1312 lines
80 KiB
HTML
1312 lines
80 KiB
HTML
<!doctype html>
|
|
<html class="no-js" lang="en">
|
|
<head>
|
|
|
|
|
|
<!-- REQUIRED META INFORMATION -->
|
|
<meta charset="UTF-8" />
|
|
<meta http-equiv="X-UA-Compatible" content="IE=Edge,chrome=1" />
|
|
<meta name="viewport" content="width=device-width,initial-scale=1" />
|
|
<meta name="dc.creator" content="SueKunkel" />
|
|
<meta name="lead_content_manager" content="SueKunkel" />
|
|
<meta name="coder" content="SueKunkel" />
|
|
|
|
|
|
<!-- DOCUMENT TITLE -->
|
|
<!-- #BeginEditable name="doctitle" --><title>Trustees Report Summary</title><!-- #EndEditable -->
|
|
|
|
<!-- OCACT META INFORMATION -->
|
|
<!-- #BeginEditable name="metatags" -->
|
|
<meta name="dc.creator" content="SueKunkel" />
|
|
<meta name="lead_content_manager" content="SueKunkel" />
|
|
<meta name="coder" content="SueKunkel" />
|
|
<meta name="date.modified" content="2013-04-22" />
|
|
<!-- #EndEditable -->
|
|
|
|
<!-- OCOMM STYLES & SCRIPTS -->
|
|
<link href="/framework/css/style.css" type="text/css" rel="stylesheet" media="all" />
|
|
|
|
<!-- OACT STYLES -->
|
|
<link href="../templatefiles/ocact.css" type="text/css" rel="stylesheet" media="all" />
|
|
|
|
<!-- local styles -->
|
|
<style type="text/css">
|
|
td.underline{border-bottom: 1px solid black;}
|
|
th.underline{border-bottom: 1px;}
|
|
td.upperline{border-top: 1px solid black;}
|
|
th.upperline{border-top: 1px;}
|
|
div.footnote {font-size: 10pt;}
|
|
hr.fn{text-align: left; width: 25%; margin: 2px; }
|
|
|
|
|
|
</style>
|
|
|
|
|
|
<!-- SSA INTERNET HEAD SCRIPTS -->
|
|
<script src="/framework/js/ssa.internet.head.js"></script>
|
|
|
|
<script>(window.BOOMR_mq=window.BOOMR_mq||[]).push(["addVar",{"rua.upush":"false","rua.cpush":"false","rua.upre":"false","rua.cpre":"false","rua.uprl":"false","rua.cprl":"false","rua.cprf":"false","rua.trans":"","rua.cook":"false","rua.ims":"false","rua.ufprl":"false","rua.cfprl":"false","rua.isuxp":"false","rua.texp":"norulematch","rua.ceh":"false","rua.ueh":"false","rua.ieh.st":"0"}]);</script>
|
|
<script>!function(e){var n="https://s.go-mpulse.net/boomerang/";if("False"=="True")e.BOOMR_config=e.BOOMR_config||{},e.BOOMR_config.PageParams=e.BOOMR_config.PageParams||{},e.BOOMR_config.PageParams.pci=!0,n="https://s2.go-mpulse.net/boomerang/";if(window.BOOMR_API_key="LERZW-HECFS-R8H4E-23UQ7-ERMQB",function(){function e(){if(!o){var e=document.createElement("script");e.id="boomr-scr-as",e.src=window.BOOMR.url,e.async=!0,i.parentNode.appendChild(e),o=!0}}function t(e){o=!0;var n,t,a,r,d=document,O=window;if(window.BOOMR.snippetMethod=e?"if":"i",t=function(e,n){var t=d.createElement("script");t.id=n||"boomr-if-as",t.src=window.BOOMR.url,BOOMR_lstart=(new Date).getTime(),e=e||d.body,e.appendChild(t)},!window.addEventListener&&window.attachEvent&&navigator.userAgent.match(/MSIE [67]\./))return window.BOOMR.snippetMethod="s",void t(i.parentNode,"boomr-async");a=document.createElement("IFRAME"),a.src="about:blank",a.title="",a.role="presentation",a.loading="eager",r=(a.frameElement||a).style,r.width=0,r.height=0,r.border=0,r.display="none",i.parentNode.appendChild(a);try{O=a.contentWindow,d=O.document.open()}catch(_){n=document.domain,a.src="javascript:var d=document.open();d.domain='"+n+"';void(0);",O=a.contentWindow,d=O.document.open()}if(n)d._boomrl=function(){this.domain=n,t()},d.write("<bo"+"dy onload='document._boomrl();'>");else if(O._boomrl=function(){t()},O.addEventListener)O.addEventListener("load",O._boomrl,!1);else if(O.attachEvent)O.attachEvent("onload",O._boomrl);d.close()}function a(e){window.BOOMR_onload=e&&e.timeStamp||(new Date).getTime()}if(!window.BOOMR||!window.BOOMR.version&&!window.BOOMR.snippetExecuted){window.BOOMR=window.BOOMR||{},window.BOOMR.snippetStart=(new Date).getTime(),window.BOOMR.snippetExecuted=!0,window.BOOMR.snippetVersion=12,window.BOOMR.url=n+"LERZW-HECFS-R8H4E-23UQ7-ERMQB";var i=document.currentScript||document.getElementsByTagName("script")[0],o=!1,r=document.createElement("link");if(r.relList&&"function"==typeof r.relList.supports&&r.relList.supports("preload")&&"as"in r)window.BOOMR.snippetMethod="p",r.href=window.BOOMR.url,r.rel="preload",r.as="script",r.addEventListener("load",e),r.addEventListener("error",function(){t(!0)}),setTimeout(function(){if(!o)t(!0)},3e3),BOOMR_lstart=(new Date).getTime(),i.parentNode.appendChild(r);else t(!1);if(window.addEventListener)window.addEventListener("load",a,!1);else if(window.attachEvent)window.attachEvent("onload",a)}}(),"".length>0)if(e&&"performance"in e&&e.performance&&"function"==typeof e.performance.setResourceTimingBufferSize)e.performance.setResourceTimingBufferSize();!function(){if(BOOMR=e.BOOMR||{},BOOMR.plugins=BOOMR.plugins||{},!BOOMR.plugins.AK){var n=""=="true"?1:0,t="",a="vht6pfix22vgcz6v6jga-f-126f5325f-clientnsv4-s.akamaihd.net",i="false"=="true"?2:1,o={"ak.v":"39","ak.cp":"1204614","ak.ai":parseInt("728289",10),"ak.ol":"0","ak.cr":3,"ak.ipv":4,"ak.proto":"http/1.1","ak.rid":"35c147a","ak.r":35636,"ak.a2":n,"ak.m":"dsca","ak.n":"essl","ak.bpcip":"169.231.231.0","ak.cport":49384,"ak.gh":"23.214.170.93","ak.quicv":"","ak.tlsv":"tls1.3","ak.0rtt":"","ak.0rtt.ed":"","ak.csrc":"-","ak.acc":"bbr","ak.t":"1742074444","ak.ak":"hOBiQwZUYzCg5VSAfCLimQ==VwI7mUpmL65+3rDhS6Tggp298iR9UIip+2vQW2XedId1z6BxsgIMfHhxchylbE7B9mG2+tGl5bvAhQUigDj4pOjLkCTHo9nDFeUnKTw7ckjnins+T34wjoHBAfRHlOxWTtGXQxLZ3KAfyyROqhNviINhvIPmjXnrac+H0TMPGIE1lZ4fjOFP20sdiyb8IjoSg9JLUCHzwxkQSjyf9P7eRUwnXLd9Riok5XK1Gc6qlbi6K9h0o4xTBOVSIKOHHok3Y3ta+Vd4sDZYoNMY1VyW6D0NTWFUjQI36ZMru8K+1UhMd+U9HesnT+ul/tmcHata92I5OIVoFug7r6coDdEOvuEFzR6tKxBlb3VQGdKiYdsgqnkuxOoG1mDYMbzOvP1iCy2P7QpHsNdG3mA5/GHvvTU0g9EROjFZu1GEE4BnS4M=","ak.pv":"98","ak.dpoabenc":"","ak.tf":i};if(""!==t)o["ak.ruds"]=t;var r={i:!1,av:function(n){var t="http.initiator";if(n&&(!n[t]||"spa_hard"===n[t]))o["ak.feo"]=void 0!==e.aFeoApplied?1:0,BOOMR.addVar(o)},rv:function(){var e=["ak.bpcip","ak.cport","ak.cr","ak.csrc","ak.gh","ak.ipv","ak.m","ak.n","ak.ol","ak.proto","ak.quicv","ak.tlsv","ak.0rtt","ak.0rtt.ed","ak.r","ak.acc","ak.t","ak.tf"];BOOMR.removeVar(e)}};BOOMR.plugins.AK={akVars:o,akDNSPreFetchDomain:a,init:function(){if(!r.i){var e=BOOMR.subscribe;e("before_beacon",r.av,null,null),e("onbeacon",r.rv,null,null),r.i=!0}return this},is_complete:function(){return!0}}}}()}(window);</script></head>
|
|
<body class="oact-sidebar-rows">
|
|
<!-- PAGE CONTAINER -->
|
|
<div id="page">
|
|
|
|
<!-- PAGE HEADER -->
|
|
