.S. Treasury. It helps pay for doctors' fees,
outpatient hospital visits, and other medical services and supplies that
are not covered by Part A.

Part C (Medicare Advantage) plans allow you to
choose to receive all of your health care services
through a provider organization. These plans may
help lower your costs of receiving medical services,
or you may get extra benefits for an additional
monthly fee. You must have both Parts A and B to
enroll in Part C.

Part D (prescription drug coverage) is voluntary and
the costs are paid for by the monthly premiums of
enrollees and Medicare. Unlike Part B in which you
are automatically enrolled and must opt out if you
do not want it, with Part D you have to opt in by
filling out a form and enrolling in an approved plan.
Medicaid
 Main program to provide health care to
Americans with low incomes
 Since 1965, costs have risen from $0.4
billion to $336 billion
 Single largest public program in nation
 Program run and financed jointly with
states
 Eligibility and services vary widely by state
42
Medicaid
 Participants fall into four groups:
 Children under age 21 (29.8 million, or 48
percent in 2008)
 Adults (5 million)
 Blind and disabled (6 million)
 Aged who are also poor (6.1 million)
 Last two categories account for over half
of Medicaid expenditures
43
Health Care Reform

President Obama signed Patient Protection
and Affordable Care Act March 23, 2010
 Compromises required to balance goal of
equality of access with desire for freedom from
government intervention

Notable provisions in bill include protections
for coverage despite pre-existing conditions
and mandatory participation
 Bill includes subsidies and tax credits to help
individuals and small businesses pay for
coverage
44
Health Care Reform

Critics of bill concerned about cost – an
estimated $940 billion over 10 years
 Some, including Congressional Budget Office,
believe bill will pay for itself

Those wary of “big government” troubled by
additional regulations and bureaucracy
 Is mandating individual coverage
Constitutional?

Others anxious about effect of reforms on
Medicare
45
Elementary and
Secondary Education
 Historically, state and local governments
have primary responsibility for schooling
in U.S.
 Today, federal government contributes
around 8 percent of expenses
 Most significant federal involvement has
come in recent years
46
Concerns Motivating
Change: Equity
 Most Americans believe social and
economic equity can be found through
equality of educational opportunity
 Brown v. Board of Education (1954)
 Elementary and Secondary Education Act of
1965 (ESEA)
 Individuals with Disabilities Education Act
(IDEA)
47
Concerns Motivating
Change: Equity
 Programs have decreased, but not
eliminated, differences in student
achievement
 Significant gaps in math, reading, and
overall graduation rates between
advantaged and disadvantaged groups
48
Concerns Motivating Change:
National Security and Prosperity
 To remain competitive globally, U.S.
must have highly educated and skilled
workers
 First federal program the National Defense
Education Act of 1958 (NDEA)
 Studies relating education to economic
competitiveness began in 1970s
 A Nation at Risk released in 1983
49
Values and Reform
 At center of current debate is dilemma
of freedom versus equality
 Equality of opportunity to get good
education
 Freedom to choose where to live and what
your children will be taught
 Charter schools and school vouchers two
proposals designed to address problems
50
The No Child Left
Behind Act of 2001
George W. Bush’s 2000 presidential
campaign focused on education
 Act designed to reform the Elementary and
Secondary Education Act
 Most significant component requires states
to guarantee proficiency in reading and
math by 2014

 Along the way, must make Adequate Yearly
Progress in all student groups
51
Implementing NCLB
NCLB initially praised for highlighting
educational inequalities and need for
qualified teachers for all
 Critics now charge its requirements mean
teachers “teach to the test”
 Other critics charge federal government did
not allocate enough funding to address
existing inequities
 Some question if low-performing students
“pushed out” to increase scores
 NCLB not reauthorized in 2007

52
Immigration
 One of most important problems facing
America
 Immigrants make up around 13 percent of
population; of those, 30 percent here
illegally
 Twenty-three percent of noncitizens live
below poverty line
 Americans have mixed feelings about
how to approach illegal immigration
53
Immigration
 Foreign workers should apply for and
receive a permanent resident card
(“green card”)
 May eventually apply for citizenship
 Federal policy limits total number of people
receiving green card each year
54
Permanent Resident Status

Priority given to





Reuniting families
Workers in occupations needed in U.S.
Refugees who face persecution in home
countries
Mix of persons from a diverse set of countries
Welfare reforms in 1996 prohibits legal
immigrants from participating in safety net
programs for five years
55
Illegal Immigration
Illegal immigrants get most attention in
policy debates
 If caught, penalties range from being asked
to leave country to imprisonment
 Most come from Mexico and other Latin
American countries

 Geographically concentrated in western states
and large urban areas
 Provide cheap labor in agriculture and
manufacturing
56
Illegal Immigration
 Never eligible for safety net programs
 American-born children are
 Can enroll in public schools and get treated
in hospital emergency rooms
 Policy debates focus on better border
security with Mexico and sanctions on
businesses that hire illegal immigrants
57
Undocumented Santa
58
Immigration Reform

Unsuccessful bill proposed in 2007 would have
allowed illegal immigrants to stay if they met
certain conditions
 Citizenship possibility led conservative critics to
accuse supporters of “offering amnesty”
 Immigrant groups did not like provisions addressing
temporary workers and change in focus from
reuniting families to needed workforce
 Union workers feared immigrants would drive down
wages and take jobs away from Americans
 Liberals did not like E-Verify program requirement
59
Immigration Reform
 Polls show many Americans support
some sort of “path to citizenship”
 Obama administration supports major
provisions of bill and plans to attempt
similar immigration reforms
 Given recent battles in Congress, success
unlikely
60
Benefits and Fairness
 Two kinds of benefits provided by
national government:
 Means-tested benefits
 Non-means-tested benefits
 Some question fairness of non-means-
tested benefits
 Reform debates may center around
making more affluent pay for programs
61