The Social Security Act of 1935 established the basic framework for what we know as the federal-state system of public welfare. Essentially, the Social Security Act established two sets of program designed to serve different purposes: (1) a national system of social insurance – or entitlements- for wage earners; and, (2) a system of state-federal public welfare programs for persons who were deemed destitute and unable to work for wages. To this day, the entitlement programs created by the Act, Unemployment Insurance and Old Age, Survivors, and Disability Insurance, form the bulwark of protection for the vast majority of wage earners and their families against the loss of income due to temporary unemployment, retirement, death or disability. For persons who were not then able to work, and therefore unlikely to become eligible for benefits under the wage-related social insurance programs, the Act authorized federal financial participation (FFP) in state administered cash assistance programs: Aid to the Aged, Aid to the Blind, and Aid to Dependent Children. The program of Aid to the Disabled was added in 1950.

The history of public welfare in the United States has been one of continuing change and growth. Prior to the 1900’s local governments shared with private charitable organizations major responsibility for public assistance or as it was often termed, “public relief.” As the nation’s economy became more industrial and the population more concentrated in urban areas, the need for public relief often grew beyond the means, and sometimes the willingness, of local public and private authorities to provide needed assistance. During the Progressive Era, some state governments began to assume more responsibility for helping the worthy poor. By 1926, forty states had established some type of public relief program for mothers with dependent children. A few states also provided cash assistance to needy elderly residents through old-age pensions.

Title I of the 1935 Social Security Act created a program, called Old Age Assistance (OAA), which would give cash payments to poor elderly people, regardless of their work record. OAA provided for a federal match of state old-age assistance expenditures. Among other things, OAA is important in the history of long term care because it later spawned the Medicaid program, which has become the primary funding source for long term care today.