<div class="bg-dark-gray accessibility" id="accessibility"><a id="skip-navigation" href="#content">Skip to main content</a></div><ssa-header class="print-hide"><noscript><header class="banner-neo" id="banner" role="banner" style="background-color: #0b4778;"><div class="banner-wrapper"><h1 class="banner-logo"><a class="banner-logo__link" href="/">Social Security</a></h1><nav class="banner-nav" id="banner-nav"><a class="banner-nav__link banner-search" href="https://search.ssa.gov/search?affiliate=ssa" title="Search" target="_blank"><svg class="banner-nav__icon" focusable="false" width="24" height="24" viewbox="0 0 24 24"><path d="M 10 23 C 11.219 23 12.384 22.762 13.496 22.285 C 14.608 21.808 15.565 21.169 16.367 20.367 C 17.169 19.565 17.808 18.608 18.285 17.496 C 18.762 16.384 19 15.219 19 14 C 19 12.953 18.829 11.951 18.488 10.992 C 18.147 10.033 17.661 9.164 17.031 8.383 L 22.711 2.711 C 22.904 2.518 23 2.281 23 2 C 23 1.713 22.905 1.475 22.715 1.285 C 22.525 1.095 22.287 1 22 1 C 21.719 1 21.482 1.096 21.289 1.289 L 15.617 6.969 C 14.836 6.339 13.966 5.853 13.008 5.512 C 12.05 5.171 11.047 5 10 5 C 8.781 5 7.616 5.238 6.504 5.715 C 5.392 6.192 4.435 6.831 3.633 7.633 C 2.831 8.435 2.192 9.392 1.715 10.504 C 1.238 11.616 1 12.781 1 14 C 1 15.219 1.238 16.384 1.715 17.496 C 2.192 18.608 2.831 19.565 3.633 20.367 C 4.435 21.169 5.392 21.808 6.504 22.285 C 7.616 22.762 8.781 23 10 23 Z M 10 21 C 9.052 21 8.146 20.815 7.281 20.445 C 6.416 20.075 5.672 19.578 5.047 18.953 C 4.422 18.328 3.925 17.584 3.555 16.719 C 3.185 15.854 3 14.948 3 14 C 3 13.052 3.185 12.146 3.555 11.281 C 3.925 10.416 4.422 9.672 5.047 9.047 C 5.672 8.422 6.416 7.925 7.281 7.555 C 8.146 7.185 9.052 7 10 7 C 10.948 7 11.854 7.185 12.719 7.555 C 13.584 7.925 14.328 8.422 14.953 9.047 C 15.578 9.672 16.075 10.416 16.445 11.281 C 16.815 12.146 17 13.052 17 14 C 17 14.948 16.815 15.854 16.445 16.719 C 16.075 17.584 15.578 18.328 14.953 18.953 C 14.328 19.578 13.584 20.075 12.719 20.445 C 11.854 20.815 10.948 21 10 21 Z" transform="matrix(-1, 0, 0, -1, 24.000001, 24.000001)" vector-effect="non-scaling-stroke"></path></svg> <span>Search</span> </a><a class="banner-nav__link banner-menu" href="/menu" id="ssa-menu" title="Menu"><svg class="banner-nav__icon" focusable="false" width="24" height="24" viewbox="0 0 24 24"><path d="M3 5h18q.414 0 .707.293T22 6t-.293.707T21 7H3q-.414 0-.707-.293T2 6t.293-.707T3 5zm0 12h18q.414 0 .707.293T22 18t-.293.707T21 19H3q-.414 0-.707-.293T2 18t.293-.707T3 17zm0-6h18q.414 0 .707.293T22 12t-.293.707T21 13H3q-.414 0-.707-.293T2 12t.293-.707T3 11z" vector-effect="non-scaling-stroke"></path></svg> <span>Menu</span> </a><a class="banner-nav__link banner-languages" href="/es" id="ssa-languages" title="Español" hreflang="es"><svg class="banner-nav__icon" focusable="false" width="24" height="24" viewbox="0 0 24 24"><path d="M12 0C5.373 0 0 5.373 0 12s5.373 12 12 12c.812 0 1.604-.08 2.37-.235-.31-.147-.343-1.255-.037-1.887.34-.703 1.406-2.485.35-3.08-1.053-.6-.76-.868-1.405-1.56-.644-.692-.38-.796-.422-.974-.14-.61.62-1.523.656-1.616.035-.094.035-.446.023-.55-.012-.107-.48-.387-.597-.4-.117-.01-.176.188-.34.2-.164.012-.88-.433-1.03-.55-.154-.117-.224-.398-.435-.61-.21-.212-.235-.047-.562-.175-.327-.13-1.382-.516-2.19-.844-.81-.33-.88-.79-.892-1.114-.012-.325-.492-.797-.718-1.137-.225-.342-.267-.81-.348-.705-.082.106.422 1.336.34 1.37-.083.037-.26-.338-.493-.643-.235-.304.245-.14-.505-1.617-.75-1.476.235-2.23.282-3 .048-.77.633.28.328-.21-.304-.493.023-1.524-.21-1.9-.235-.374-1.57.423-1.57.423.034-.363 1.17-.985 1.99-1.56.82-.573 1.322-.128 1.982.083.66.21.703.142.48-.07-.222-.21.094-.316.61-.235.516.082.656.704 1.442.645.784-.06.08.152.186.35.105.2-.117.177-.633.53-.516.35.012.35.926 1.02.913.667.632-.447.538-.94-.094-.49.668-.105.668-.105.563.375.46.02.87.15.408.13 1.52 1.07 1.52 1.07-1.395.762-.516.844-.282 1.02.235.175-.48.515-.48.515-.294-.293-.34.012-.528.117-.187.105-.012.375-.012.375-.97.153-.75 1.173-.738 1.418.012.247-.62.622-.786.973-.164.35.423 1.113.117 1.16-.305.048-.61-1.148-2.25-.703-.495.134-1.593.703-1.008 1.863.585 1.16 1.558-.328 1.886-.164.33.163-.093.902-.023.913.07.012.927.033.974 1.032.048 1 1.3.914 1.57.938.27.023 1.173-.74 1.3-.774.13-.035.646-.47 1.77.175 1.126.644 1.7.55 2.086.82.387.27.117.81.48.985.365.176 1.818-.058 2.18.54.364.597-1.5 3.597-2.085 3.925-.586.328-.856 1.078-1.442 1.558-.69.563-1.418 1.076-2.18 1.535-.684.407-.807 1.137-1.112 1.367C19.984 22.52 24 17.73 24 12c0-6.627-5.373-12-12-12zm2.813 11.262c-.165.047-.504.352-1.336-.14-.832-.494-1.406-.4-1.477-.48 0 0-.07-.2.293-.236.747-.072 1.688.692 1.9.704.21.012.315-.21.69-.09.375.12.094.195-.07.242zM10.887 1.196c-.082-.06.068-.128.157-.246.05-.07.013-.182.078-.246.175-.177 1.043-.423.874.058-.17.48-.98.527-1.11.434zm2.098 1.523c-.293-.013-.983-.086-.856-.212.494-.492-.188-.633-.61-.668-.423-.036-.598-.27-.388-.294.21-.024 1.055.013 1.196.13.14.117.902.422.95.644.047.223 0 .41-.293.4zm2.542-.083c-.234.188-1.413-.673-1.64-.867-.985-.844-1.513-.563-1.72-.703-.206-.142-.132-.33.184-.61.318-.282 1.21.094 1.724.152.516.058 1.113.457 1.125.93.01.474.562.91.327 1.097z" vector-effect="non-scaling-stroke"></path></svg> <span>Español</span> </a><a class="banner-nav__link banner-signin" href="https://secure.ssa.gov/RIL/SiView.action" id="ssa-signin" title="Sign in" target="_blank"><svg class="banner-nav__icon" focusable="false" width="24" height="24" viewbox="0 0 24 24"><path d="M12 17.016q-.797 0-1.406-.61t-.61-1.405.61-1.405 1.406-.61 1.406.61.61 1.406-.61 1.407-1.406.61zm6 3V9.986H6v10.03h12zm-6-17.11q-1.266 0-2.18.914T8.906 6H9v2.016h6.094V6q0-1.266-.914-2.18T12 2.906zm6 5.11q.797 0 1.406.586t.61 1.383v10.03q0 .798-.61 1.384T18 21.984H6q-.797 0-1.406-.586t-.61-1.384V9.986q0-.798.61-1.384T6 8.016h.984V6q0-2.063 1.477-3.54T12 .985t3.54 1.477T17.015 6v2.016H18z" vector-effect="non-scaling-stroke"></path></svg> <span>Sign in</span></a></nav></div></header></noscript></ssa-header><script src="https://www.ssa.gov/legacy/components/dist/ssa-header.js"></script>
|
|
|
|
<!-- PAGE NAVIGATION -->
|
|
<!-- DEPRECATED -->
|
|
|
|
<!-- PAGE TITLE -->
|
|
<div id="title-bar">
|
|
<!-- #BeginEditable name="pagetitle" -->
|
|
<h2>Status of the Social Security and Medicare Programs</h2><!-- #EndEditable -->
|
|
</div>
|
|
|
|
<!-- PAGE CONTENT -->
|
|
<div id="content" role="main">
|
|
|
|
|
|
<style type="text/css">
|
|
.newpage {page-break-before: always; }
|
|
.bluebold { color: navy; font-weight: 700; }
|
|
</style>
|
|
|
|
<!-- GRID SYSTEM -->
|
|
<div class="row-12">
|
|
|
|
<div class="column-3 no-bg-image" >
|
|
|
|
<div class="pad-left pad-top" >
|
|
|
|
<p> <a href="../../index.html">Office of the Chief Actuary </a> </p>
|
|
|
|
<p> <a href="../../TR/2015/index.html">2015 Trustees Report </a> </p>
|
|
|
|
<p> <a href="../../pubs.html">Actuarial Publications</a> </p>
|
|
|
|
</div>
|
|
|
|
</div><!-- end .column-3 -->
|
|
|
|
<div class="column-9 ">
|
|
<div class="large pad-top align-center ">
|
|
<h2 style="font-family:Verdana" >A SUMMARY OF THE 2015 ANNUAL REPORTS</h2>
|
|
Social Security and Medicare Boards of Trustees
|
|
</div>
|
|
|
|
</div><!-- end .column-9 -->
|
|
|
|
</div><!-- end .row-12 -->
|
|
<div class="row-12">
|
|
|
|
<div class="column-12" >
|
|
|
|
<div class="pad-left large pad-right pad-top" >
|
|
<br />
|
|
<h3 class="center">A MESSAGE TO THE PUBLIC:</h3>
|
|
<p>
|
|
Each year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial
|
|
status of the two programs. This message summarizes the 2015 Annual Reports.
|
|
</p>
|
|
|
|
<p>
|
|
Social Security’s Disability Insurance (DI) Trust Fund now faces an urgent threat of reserve depletion, requiring prompt
|
|
corrective action by lawmakers if sudden reductions or interruptions in benefit payments are to be avoided. Beyond DI, Social
|
|
Security as a whole as well as Medicare cannot sustain projected long-run program costs under currently scheduled
|
|
financing. Lawmakers should take action sooner rather than later to address these structural shortfalls, so that the
|
|
uncertainty now facing disability beneficiaries will not eventually be experienced by other programs’ participants, and
|
|
so that a broader range of solutions can be considered and more time will be available to phase in changes while giving
|
|
the public adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable
|
|
populations, including lower-income workers and people already dependent on program benefits.
