Lauren T. - Guide to Government Benefits: Social Security, Medicare, Medicaid, Unemployment Insurance, Disability

According to the Nation Poverty Center of the University of Michigan, 15 percent of the entire US population , or 45 million people, lived at or below the national poverty level in 2010. Many of these people are barely able to make ends meet, and are forced to make difficult decisions about paying for one basic necessity over another. This often leads to stress-related conditions such as heart disease, depression and anxiety, and many poverty-stricken people who cannot afford to treat these medical problems themselves.

Fortunately, federal and state governments provide income, health care and other benefits as safety nets for impoverished and economically vulnerable people. These come in the form of Social Security benefits, Medicaid and unemployment insurance. Government benefits are an important aspect of a healthy, productive society and serve as a fail-safe against widespread poverty. Without them, many would go without basics such as food, shelter clothing and health care.

The Social Security Act was passed in 1935 under President Franklin Delano Roosevelt. At the time, Social Security benefits were enacted as a means to curtail the high rate of poverty the elderly experienced during the Great Depression, which was more than 50 percent. The original Social Security Act and the amendments that followed created the federal Social Security Administration, as well as state government programs to provide assistance to additional people in need.

At first, Social Security benefits only applied to retirees. However, in 1939, an amendment to the original Social Security Act added survivor's benefits for the families of deceased workers. Another amendment in 1956 gave people with debilitating conditions and serious illnesses disability benefits. Health coverage in the form of Medicare , a federal program, and Medicaid , a state program, was added in 1965. The 1935 Social Security Act also created a federal unemployment benefit program, although some states, such as Wisconsin, already had such programs in place since 1932.

Government benefits are often joint undertakings between each state and the federal government. Although states run their own Medicaid and unemployment programs and have the ability to set their own program qualifications, they also work closely with the federal government to help as many people as possible. State governments receive partial funding for their benefit programs from federal sources and must adhere to some federal guidelines. Similarly, the Social Security Administration , a federal entity, has offices in every state to streamline the application process, provide local services and location-specific benefits.

Funding for these benefits comes from a few different sources. Title VIII of the Social Security Act mandated tax deductions from wage income to cover Social Security program expenditures. In the Internal Revenue Code, these are referred to as Federal Insurance Contributions Act, or FICA taxes. Also known as payroll taxes, FICA deductions equal 7.65 percent of a wage-earner's income, up to $110,100. Medicaid funds come from state income taxes while unemployment benefits are paid for by employers. State governments also receive some funding from the federal government for their Medicaid and unemployment programs.

Workers who reach retirement age can receive monthly benefits from the Social Security Administration. People who retire at age 62 can receive partial payment of their retirement benefits. People who work until their full retirement age qualify for full benefits payments. Traditionally, the full retirement age has been 65. However, for people born after 1937, the full retirement age increases by two months until it reaches 67 for people born in 1960 or later.

Early Retirement Penalty

Taking retirement benefits at age 62 will permanently decrease retirement benefit payments by 20 percent for people with a full retirement age of 65. Workers whose full retirement age is 67 will see a 30 percent reduction in benefit payments by retiring at 62. The payment reduction is reduced each year a worker waits to retire, and is only about 7 percent the year before full retirement age .

Work Credits

The SSA calculates benefits amounts by utilizing a concept called work credits. A worker must have earned at least 40 work credits over their lifetime to qualify for retirement benefits. The number of work credits a person earns depends on their income and the number of years they have worked. Workers who earn at least $4,480 in annual income receive a maximum of four work credits per year, meaning it takes roughly 10 years of work to accumulate 40 work credits.

The average retirement benefit amount was $1,177 in 2011, but each worker's payment will vary depending on their lifetime average income and when they start receiving benefits. The Social Security Administration uses the years with the highest income from the past 35 years to calculate the average lifetime earnings and adjusts them for inflation. This number is called the primary insurance amount, and it represents the full benefit payment. The SSA automatically increases payments when the national cost-of-living goes up. This helps beneficiaries maintain the same level of income during times of inflation, but does not occur every year.

Applying

Retirees can apply for benefits online or in person at a local SSA office. Both application processes require the worker to provide basic information such as their name, date of birth, Social Security number and address. Applicants must also provide information on their marital status, spouse and the number of dependents they have.

Once the application is submitted, the SSA usually does not need require documentation from the applicant because the information can be easily verified by various government databases. However, if the Social Security Administration does request proof or other documentation of any information on the application, potential beneficiaries must turn in the required paperwork within the specified time frame to avoid a delay in receiving benefits. The most commonly requested documents include photo identification, Social Security cards, birth certificates, marriage certificates and tax returns. The SSA does not accept photocopies or faxes of these documents; applicants must send the original documents by mail. The Social Security Administration will mail them back at the end of the application process.

When a worker dies, the Social Security Administration provides their family with survivor's benefits to help fill the income gap left behind. These come as both one-time and monthly payments. A worker must have earned at least six credits in the three years before his death for his family to receive survivors benefits.

Benefit Amount

Children receive 75 percent of their deceased parent's full projected retirement payment amount until they are 18. High school students can receive benefits until age 19. Surviving spouses who are at full retirement age or those who are at least 50 years old and disabled can also receive 75 percent of their spouse's benefits. The total household survivor's benefit amount is 150 percent of the deceased worker's benefit amount. The Social Security Administration also provides a single lump-sum payment of $255 to the deceased's spouse or, if there is no spouse, the deceased's minor child.

Applying

Potential beneficiaries must apply for survivor's benefits at a local SSA office. Applicants must bring birth certificates and Social Security cards for all members of the family, including the deceased. Applicants must also provide a death certificate or official statement from the medical examiner or funeral home. There is a two-year limit to claim the lump-sum payment, but monthly benefits do not have an application time limit.