|
|
</p>
|
|
|
|
<p>
|
|
Social Security and Medicare together accounted for 42 percent of Federal program expenditures in fiscal year 2014. Current
|
|
trust fund operations including General Fund transfers into SMI, the portion of interest payments made to the trust funds
|
|
that are necessary to pay benefits, and any drawdowns of a trust fund’s assets—are resulting in mounting pressure on the
|
|
unified budget. Both Social Security and Medicare will experience cost growth substantially in excess of GDP growth
|
|
through the mid-2030s due to rapid population aging caused by the large baby-boom generation entering retirement and
|
|
lower-birth-rate generations entering employment and, in the case of Medicare, to growth in expenditures per beneficiary
|
|
exceeding growth in per capita GDP. In later years, projected costs expressed as a share of GDP trend up slowly for
|
|
Medicare and are relatively flat for Social Security, reflecting very gradual population aging caused by increasing
|
|
longevity and slower growth in per-beneficiary health care costs.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
<b><u>Social Security</u></b>
|
|
</p>
|
|
|
|
<p>
|
|
The DI program satisfies neither the Trustees’ long-range test of close actuarial balance nor our short-range test of
|
|
financial adequacy and faces the most immediate financing shortfall of any of the separate trust funds. DI Trust Fund
|
|
reserves expressed as a percent of annual cost (the trust fund ratio) declined to 40 percent at the beginning of 2015, and
|
|
the Trustees project trust fund depletion late in 2016, the same year projected in the last Trustees Report. DI costs have
|
|
exceeded non-interest income since 2005, and the trust fund ratio has declined in every year since peaking in 2003. While
|
|
legislation is needed to address all of Social Security’s financial imbalances, the need has become urgent with respect
|
|
to the program’s disability insurance component. Lawmakers need to act soon to avoid automatic reductions in payments to DI
|
|
beneficiaries in late 2016.
|
|
</p>
|
|
|
|
<p>
|
|
To summarize overall Social Security finances, the Trustees have traditionally emphasized the financial status of the
|
|
hypothetical combined trust funds for DI and for Old Age and Survivors Insurance (OASI). The combined trust funds, and
|
|
expenditures that can be financed in the context of the combined trust funds, are hypotheticals because there is no
|
|
legal authority to finance one program’s expenditures with the other program’s taxes or reserves.
|
|
</p>
|
|
|
|
<p>
|
|
Social Security’s total expenditures have exceeded non-interest income of its combined trust funds since 2010, and the
|
|
Trustees estimate that Social Security cost will exceed non-interest income throughout the 75-year projection period. The
|
|
Trustees project that this annual cash-flow deficit will average about $76 billion between 2015 and 2018 before rising
|
|
steeply as income growth slows to its sustainable trend rate after the economic recovery is complete while the number of
|
|
beneficiaries continues to grow at a substantially faster rate than the number of covered workers.
|
|
</p>
|
|
|
|
<p>
|
|
Interest income and redemption of trust fund assets from the General Fund of the Treasury, will provide the resources needed
|
|
to offset Social Security’s annual aggregate cash-flow deficits until 2034. Since the cash-flow deficit will be less than
|
|
interest earnings through 2019, total income will exceed expenditures and reserves of the combined trust funds will continue
|
|
to grow but not by enough to prevent the ratio of reserves to one year’s projected cost (the combined trust fund ratio) from
|
|
declining. (This ratio peaked in 2008, declined through 2014, and is expected to decline steadily in future years.) After
|
|
2019, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest
|
|
earnings until depletion of total trust fund reserves in 2034, one year later than projected in last year’s Trustees
|
|
Report. Thereafter, tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the
|
|
end of the projection period in 2089.
|
|
</p>
|
|
|
|
<p>
|
|
Under current projections, the annual cost of Social Security benefits expressed as a share of workers’ taxable earnings will
|
|
grow rapidly from 11.3 percent in 2007, the last pre-recession year, to roughly 16.7 percent in 2038, and will then decline
|
|
lightly before slowly increasing after 2050. Costs display a slightly different pattern when expressed as a share of
|
|
GDP. Program costs equaled 4.1 percent of GDP in 2007, and the Trustees project these costs will increase to 6.0 percent
|
|
of GDP for 2037, then stay about flat through 2060, and thereafter rise slowly reaching 6.2 percent by 2089.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
The projected 75-year actuarial deficit for the combined Old-Age and Survivors Insurance and Disability Insurance (OASDI)
|
|
Trust Funds is 2.68 percent of taxable payroll, down from 2.88 percent projected in last year’s report. This deficit amounts
|
|
to 20 percent of program non-interest income or 16 percent of program cost. A 0.06 percentage point increase in the OASDI
|
|
actuarial deficit would have been expected if nothing had changed other than the one-year extension of the valuation period
|
|
to 2089. The effects of recently enacted legislation, updated demographic and economic data, and improved methodologies on
|
|
net improved the actuarial deficit by 0.26 percent of taxable payroll.
|
|
</p>
|
|
|
|
<p>
|
|
While the hypothetical combined OASDI Trust Fund fails the long-range test of close actuarial balance, it does satisfy the
|
|
test for short-range (ten-year) financial adequacy. The Trustees project that the combined trust fund asset reserves at the
|
|
beginning of each year will exceed that year’s projected cost through 2028.
|
|
</p>
|
|
|
|
|
|
<p><b><u>Medicare</u></b></p>
|
|
|
|
<p>
|
|
The Trustees project that the Medicare Hospital Insurance (HI) Trust Fund will be depleted in 2030, the same year projected
|
|
in last year’s report. At that time dedicated revenues will be sufficient to pay 86 percent of HI costs. The Trustees
|
|
project that the share of HI cost that can be financed with HI dedicated revenues will decline slowly to 80 percent in
|
|
2050, and will then rise gradually to 84 percent in 2089. HI non-interest income less HI expenditure is projected to be
|
|
negative this year and next (as it has been in every year since 2008), and then turn positive for four years (2017-2020)
|
|
before turning negative again in 2021. The HI fund again fails the test of short-range financial adequacy, as its trust
|
|
fund ratio is already below 100 percent and is expected to decline in a near continuous fashion until reserve depletion
|
|
in 2030.
|
|
</p>
|
|
|
|
<p>
|
|
The HI Trust Fund’s projected long-term actuarial imbalance is smaller than that of the combined Social Security trust
|
|
funds under the intermediate assumptions employed in the 2015 Trustees Report. The estimated 75-year actuarial deficit in
|
|
the HI Trust Fund is 0.68 percent of taxable payroll, which amounts to 18 percent of tax receipts or 15 percent of program
|
|
cost. This estimate is down from 0.87 percent projected in last year’s report, in large part due to a change in the
|
|
projection methodology that results in a lower estimate for long-range health care cost growth for HI and other parts
|
|
of Medicare.
|
|
</p>
|
|
|
|
<p>
|
|
The Trustees project that Part B of Supplementary Medical Insurance (SMI), which pays doctors’ bills and other outpatient
|
|
expenses, and Part D of SMI that pays for prescription drug coverage, will remain adequately financed into the indefinite
|
|
future because current law provides financing from general revenues and beneficiary premiums each year to meet the next
|
|
year’s expected costs. However, the aging population and rising health care costs cause SMI projected costs to grow
|
|
steadily from 2.0 percent of GDP in 2014 to approximately 3.4 percent of GDP in 2035, and then more slowly to 3.8 percent
|
|
of GDP by 2089. General revenues will finance roughly three quarters of these costs, and premiums paid by beneficiaries
|
|
almost all of the remaining quarter. SMI also receives a small amount of financing from special payments by States and
|
|
from fees on manufacturers and importers of brand-name prescription drugs.
|
|
</p>
|
|
|
|
<p>
|
|
The Trustees project that total Medicare costs (including both HI and SMI expenditures) will grow from approximately 3.50
|
|
percent of GDP in 2014 to 5.4 percent of GDP by 2035 and will increase gradually thereafter to about 6.0 percent of GDP
|
|
by 2089.
|
|
</p>
|
|
|
|
<p>
|
|
Relative to last year’s projections, the projections for Medicare’s total costs are little changed over the next 20
|
|
years, but are substantially lower over the longer range. The improvement in the longer-term Medicare outlook is
|
|
principally due to the methodological change mentioned above, and also to provisions of the recently enacted
|
|
Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) that lowers projected long-range Medicare Part B costs. After
|
|
20 years, Medicare reimbursement rates for physicians’ services under MACRA are substantially reduced relative to
|
|
last year’s featured baseline projection that assumed continued overrides of the prior-law mechanism for setting
|
|
Medicare’s physician reimbursement rates.
|
|
</p>
|
|
|
|
<p>
|
|
|
|
<p>
|
|
In recent years U.S. national health expenditure (NHE) growth has slowed considerably. There is uncertainty regarding the
|
|
degree to which this slowdown reflects the impacts of the recent economic downturn and other non-persistent factors or
|
|
structural changes in the health care sector that may continue to produce cost savings in the years ahead. The Trustees
|
|
are hopeful that U.S. health care practices are in the process of becoming more efficient as new payment models become
|
|
more prevalent and providers anticipate less rapid growth of reimbursement rates in both the public and private sectors
|
|
than has occurred during the past several decades.
|
|
</p>
|
|
|
|
<p>
|
|
For a number of years the methodology the Trustees have employed for projecting Medicare finances over the long term has
|
|
assumed a substantial reduction in per capita health expenditure growth rates relative to historical experience. In
|
|
addition, the Trustees have been revising down their projections for near-term Medicare expenditure growth in light of
|
|
the recent favorable experience, in part due to effects of payment changes and delivery system reform that are changing
|
|
how health care is practiced. However, the Trustees have not assumed additional, specific cost saving arising from
|
|
structural changes in the delivery system that may result from MACRA’s new payment mechanisms and the cost-reduction
|
|
incentives in the Affordable Care Act, as well as from payment reforms initiated by the private sector.
|
|
</p>
|
|
|
|
<p>
|
|
Notwithstanding the assumption of a substantial slowdown of per capita health expenditure growth, the projections indicate
|
|
that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation. Such
|
|
legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.
|
|
</p>
|
|
|
|
<p>
|
|
<b><u>Conclusion</u></b>
|
|
</p>
|
|
<p>
|
|
Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action
|
|
sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in
|
|
changes so that the public has adequate time to prepare.
|
|
</p>
|
|
|
|
By the Trustees:
|
|
<br /> <br />
|
|
|
|
<div class="row-12">
|
|
<div class="column-6" >
|
|
Jacob J. Lew,<br />
|
|
<span class="eightypercent">Secretary of the Treasury,<br />
|
|
and Managing Trustee <br />
|
|
of the Trust Funds. <br /> <br /> </span>
|
|
<br />
|
|
|
|
Sylvia M. Burwell,<br />
|
|
<span class="eightypercent">Secretary of Health<br />
|
|
and Human Services,<br />
|
|
and Trustee. <br /><br /></span>
|
|
<br />
|
|
|
|
Charles P. Blahous III,<br />
|
|
<span class="eightypercent">Trustee.<br /><br /> </span>
|
|
|
|
</div><!-- end .column-6 -->
|
|
|
|
<div class="column-6" >
|
|
Thomas E. Perez,<br />
|
|
<span class="eightypercent">Secretary of Labor,<br />
|
|
and Trustee.<br /><br /></span>
|
|
|
|
<br /><br />
|
|
Carolyn W. Colvin,<br />
|
|
<span class="eightypercent">Acting Commissioner of<br />
|
|
Social Security,<br />
|
|
and Trustee.<br /><br /></span>
|
|
|
|
<br />
|
|
|
|
Robert D. Reischauer,<br />
|
|
<span class="eightypercent">Trustee.<br /><br /> </span>
|
|
<br /> <br />
|
|
|
|
</div><!-- end .column-6 -->
|
|
</div><!-- end .row-12 -->
|
|
|
|
<hr />
|
|
|
|
<h3 align="center" class="newpage">A SUMMARY OF THE 2015 ANNUAL SOCIAL SECURITY<br />
|
|
AND MEDICARE TRUST FUND REPORTS</h3>
|
|
|
|
<p>
|
|
The Trustees continue to project depletion of the Social Security Disability Insurance (DI) Trust Fund in late 2016 if
|
|
lawmakers take no action. This impending DI funding shortfall, which threatens beneficiaries with sudden and substantial
|
|
benefit reductions, is but the first manifestation of larger financial imbalances facing Social Security as a whole as
|
|
well as Medicare. The Trustees strongly urge lawmakers to enact legislation promptly to achieve sustainable financial
|
|
balance which, in view of current financing needs, would almost certainly need to include at least a temporary increase
|
|
in resources for the DI Trust Fund.
|
|
</p>
|
|
|
|
<p>
|
|
Social Security’s and Medicare’s projected long-range costs are not sustainable with currently scheduled financing and will
|
|
require legislative action to avoid disruptive consequences for beneficiaries and taxpayers. The sooner that lawmakers take
|
|
action, the wider will be the range of solutions to consider and the more time that will be available to phase in
|
|
changes, giving the public adequate time to prepare. Timely resolution of the financial imbalances will prevent the
|
|
uncertainty currently facing the disabled population from being experienced by other Social Security and Medicare
|
|
participants. Earlier action would also provide more opportunity to ameliorate adverse impacts on vulnerable
|
|
populations, including lower-income workers and people already significantly dependent
|
|
on program benefits.
|
|
</p>
|
|
|
|
|
|
|
|
<p>
|
|
<span class="bluebold">What Were the Trust Fund Results in 2014?</span>
|
|
In 2014, 48.1 million people received Old-Age and Survivors Insurance (OASI) benefits, 10.9 million received DI
|
|
benefits, and 53.8 million were covered under Medicare. A summary of Social Security and Medicare trust fund operations
|
|
is shown in the following table. The OASI Trust Fund increased asset reserves in 2014; reserves in the DI, Hospital
|
|
Insurance (HI), and Supplemental Medical Insurance (SMI) Trust Funds declined.
|
|
</p>
|
|
|
|
<table cellpadding="2" cellspacing="0" class="border" bordercolor="#cccccc" width="100%"
|
|
summary="trust fund operations in 2013, in billions of dollars, for OASI, DI and Medicare">
|
|
<caption><span class="bluebold">Table 1. Trust Fund Operations </span>
|
|
<br /><small>(in billions)</small>
|
|
</caption>
|
|
<tr class="align-right">
|
|
<td> </td> <th class="right" scope="col">OASI</th> <th class=" right" scope="col">DI</th>
|
|
<th class="right" scope="col">HI</th> <th class=" right" scope="col">SMI</th>
|
|
</tr>
|
|
<tr align="right">
|
|
<td align="left">Reserves (end of 2013)</td>
|
|
<td>$2,674.0</td>
|
|
<td>$90.4</td>
|
|
<td>$205.4</td>
|
|
<td>$75.1</td>
|
|
</tr>
|
|
<tr align="right">
|
|
<td align="left">Income during 2014</td>
|
|
<td>769.4</td>
|
|
<td>114.9</td>
|
|
<td>261.2</td>
|
|
<td>338.0</td>
|
|
</tr>
|
|
<tr align="right">
|
|
<td align="left">Cost during 2014</td>
|
|
<td>714.2</td>
|
|
<td>145.1</td>
|
|
<td>269.3</td>
|
|
<td>344.0</td>
|
|
</tr>
|
|
<tr align="right">
|
|
<td align="left"> Net change in Reserves</td>
|
|
<td>55.2</td>
|
|
<td>-30.2</td>
|
|
<td>-8.1</td>
|
|
<td>-6.0 </td>
|
|
</tr>
|
|
<tr align="right">
|
|
<td align="left">Reserves (end of 2014)</td>
|
|
<td>2,729.2</td>
|
|
<td>60.2</td>
|
|
<td>197.3</td>
|
|
<td>69.1</td>
|
|
</tr>
|
|
|
|
</table>
|
|
<p>Note: Totals do not necessarily equal the sum of rounded components.</p>
|
|
<br />
|
|
|
|
<p>
|
|
The following table shows payments, by category, from each trust fund in 2014.
|
|
</p>
|
|
|
|
<table class="border" bordercolor="#cccccc" width="100%" cellspacing="0" cellpadding="2">
|
|
<caption><span class="bluebold">Table 2. Program Cost </span>
|
|
<br /><small>(in billions)</small>
|
|
<tr class="align-right" valign="bottom">
|
|
<td align="left" scope="col"><b>Category</b> (<i>in billions</i>)</td>
|
|
<th class=" right" scope="col">OASI</th>
|
|
<th class=" right" scope="col">DI</th>
|
|
<th class=" right" scope="col">HI</th>
|
|
<th class=" right" scope="col">SMI</th>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Benefit payments</td>
|
|
<td>$706.8</td>
|
|
<td>$141.7</td>
|
|
<td>$264.9</td>
|
|
<td>$339.6</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Railroad Retirement financial interchange</td>
|
|
<td>4.3</td>
|
|
<td>0.4</td>
|
|
<td>—</td>
|
|
<td>—</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Administrative expenses</td>
|
|
<td>3.1</td>
|
|
<td>2.9</td>
|
|
<td>4.5</td>
|
|
<td>4.4</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Total</td>
|
|
<td>714.2</td>
|
|
<td>145.1</td>
|
|
<td>269.3</td>
|
|
<td>344.0</td>
|
|
</tr>
|
|
</table>
|
|
<p>Note: Totals do not necessarily equal the sum of rounded components.</p>
|
|
<br />
|
|
<p>
|
|
Trust fund income, by source, in 2014 is shown below.
|
|
</p>
|
|
|
|
<table class="border" bordercolor="#cccccc" width="100%" cellspacing="0" cellpadding="2">
|
|
<caption><span class="bluebold">Table 3. Program Income </span>
|
|
<br /><small>(in billions)</small>
|
|
<tr class="align-right valign="bottom">
|
|
<td class="align-left scope="col"><b>Source</b> <i>(in billions)</i></td>
|
|
<th class=" right" scope="col">OASI</th>
|
|
<th class=" right" scope="col">DI</th>
|
|
<th class=" right" scope="col">HI</th>
|
|
<th class=" right" scope="col">SMI</th>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Payroll taxes</td>
|
|
<td>$646.2</td>
|
|
<td>$109.7</td>
|
|
<td>$227.4</td>
|
|
<td>—</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Taxes on OASDI<sup><a name="fna" href="#fna">a</a></sup> benefits</td>
|
|
<td>28.0</td>
|
|
<td>1.7</td>
|
|
<td>18.1</td>
|
|
<td>—</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Beneficiary premiums</td>
|
|
<td>—</td>
|
|
<td>—</td>
|
|
<td>3.3</td>
|
|
<td>$77.0</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Transfers from States</td>
|
|
<td>—</td>
|
|
<td>—</td>
|
|
<td>—</td>
|
|
<td>8.7</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">General Fund reimbursements</td>
|
|
<td>0.4</td>
|
|
<td>0.1</td>
|
|
<td>2.0</td>
|
|
<td>3.0</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">General revenues</td>
|
|
<td>—</td>
|
|
<td>—</td>
|
|
<td>—</td>
|
|
<td>$243.7</td>
|
|
</tr>
|
|
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Interest earnings</td>
|
|
<td>94.8</td>
|
|
<td>3.4</td>
|
|
<td>8.8</td>
|
|
<td>2.4</td>
|
|
</tr>
|
|
|
|
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Other</td>
|
|
<td ><sup><a name="fnb" href="#fnb">b</a></sup></td>
|
|
<td >—</td>
|
|
<td >1.6</td>
|
|
<td >3.3</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Total</td>
|
|
<td>769.4</td>
|
|
<td>114.9</td>
|
|
<td>261.2</td>
|
|
<td>338.0</td>
|
|
</tr>
|
|
</table>
|
|
<!-- <small><sup>a</sup> Less than $50 million.</small> -->
|
|
Note: Totals do not necessarily equal the sum of rounded components.<br />
|
|
<p class="seventypercent" >
|
|
<sup><a name="fna" href="#fna">a</a></sup>
|
|
OASDI designates the combined operations of the OASI and DI programs.<br />
|
|
<sup><a name="fnb" href="#fnb">b</a></sup>
|
|
Less than $50 million.</p>
|
|
|
|
<p>
|
|
In 2014, Social Security’s cost continued to exceed the combined program’s tax income, a situation that the Trustees project
|
|
to persist throughout the long-range period (2015-89) and beyond. The 2014 deficit of tax income (Table 3, first two lines)
|
|
relative to cost was $74 billion.
|
|
</p>
|
|
|
|
<p>
|
|
In 2014, the HI fund used $9 billion of interest income (Table 3) and $8 billion of asset reserves (Table 1) to finance
|
|
expenditures beyond those that could have been made solely on the basis of tax and premium income. For SMI, transfers from
|
|
the General Fund of the Treasury, which are set prospectively based on projected costs, represent the largest source of
|
|
income. Part B spending was higher than anticipated in 2014, accounting for half of the $6 billion decrease in account asset
|
|
reserves (Table 1).
|
|
</p>
|
|
|
|
<p>
|
|
<span class="bluebold">What is the Outlook for Future Social Security and Medicare Costs in Relation to GDP? </span>One
|
|
instructive way to view the projected costs of Social Security and Medicare is to compare the costs of scheduled benefits
|
|
nd administrative costs for the programs with the gross domestic product (GDP), the most frequently used measure of the
|
|
total output of the U.S. economy (Chart A). Under the intermediate assumptions employed in the reports and throughout this
|
|
Summary, costs for the programs increase substantially through 2035 when measured this way because: (1) the number of
|
|
beneficiaries rises rapidly as the baby-boom generation retires; and (2) the lower birth rates that have persisted since
|
|
the baby boom cause slower growth of the labor force and GDP.
|
|
</p>
|
|
|
|
<p><center><a name="A"></a>
|
|
<table>
|
|
<caption><span class="bluebold">
|
|
Chart A—Social Security and Medicare Cost as a Percentage of GDP</span>
|
|
</caption>
|
|
<tr>
|
|
<td><a href="images/LD_ChartA.html" title="click on graph for underlying data">
|
|
<img src="images/chartA.jpg" width="600" height="500" border="0" alt="click on graph for underlying data">
|
|
</a>
|
|
</td></tr></table>
|
|
</center></p>
|
|
|
|
<p>
|
|
|
|
Social Security’s projected annual cost increases to about 6.0 percent of GDP by 2035, declines to 5.9 percent by 2050, and
|
|
rises to 6.2 percent of GDP by 2089. Under the intermediate assumptions, Medicare cost rises to 5.4 percent of GDP by 2035
|
|
due mainly to the rapid growth in the number of beneficiaries, and then to 6.0 percent by 2089. The growth in health care
|
|
cost per beneficiary becomes the larger factor later in the valuation period, particularly in Part D
|
|
</p>
|
|
|
|
|
|
<p>
|
|
In 2014, the combined cost of the Social Security and Medicare programs equaled 8.5 percent of GDP. The Trustees project an
|
|
increase to 11.4 percent of GDP by 2035 and to 12.2 percent of GDP by 2089. Medicare’s relative cost (3.5 percent of GDP) is
|
|
expected to rise gradually from 71 percent of the cost of Social Security (5.0 percent of GDP) in 2015 to about 97 percent
|
|
by 2089.
|
|
</p>
|
|
|
|
<p>
|
|
The projected costs for OASDI and HI depicted in Chart A and elsewhere in this document reflect the full cost of scheduled
|
|
current-law benefits without regard to whether the trust funds will have sufficient resources to meet these
|
|
obligations. Current law precludes payment of any benefits beyond the amount that can be financed by the trust funds, that
|
|
is, from annual income and trust fund reserves. In years after trust fund depletion, the amount of benefits that would be
|
|
payable is lower than shown, as described later in this summary, because benefit cost exceeds annual income. In addition,
|
|
the projected costs assume realization of the full estimated savings of the Affordable Care Act and the physician payment
|
|
rate updates specified in the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. As described in the Medicare
|
|
Trustees Report, the projections for HI and SMI Part B depend significantly on the sustained effectiveness of various
|
|
current-law cost-saving measures, in particular, the lower increases in Medicare payment rates to most categories of
|
|
health care providers.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
<span class="bluebold">What is the Outlook for Future Social Security and Medicare HI Costs and Income in Relation to Taxable Earnings?</span>
|
|
Since the primary source of income for OASDI and HI is the payroll tax, it is informative to express the programs’ incomes and
|
|
costs as percentages of taxable payroll—that is, of the base of worker earnings taxed to support each program (Chart B). Both
|
|
the OASDI and HI annual cost rates rise over the long run from their 2014 levels (13.99 and 3.42 percent). Projected Social
|
|
Security cost grows to 16.73 percent of taxable payroll by 2038, declines to 16.54 percent in 2050, and then rises gradually
|
|
to 17.97 percent in 2089. The projected Medicare HI cost rate rises to 4.84 percent of taxable payroll in 2050, and thereafter
|
|
increases to 5.14 percent in 2089.
|
|
</p
|
|
|
|
<p><center><a name="B"></a>
|
|
<table>
|
|
<caption><span class="bluebold">
|
|
Chart B—OASDI and HI Income and Cost as a Percentage
|
|
of Taxable Payroll</span><br /></caption>
|
|
<tr>
|
|
<td><a href="images/LD_ChartB.html" title="click on graph for underlying data">
|
|
<img src="images/chartB.jpg" width="600" height="500" border="0" alt="click on graph for underlying data"></a>
|
|
</td></tr></table>
|
|
</center></p>
|
|
|
|
<p>
|
|
HI taxable payroll is about 25 percent larger than that of OASDI because the HI payroll tax is imposed on all earnings
|
|
while OASDI taxes apply only to earnings up to a maximum ($118,500 in 2015) which ordinarily is adjusted each year.
|
|
|
|
<p/>
|
|
|
|
<p>
|
|
The OASDI income rate—which includes scheduled payroll taxes at the current 12.4 percent level, taxes on benefits, and
|
|
any other transfers of revenues to the trust funds excepting interest payments—was 12.80 percent in 2014 and increases
|
|
slowly over time, reaching 13.32 percent in 2089. Annual income from the taxation of OASDI benefits will increase
|
|
gradually relative to taxable payroll as a greater proportion of Social Security benefits is subject to taxation in
|
|
future years, but will continue to be a relatively small component of program income.
|
|
|
|
</p>
|
|
|
|
|
|
|
|
<p>
|
|
The HI income rate—which includes payroll taxes and taxes on OASDI benefits, but excludes interest payments—rises gradually
|
|
from 3.26 percent in 2014 to 4.32 percent in 2089 due to the Affordable Care Act’s increase in payroll tax rates for high
|
|
earners that began in 2013. Individual tax return filers with earnings above $200,000, and joint return filers with earnings
|
|
above $250,000, pay an additional 0.9 percent tax on earnings above these earnings thresholds. An increasing fraction of all
|
|
earnings will be subject to the higher tax rate over time because the thresholds are not indexed. By 2089, an estimated 80
|
|
percent of workers would pay the higher rate.
|
|
</p>
|
|
|
|
<p>
|
|
<span class="bluebold">How Will Cost Growth in the Different Parts of Medicare Change the
|
|
Sources of Program Financing?</span>
|
|
As Medicare cost grows over time, general revenue and beneficiary premiums will play an increasing
|
|
role in financing the program. Chart C shows scheduled cost and non-interest revenue sources under current law for HI and
|
|
SMI combined as a percentage of GDP. The total cost line is the same as displayed in Chart A and shows Medicare cost rising
|
|
to 6.0 percent of GDP by 2089.
|
|
</p>
|
|
|
|
<p>
|
|
Projected revenue from payroll taxes and taxes on OASDI benefits credited to the HI Trust Fund increases from 1.4
|
|
percent of GDP in 2015 to 1.9 percent in 2089 under the projected baseline, while projected general revenue transfers
|
|
to the SMI Trust Fund increase from 1.5 percent of GDP in 2015 to 2.8 percent in 2089, and beneficiary premiums
|
|
increase from 0.5 to 1.0 percent of GDP. The share of total non-interest Medicare income from taxes falls
|
|
substantially (from 41 percent to 32 percent) while general revenue transfers rises (from 44 percent to 48 percent), as
|
|
does the share of premiums (from 14 percent to 18 percent). The distribution of financing changes in part because in
|
|
Parts B and D—the Medicare components that are financed largely from general revenues—costs increase at a faster rate
|
|
than Part A cost under the Trustees’ projections. By 2089, the projected HI deficit represents 0.5 percent of GDP and
|
|
there is no provision under current law to finance that shortfall through general revenue transfers or any other
|
|
revenue source.
|
|
</p>
|
|
|
|
<p>
|
|
Projected revenue from payroll taxes and taxes on OASDI benefits credited to the HI Trust Fund increases from 1.4 percent
|
|
of GDP in 2015 to 1.9 percent in 2089 under current law, while projected general revenue transfers to the SMI Trust Fund
|
|
increase from 1.5 percent of GDP in 2015 to 2.8 percent in 2089, and beneficiary premiums increase from 0.5 to 1.0 percent
|
|
of GDP during the same period. Thus, the share of total non-interest Medicare income from taxes falls substantially (from 41
|
|
percent to 32 percent) while general revenue transfers rises (from 44 percent to 48 percent), as does the share of
|
|
premiums (from 14 percent to 18 percent). The distribution of financing changes in large part because in Part B and
|
|
especially Part D—the Medicare components that are financed largely from general revenues—costs increase at a faster
|
|
rate than Part A cost under the Trustees’ projections. The projected annual HI financial deficit beyond 2035 through
|
|
2089 averages about 0.4 percent of GDP and there is no provision under current law to finance that shortfall through
|
|
general revenue transfers or any other revenue source.
|
|
</p>
|
|
|
|
|
|
<p><center><a name="C"></a>
|
|
<table>
|
|
<caption><span class="bluebold">
|
|
Chart C—Medicare Cost and Non-Interest Income by Source as a Percentage of GDP
|
|
</span></caption>
|
|
<tr>
|
|
<td><a href="images/LD_ChartC.html" title="click on graph for underlying data">
|
|
<img src="images/chartC.jpg" width="600" height="500" border="0" alt="click on graph for underlying data"></a>
|
|
</td></tr></table>
|
|
</center></p>
|
|
|
|
|
|
|
|
<p>
|
|
The Medicare Modernization Act (2003) requires that the Board of Trustees determine each year whether the annual difference
|
|
between program cost and dedicated revenues (the bottom four layers of Chart C) under current law exceeds 45 percent of
|
|
total Medicare cost in any of the first seven fiscal years of the 75-year projection period, in which case the annual Trustees
|
|
Report must include, as it did from 2006 through 2013, a determination of “excess general revenue Medicare funding.” Because
|
|
the difference between program cost and dedicated revenues is not expected to exceed the 45 percent threshold during fiscal
|
|
years 2015-21, there is no such determination in this year’s report.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
<span class="bluebold">What are the Budgetary Implications of Rising Social Security and Medicare Costs?</span>
|
|
Concern about the long-range financial outlook for Medicare and Social Security often focuses on the depletion dates for the
|
|
HI and OASDI trust funds—the times when the projected trust fund balances under current law will be insufficient to pay the
|
|
full amounts of scheduled benefits. A more immediate issue is the effect the programs have on the unified Federal budget
|
|
prior to depletion of the trust funds.
|
|
</p>
|
|
|
|
<p>
|
|
Chart D shows the excess of scheduled costs over dedicated tax and premium income for the OASDI, HI, and SMI trust funds
|
|
expressed as percentages of GDP through 2040.<sup><a name="fn1" href="#fntext1">1</a></sup> Each of these trust funds’ operations will contribute increasing amounts to
|
|
Federal unified budget deficits in future years. General revenues pay for roughly 75 percent of all SMI costs. Until
|
|
2030, interest earnings and asset redemptions, financed from general revenues, will cover the shortfall of HI tax and
|
|
premium revenues relative to expenditures. In addition, general revenues must cover similar payments as a result of
|
|
OASDI deficits through 2034.<sup><a name="fn2" href="#fntext2">2</a></sup>
|
|
</p>
|
|
|
|
<p><center><a name="D"></a>
|
|
<table>
|
|
<caption><span class="bluebold">
|
|
Chart D—Projected SMI General Revenue Funding <br /> plus OASDI and HI Tax Shorfalls<br /><i>[Percentage of GDP]</i>
|
|
</span></caption>
|
|
<tr>
|
|
<td><a href="images/LD_ChartD.html" title="click on graph for underlying data">
|
|
<img src="images/chartD.jpg" width="600" height="500" border="0" alt="click on graph for underlying data"></a>
|
|
</td></tr></table>
|
|
</center></p>
|
|
|
|
|
|
<p>
|
|
In 2015, the projected difference between Social Security’s expenditures and dedicated tax income is $84 billion. For HI, the
|
|
projected difference between expenditures and dedicated tax and premium income is $4 billion.
|
|
<sup><a name="fn3" href="#fntext3">3</a></sup>
|
|
The projected general revenue demands of SMI are $276 billion. Thus, the total General Fund requirements for Social Security
|
|
and Medicare in 2015 are $364 billion, or 2.0 percent of GDP. Redemption of trust fund bonds, interest paid on those
|
|
bonds, and transfers from the General Fund provide no new net income to the Treasury, which must finance these payments
|
|
through some combination of increased taxation, reductions in other government spending, or additional borrowing from the
|
|
public.
|
|
</p>
|
|
|
|
|
|
|
|
|
|
<p>
|
|
Chart D shows that the difference between cost and revenue (expressed as a percentage of GDP) from dedicated payroll
|
|
taxes, income taxation of benefits, and premiums will grow rapidly through the 2030s as the baby-boom generation reaches
|
|
retirement age, under the assumption that scheduled benefits will be paid even in the absence of an increase in dedicated
|
|
tax revenues.
|
|
<sup><a name="fn4" href="#fntext4">4</a></sup>
|
|
This imbalance would result in vastly increasing pressure on the unified Federal budget, with such financing requirements
|
|
equaling 4.2 percent of GDP by 2040.
|
|
</p>
|
|
|
|
<p>
|
|
<span class="bluebold">What Is the Outlook for Short-Term Trust Fund Adequacy?</span>
|
|
The reports measure the short-range adequacy of the OASI, DI, and HI Trust Funds by comparing fund asset reserves at the
|
|
start of a year to projected costs for the ensuing year (the “trust fund ratio”). A trust fund ratio of 100 percent or
|
|
more—that is, asset reserves at least equal to projected cost for the year—is a good indicator of a fund’s short-range
|
|
adequacy. That level of projected reserves for any year suggests that even if cost exceeds income, the trust fund
|
|
reserves, combined with annual tax revenues, would be sufficient to pay full benefits for several years.
|
|
</p>
|
|
|
|
<p>
|
|
By this measure, the OASI Trust Fund is financially adequate throughout and beyond the short-range period (2015-24)
|
|
period, but the DI Trust Fund fails the short-range test because its estimated trust fund ratio was 40 percent at the
|
|
beginning of 2015, with projected depletion of all reserves in late 2016.
|
|
</p>
|
|
|
|
<p>
|
|
The HI Trust Fund also does not meet the short-range test of financial adequacy; its trust fund ratio was 72 percent at
|
|
the beginning of 2015 based on the year’s anticipated expenditures, and the projected ratio does not rise to 100 percent
|
|
within five years. Projected HI Trust Fund asset reserves become fully depleted in 2030. Chart E shows the trust fund
|
|
ratios through 2040 under the intermediate assumptions.
|
|
</p>
|
|
|
|
<p>
|
|
The Trustees apply a less stringent annual “contingency reserve” test to SMI Part B asset reserves because (i) the
|
|
financing for that account is set each year to meet expected costs, and (ii) the overwhelming portion of the financing
|
|
for that account consists of general revenue contributions and beneficiary premiums, which were 73 percent and 25
|
|
percent of total Part B income in calendar year 2014. Part D premiums paid by enrollees and the amounts apportioned
|
|
from the General Fund of the Treasury are determined each year. Moreover, flexible appropriation authority typically
|
|
established by lawmakers for Part D allows additional General Fund financing if costs are higher than
|
|
anticipated, limiting the need for a contingency reserve in that account.
|
|
</p>
|
|
|
|
|
|
<p><center><a name="E"></a>
|
|
<table>
|
|
<caption><span class="bluebold">
|
|
Chart E—OASI, DI, and HI Trust Fund Ratios<br /> <i>[Asset reserves as a percentage of annual cost] </i></span>
|
|
|
|
</caption>
|
|
<tr>
|
|
<td><a href="images/LD_ChartE.html" title="click on graph for underlying data">
|
|
<img src="images/chartE.jpg" width="600" height="500" border="0" alt="click on graph for underlying data"></a>
|
|
</td></tr></table>
|
|
</center></p>
|
|
|
|
|
|
<p>
|
|
<span class="bluebold">What Are Key Dates in OASI, DI, and HI Financing?</span>
|
|
The 2015 reports project that the DI, OASI, and HI Trust Funds will all be depleted within the next 20 years. The following
|
|
table shows key dates for the respective trust funds as well as for the theoretical combined OASDI trust funds.
|
|
<sup><a name="fn5" href="#fntext5">5</a></sup>
|
|
</p>
|
|
|
|
<p>
|
|
<table class="border" bordercolor="#cccccc" width="100%" cellspacing="0" cellpadding="2">
|
|
<caption><span class="bluebold">KEY DATES FOR THE TRUST FUNDS</span></caption>
|
|
|
|
<tr valign="bottom" >
|
|
<td> </td>
|
|
<th class="right " width="13%" scope="col">OASI</th>
|
|
<th class="right " width="13%" scope="col">DI</th>
|
|
<th class="right " width="13%" scope="col">OASDI<sup>a</sup></th>
|
|
<th class="right " width="13%" scope="col">HI</th>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Year of peak trust fund ratio<sup>b</sup></td>
|
|
<td>2011</td>
|
|
<td>2003</td>
|
|
<td>2008</td>
|
|
<td>2003</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">First year outgo exceeds income excluding interest<sup>c</sup></td>
|
|
<td>2010</td>
|
|
<td>2005</td>
|
|
<td>2010</td>
|
|
<td>2021</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">First year outgo exceeds income including interest<sup>c</sup></td>
|
|
<td>2022</td>
|
|
<td>2009</td>
|
|
<td>2020</td>
|
|
<td>2023</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Year trust funds are depleted</td>
|
|
<td>2035</td>
|
|
<td>2016</td>
|
|
<td>2034</td>
|
|
<td>2030</td>
|
|
</tr>
|
|
</table>
|
|
</p>
|
|
<p class="seventypercent">
|
|
<sup>a</sup> Column entries represent key dates for the hypothetical combined OASI and DI funds. <br />
|
|
<sup>b</sup> Dates pertain to the post-2000 period. <br />
|
|
<sup>c</sup> Dates indicate the first year that a condition is projected to occur and to
|
|
persist annually thereafter through 2088.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
DI Trust Fund asset reserves, which have been declining since 2008, are projected to be fully depleted in late 2016, as
|
|
reported last year. Payment of full DI benefits beyond 2016, when tax income would cover only 81 percent of scheduled
|
|
benefits, will require legislation to address the financial imbalance. The OASI Trust Fund, when considered separately, has
|
|
a projected reserve depletion date of 2035, one year later than in last year’s report. At that time income would be s
|
|
ufficient to pay 77 percent of scheduled OASI benefits.
|
|
</p>
|
|
|
|
<p>
|
|
The theoretical combined OASDI trust funds have a projected depletion date of 2034, one year later than indicated in last
|
|
year’s report. After the depletion of reserves, continuing tax income would be sufficient to pay 79 percent of scheduled
|
|
benefits in 2034 and 73 percent in 2089.
|
|
</p>
|
|
|
|
<p>
|
|
The OASDI reserves are projected to grow in 2015 because anticipated interest earnings ($93 billion in 2015) still exceed
|
|
the non-interest income deficit ($84 billion). This year’s report indicates that annual OASDI income, including payments of
|
|
interest to the trust funds from the General Fund, will exceed annual cost every year until 2020, increasing the nominal value
|
|
of combined OASDI trust fund asset reserves. The trust fund ratio (the ratio of projected reserves to annual cost) will
|
|
continue to decline gradually (Chart E), as it has since 2008, despite this nominal balance increase. Beginning in 2020, net
|
|
redemptions of trust fund asset reserves with General Fund payments will be required until projected depletion of these
|
|
reserves in 2034.sset reserves with General Fund payments will
|
|
be required until projected depletion of these reserves in 2034.
|
|
</p>
|
|
|
|
<p>
|
|
The projected HI Trust Fund depletion date is 2030, unchanged from last year’s report. Under current law, scheduled HI tax
|
|
and premium income would be sufficient to pay 86 percent of estimated HI cost after trust fund depletion in 2030, declining
|
|
to 79 percent by 2039, and then gradually increasing to 84 percent by 2089.
|
|
</p>
|
|
|
|
<p>
|
|
This report anticipates that HI Trust Fund reserve assets will increase by $2.0 billion in 2015 because interest
|
|
earnings ($9 billion) will exceed the non-interest income deficit ($7 billion). Annual non-interest HI income is projected
|
|
to exceed expenditures from 2017 through 2020, after which annual shortfalls reappear and persist through the remainder of
|
|
the long-range projection period.
|
|
</p>
|
|
|
|
<p>
|
|
<span class="bluebold">What is the Long-Range Actuarial Balance of the OASI, DI, and HI Trust Funds?</span>
|
|
Another way to view the outlook for payroll tax-financed trust funds (OASI, DI, and HI) is to consider their actuarial
|
|
balances for the 75-year valuation period. The actuarial balance measure includes the trust fund asset reserves at the
|
|
beginning of the period, an ending fund balance equal to the 76th year’s costs, and projected costs and income during the
|
|
valuation period, all expressed as a percentage of taxable payroll for the 75-year projection period. Actuarial balance is
|
|
not an informative concept for the SMI program because Federal law sets premium increases and general revenue transfers at
|
|
the levels necessary to bring SMI into annual balance.
|
|
</p>
|
|
|
|
<p>
|
|
The actuarial deficit represents the average amount of change in income or cost that is needed throughout the valuation
|
|
period in order to achieve actuarial balance. The actuarial balance equals zero if cost for the period can be met for the
|
|
period as a whole and trust fund asset reserves at the end of the period are equal to the following year’s cost. The OASI, DI,
|
|
and HI Trust Funds all have long-range actuarial deficits under the intermediate assumptions, as shown in the following table.
|
|
</p>
|
|
|
|
<table class="border" bordercolor="#cccccc" width="100%" cellspacing="0" cellpadding="2">
|
|
<caption><span class="bluebold">LONG-RANGE ACTUARIAL DEFICIT OF THE OASI, DI, AND HI TRUST FUNDS</span>
|
|
<br /><small>(As a percentage of taxable payroll)</small>
|
|
</caption>
|
|
|
|
<tr valign="bottom" align="right">
|
|
<td> </td>
|
|
<th class="right " width="18%" scope="col">OASI</th>
|
|
<th class="right " width="18%" scope="col">DI</th>
|
|
<th class="right " width="18%" scope="col">OASDI</th>
|
|
<th class="right " width="18%" scope="col">HI</th>
|
|
</tr>
|
|
<tr valign="bottom" align="center">
|
|
<td align="left">Actuarial deficit</td>
|
|
<td>2.37</td>
|
|
<td>0.31</td>
|
|
<td>2.68</td>
|
|
<td>0.68</td>
|
|
</tr>
|
|
</table>
|
|
<br />
|
|
<p>
|
|
The Trustees project that the annual deficits for Social Security as a whole, expressed as the difference between the cost
|
|
rate and income rate for a particular year, will decline from 1.31 percent of taxable payroll in 2015 to 0.98 percent in
|
|
2017 before increasing steadily to 3.52 percent in 2038. Annual deficits then decline slightly to 3.32 percent in 2050
|
|
before resuming an upward trajectory and reaching 4.65 percent of taxable payroll in 2089 (Chart B). The relatively
|
|
large annual variations in deficits indicate that a single tax rate increase for all years starting in 2015 sufficient
|
|
to achieve actuarial balance would result in sizable annual surpluses early in the period followed by increasing deficits
|
|
in later years. Sustained solvency would require payroll tax rate increases or benefit reductions (or a combination thereof)
|
|
by the end of the period that are substantially larger than those needed on average for this report’s long-range
|
|
period (2015-89).
|
|
</p>
|
|
|
|
<p>
|
|
The Trustees project that the HI cost rate will exceed the income rate in 2015 by 0.05 percent of taxable payroll, followed
|
|
by a period of small tax-income surpluses in 2016 through 2021. Deficits subsequently re-emerge to grow rapidly with the aging
|
|
of the baby boom population through about 2045, when the annual deficit reaches a peak of 1.03 percent of taxable
|
|
payroll. Annual deficits then decline to 0.82 percent of payroll by 2060 and remain in the range of 0.80 to 0.90 percent of
|
|
taxable payroll through 2089.
|
|
|
|
<p>
|
|
The financial outlooks for both OASDI and HI depend on a number of demographic and economic assumptions. Nevertheless, the
|
|
actuarial deficit in each of these programs is large enough that averting trust fund depletion under current-law financing
|
|
is extremely unlikely. An analysis that allows plausible random variations around the intermediate assumptions employed in
|
|
the report indicates that OASDI trust fund depletion is highly probable by mid-century.
|
|
</p>
|
|
|
|
<p>
|
|
<span class="bluebold">How Has the Financial Outlook for Social Security and Medicare Changed Since Last Year?</span>
|
|
Under the intermediate assumptions, the combined OASDI trust funds have a projected 75-year actuarial deficit equal to 2.68
|
|
percent of taxable payroll, 0.20 percentage point smaller than last year’s estimate. The anticipated depletion date for the
|
|
theoretical combined asset reserves is 2034. If the assumptions, methods, starting values, and the law had remained unchanged
|
|
from last year, the actuarial deficit would have increased by about 0.06 percent of payroll due to advancing the valuation
|
|
date by one year and including the year 2089. Changes in methods (for example, improved earnings projections for future
|
|
beneficiaries), updated starting values, and revised economic assumptions (for example, an increased average real wage
|
|
differential) account for most of the net decline in the actuarial deficit.
|
|
</p>
|
|
|
|
<p>
|
|
Medicare’s HI Trust Fund has a long-range actuarial deficit equal to 0.68 percent of taxable payroll under the intermediate
|
|
assumptions, 0.19 percentage point smaller than reported last year. This improvement is primarily due to a reduction in
|
|
projected long-range health care cost growth based on 1) changed assumptions about the effect of increases in
|
|
income, technology, and health care prices on health care costs (0.23 percent of payroll), and 2) provider payment
|
|
reductions due to legislation (0.03 percent of payroll). Partly offsetting these gains, by -0.07 percent of payroll, was
|
|
an increase in the projected number of beneficiaries enrolled in Medicare Advantage plans, where benefits are more
|
|
costly. The projected date of depletion of the HI Trust Fund remains 2030.
|
|
</p>
|
|
|
|
<p>
|
|
<span class="bluebold">What Are the Trust Funds? </span>
|
|
Congress established trust funds managed by the Secretary of the Treasury to account for Social Security and Medicare
|
|
income and disbursements. The Treasury credits Social Security and Medicare taxes, premiums, and other income to the
|
|
funds. There are four separate trust funds. For Social Security, the Old-Age and Survivors Insurance (OASI) Trust Fund
|
|
pays retirement and survivors benefits and the Disability Insurance (DI) Trust Fund pays disability benefits. (OASDI is
|
|
the designation for the two trust funds when they are considered on a theoretical combined basis.) For Medicare, the
|
|
Hospital Insurance (HI) Trust Fund pays for inpatient hospital and related care. The Supplementary Medical
|
|
Insurance (SMI) Trust Fund comprises two separate accounts: Part B, which pays for physician and outpatient
|
|
services, and Part D, which covers the prescription drug benefit.
|
|
</p>
|
|
|
|
<p>
|
|
The only disbursements permitted from the funds are benefit payments and administrative costs. Federal law requires that
|
|
all excess funds be invested in interest-bearing securities backed by the full faith and credit of the United States. The
|
|
Department of the Treasury currently invests all program revenues in special non-marketable securities of the U.S. Government
|
|
which earn interest equal to rates on marketable securities with durations defined in law. The balances in the trust
|
|
funds, which represent the accumulated value, including interest, of all prior program annual surpluses and deficits, provide
|
|
automatic authority to pay benefits.
|
|
</p>
|
|
|
|
<p>
|
|
<span class="bluebold">How Are Social Security and Medicare Financed?</span>
|
|
For OASDI and HI, the major source of financing is payroll taxes on earnings paid by employees and their
|
|
employers. Self-employed workers pay the equivalent of the combined employer and employee tax rates. During 2014, an
|
|
estimated 166 million people had earnings covered by Social Security and paid payroll taxes; for Medicare the corresponding
|
|
figure was 169.6 million. Current law establishes payroll tax rates for OASDI, which apply to earnings up to an annual
|
|
maximum ($118,500 in 2015) that ordinarily increases with the growth in the nationwide average wage. In contrast to
|
|
OASDI, covered workers pay HI taxes on total earnings. The scheduled payroll tax rates (in percent) for 2015 are:
|
|
|
|
<table class="border" bordercolor="#cccccc" width="100%" cellspacing="0" cellpadding="2"
|
|
summary="payroll tax rates by trust fund">
|
|
<tr valign="bottom" align="right">
|
|
<td> </td>
|
|
<th class="right " width="15%" scope="col">OASI</th>
|
|
<th class="right " width="15%" scope="col">DI</th>
|
|
<th class="right " width="15%" scope="col">OASDI</th>
|
|
<th class="right " width="15%" scope="col">HI</th>
|
|
<th class="right " width="15%" scope="col">Total</th>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Employees</td>
|
|
<td>5.30</td>
|
|
<td>0.90</td>
|
|
<td>6.20</td>
|
|
<td>1.45</td>
|
|
<td>7.65</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Employers</td>
|
|
<td class=" ">5.30</td>
|
|
<td class=" ">0.90</td>
|
|
<td class=" ">6.20</td>
|
|
<td class=" ">1.45</td>
|
|
<td class=" ">7.65</td>
|
|
</tr>
|
|
<tr valign="bottom" align="right">
|
|
<td align="left">Combined total</td>
|
|
<td>10.60</td>
|
|
<td>1.80</td>
|
|
<td>12.40</td>
|
|
<td>2.90</td>
|
|
<td>15.30</td>
|
|
</tr>
|
|
</table>
|
|
<br />
|
|
<p>
|
|
Self-employed persons pay the combined rates. The Affordable Care Act applies an additional HI tax equal to 0.9 percent
|
|
of earnings over $200,000 for individual tax return filers, and on earnings over $250,000 for joint return filers.
|
|
</p>
|
|
|
|
<p>
|
|
Taxation of Social Security benefits is another source of income for the Social Security and Medicare trust
|
|
funds. Beneficiaries with incomes above $25,000 for individuals (or $32,000 for married couples filing jointly) pay income
|
|
taxes on up to 50 percent of their benefits, with the revenues going to the OASDI trust funds. This income from taxation of
|
|
benefits made up about 3 percent of Social Security’s income in 2014. Those with incomes above $34,000 (or $44,000 for
|
|
married couples filing jointly) pay income taxes on up to 85 percent of benefits, with the additional revenues going to the
|
|
Medicare trust fund. This income from taxation of benefits made up about 7 percent of HI Trust Fund income in 2014.
|
|
</p>
|
|
|
|
<p>
|
|
The trust funds also receive income from interest on their accumulated reserves, which are invested in U.S. Government
|
|
securities. In 2014, interest income made up 11 percent of total income to the OASDI trust funds, 3 percent for HI, and
|
|
less than 1 percent for SMI.
|
|
</p>
|
|
|
|
<p>
|
|
Payments from the General Fund currently finance about 75 percent of SMI Part B and Part D costs, with most of the remaining
|
|
costs covered by monthly premiums charged to enrollees or in the case of low-income beneficiaries, paid on their behalf
|
|
by Medicaid for Part B and Medicare for Part D. Part B and Part D premium amounts are determined by methods defined in
|
|
law and increase as the estimated costs of those programs rise.
|
|
</p>
|
|
|
|
<p>
|
|
In 2015, the Part B standard monthly premium is $104.90. There are also income-related premium surcharges for Part B
|
|
beneficiaries whose modified adjusted gross income exceeds a specified threshold. In 2015 through 2019, the threshold
|
|
is $85,000 for individual tax return filers and $170,000 for joint return filers. Income-related premiums range
|
|
from $146.90 to $335.70 per month in 2015.
|
|
</p>
|
|
|
|
<p>
|
|
In 2015, the Part D “base monthly premium” is $33.13. Actual premium amounts charged to Part D beneficiaries depend on the
|
|
specific plan they have selected and average around $32 for standard coverage. Part D enrollees with incomes exceeding
|
|
the thresholds established for Part B must pay income-related monthly adjustment amounts in addition to their normal
|
|
plan premium. For 2015, the adjustments range from $12.30 to $70.80 per month. Part D also receives payments from
|
|
States that partially compensate for the Federal assumption of Medicaid responsibilities for prescription drug costs
|
|
for individuals eligible for both Medicare and Medicaid. In 2015, State payments will cover about 9 percent of Part D
|
|
costs.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
<span class="bluebold">Who Are the Trustees?</span>
|
|
There are six Trustees, four of whom serve by virtue of their positions in the Federal Government: the Secretary of the
|
|
Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The
|
|
other two Trustees are public representatives appointed by the President and confirmed by the Senate: Charles P. Blahous
|
|
III, Senior Research Fellow at the Mercatus Center and Research Fellow at the Hoover Institution, and Robert D.
|
|
Reischauer, President Emeritus and Distinguished Fellow of the Urban Institute.
|
|
</p>
|
|
|
|
|
|
<hr class="fn" />
|
|
|
|
<div class="footnote">
|
|
|
|
<sup><a name="fntext1" href="#fn1">1</a></sup>
|
|
Note that HI contributes small surpluses to combined General Revenue needs during 2017-20. The depicted height
|
|
of the combined shortfall during those years reflects these HI surpluses.
|
|
<br />
|
|
<sup><a name="fntext2" href="#fn2">2</a></sup>
|
|
As noted earlier in this summary, if trust fund depletion actually occurred as projected for HI in 2030 and for
|
|
theoretical combined OASDI in 2034, each program could pay benefits thereafter only up to the amount of continuing
|
|
dedicated revenues. Chart D, by contrast, compares dedicated sources of tax and premium income with the full cost of
|
|
paying scheduled benefits under each program. In practice, lawmakers have never allowed the asset reserves of the
|
|
Social Security or Medicare HI trust funds to become depleted.
|
|
<br />
|
|
<sup><a name="fntext3" href="#fn3">3</a></sup>
|
|
This difference is projected on a cash rather than the incurred expenditures basis applied elsewhere in the
|
|
long-range projections, except where explicitly noted otherwise.
|
|
<br />
|
|
<sup><a name="fntext4" href="#fn4">4</a></sup>
|
|
As previously noted, this scenario would require a change in law to allow for the timely payment of all scheduled benefits
|
|
upon trust fund depletion.
|
|
<br />
|
|
<sup><a name="fntext5" href="#fn5">5</a></sup>
|
|
HI results in this section of the Summary are on a cash rather than the incurred expenditures basis.
|
|
</div>
|
|
|
|
|
|
<hr />
|
|
<h3 align="center" class="newpage">A MESSAGE FROM THE PUBLIC TRUSTEES</h3>
|
|
|
|
<p>
|
|
Participation in our fifth annual Trustees Reports provides an opportunity to reflect on the great privilege it has been to
|
|
serve as Public Trustees for the Social Security and Medicare trust funds. Not only do the Social Security and Medicare
|
|
programs remain exceptional public policy achievements, but also we have found that the Trustees’ process itself accords
|
|
with the highest standards of public service. The ex officio Trustees and their capable staffs with whom we have worked
|
|
have invariably approached their responsibilities with an attitude of respect for a process that well serves lawmakers
|
|
and the public. The same can be said of the independent and tirelessly working Chief Actuaries at the Social Security
|
|
Administration and Centers for Medicare & Medicaid Services and their skilled staffs.We have also benefited tremendously
|
|
from the insights of the Social Security and Medicare technical panels that have reviewed the assumptions and
|
|
methodologies underlying the annual reports. Although only time will allow us to judge the accuracy of the Trustees’
|
|
long-term projections, it is not too soon for us to vouch for the methodological rigor, objectivity, and integrity
|
|
with which the work has been conducted.</p>
|
|
|
|
<p>
|
|
As noted in last year’s Message, the public trustee positions were created pursuant to a recommendation of the 1983 Greenspan
|
|
Commission, based on its view that “the presence of such public members would inspire more confidence in the investment
|
|
procedure” for trust fund assets. This recommendation followed the Commission’s finding that the trust fund investment
|
|
procedures were “equitable to both the trust funds and the General Fund of the Treasury.” It preceded the Commission
|
|
recommendation on budget procedures to “make clear the effect and presence of any payments from the General Fund of the
|
|
Treasury to the Social Security program.” While it emphasized the usefulness of public trustees in monitoring these
|
|
interactions, the Commission also opined that establishing public trustees “would help to assure that the demographic
|
|
and economic assumptions for the cost estimates of the future operations of the program would continue to be developed
|
|
in an objective manner.”
|
|
</p>
|
|
|
|
<p>
|
|
Our positions thus require that we monitor several important aspects of Social Security and Medicare financing. The
|
|
language of the Social Security Act, statements of influential legislators and commission members, and the structures
|
|
of the Social Security and Medicare programs themselves, all convey that a positive trust fund balance is a necessary
|
|
but insufficient condition for financial viability. To ensure that these programs function adequately, policy makers
|
|
will need to consult other information in our reports beyond the mere projected duration of trust fund adequacy. This is
|
|
true for both Social Security and Medicare, though the underlying considerations are distinct in each case.
|
|
</p>
|
|
|
|
<p>
|
|
The importance of financial information beyond a trust fund’s solvency status is most readily apparent in Medicare, a
|
|
significant portion of which is kept automatically solvent by statutory design. For example, lawmakers have long required
|
|
that the Trustees provide an annual report on the finances of Medicare’s Supplemental Medical Insurance (SMI) Trust Fund,
|
|
using statutory terminology similar to that used for the Social Security and Hospital Insurance trust funds despite the
|
|
fact that, in contrast to these other trust funds, the SMI fund can never be depleted. By this and other actions, lawmakers
|
|
have conveyed to the Trustees a desire for a range of pertinent financial information. In the specific case of SMI, financing
|
|
strains are manifested not in a threat of Trust Fund reserve depletion but in rising costs facing premium payers as well
|
|
as the Federal Government’s General Fund. The budgetary pressures that arise from maintaining Trust Fund solvency are
|
|
among the issues about which the annual Trustees Reports are intended to inform lawmakers and the public.
|
|
</p>
|
|
|
|
<p>
|
|
With Social Security, much of the need to look more critically at program finances arises from the pattern of trust fund
|
|
operations that has developed over time. Throughout much of Social Security’s early history annual income and outgo were
|
|
kept in reasonably proximate annual balance, such that when the Trust Funds faced a threat of depletion in the early 1980s
|
|
it was still fully possible, though difficult to be sure, to close the financing gap. After the 1977 and 1983 program
|
|
amendments, Social Security experienced substantial surpluses of tax income relative to expenditures from the late 1980s
|
|
through the 2000s. Notwithstanding the fact that the aggregate program has been running annual cash deficits since
|
|
2010, these surpluses have accumulated to a substantial positive balance in the hypothetical combined trust funds, one
|
|
that will peak in 2019 and then decline gradually to depletion in 2034. A critical unintended consequence of large trust
|
|
fund balances has been that unavoidable corrective actions have been postponed. Continued inaction going forward to the
|
|
point where the combined trust funds near depletion would—unlike the situation in 1983—likely preclude any plausible
|
|
opportunity to maintain Social Security’s historical financing structure.
|
|
</p>
|
|
|
|
<p>
|
|
To appreciate these dangers, consider that under the Trustees’ current projections, annual Social Security costs will be
|
|
more than 25 percent higher than income by 2034. There is no historical precedent for closing annual gaps of this size
|
|
within the space of just a few years. As the Trustees Report notes, even the total elimination of Social Security benefits
|
|
for those newly eligible in 2034 would be insufficient to restore short-term financial balance. Similarly, a payroll tax
|
|
increase of the magnitude needed to maintain scheduled benefits would have a profound adverse impact on the economy and
|
|
employment. Thus, while legislative action is not yet necessary to prevent imminent reductions in Old-Age and Survivors
|
|
Insurance (OASI) benefits (the immediate threat being confined to disability benefits), prompt action is needed to
|
|
prevent Social Security’s aggregate financial shortfall from growing to an intractable size.
|
|
</p>
|
|
|
|
<p>
|
|
The imminent depletion of Social Security’s Disability Insurance (DI) Trust Fund reserves is but the first financing crisis
|
|
arising from program cost growth trends that have been evident for the past few decades. Social Security DI faces unique
|
|
policy challenges that lawmakers should address, distinct from those facing the OASI Trust Fund. At the same time, however,
|
|
the projected imbalance of the OASI Trust Fund is larger in both absolute and relative terms than that facing the DI fund
|
|
and arises from many of the same sources.
|
|
</p>
|
|
|
|
<p>
|
|
Conflicting considerations arise from these factors. At this late date, it is impracticable to reduce DI costs sufficiently
|
|
to prevent imminent Trust Fund depletion (and thus, sudden benefit reductions for highly vulnerable individuals) without at
|
|
least a temporary increase in DI Trust Fund resources, irrespective of its source or combination with other measures. But on
|
|
the other hand, DI already receives a higher share of the Social Security payroll tax relative to its projected
|
|
obligations, than does OASI. Moreover, past DI income increases have generally been enacted in the context of legislation
|
|
affecting projected program outlays, the sole recent exception in 1994 being preceded by a Trustees’ warning that a further
|
|
reallocation to DI from OASI “would ultimately raise concern about the financial viability of the retirement and survivors
|
|
program.” Any necessary resource reallocation that does occur should not be regarded as a substitute for action to sustain
|
|
the finances of DI and Social Security as a whole, nor enacted in a manner that has the effect of further postponing those
|
|
required corrections.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
Several years of delay in legislating financing corrections has led to the current situation in which there are few options
|
|
for preventing sudden DI benefit reductions affecting many of our society’s most vulnerable members. Substantial further
|
|
delay in enacting financial repairs to Social Security as a whole would compound these problems, creating uncertainty on
|
|
an even larger scale for millions of vulnerable OASI beneficiaries and taxpayers, and leaving even less palatable options
|
|
than now exist.
|
|
</p>
|
|
|
|
|
|
<p>
|
|
Though Medicare has long been considered the relatively more difficult financing challenge, by some measures it is in better
|
|
financial shape than Social Security. Medicare’s actuarial imbalance is smaller and its Hospital Insurance Trust Fund
|
|
depletion date (2030) is substantially more distant than that facing Social Security’s DI fund (2016). But two important
|
|
factors complicate this picture. One is that, as earlier noted, Medicare SMI is constructed to remain solvent by statutory
|
|
design. Thus the absence of a projected SMI Trust Fund depletion date does not by itself signify that Medicare is free from
|
|
financing strains. Instead, these pressures are simply manifested in different ways—as projected financial burdens on
|
|
Federal income taxpayers and Medicare premium payers.
|
|
</p>
|
|
|
|
<p>
|
|
The other important factor is that the relatively smaller size of Medicare’s financing gap depends in large part on sustaining
|
|
ambitious cost-containment provisions under current law whose effectiveness has yet to be fully tested over the long
|
|
term. Irrespective of whether one supported or opposed the enactment of these provisions, Medicare participants and those
|
|
with insurance obtained through employers, unions and exchanges share a common stake in their success. If these
|
|
provisions were to be scaled back or repealed, other more aggressive savings measures would need to be enacted in
|
|
their place. Because even under current projections Medicare faces a substantial financing gap, we will need all of
|
|
current law’s cost containment and more to ensure that it remains on a financially secure footing.
|
|
</p>
|
|
|
|
<p>
|
|
We hope that the information contained in these reports will prove useful to policy makers as they undertake the important
|
|
work of strengthening Social Security and Medicare finances.
|
|
</p>
|
|
|
|
<br />
|
|
|
|
<div class="row-12">
|
|
|
|
<div class="column-6">
|
|
|
|
Charles P. Blahous III,<br />Trustee.
|
|
<br /><br />
|
|
</div><!-- end .column-6 -->
|
|
|
|
<div class="column_6">
|
|
Robert D. Reischauer,<br />Trustee.
|
|
<br /><br />
|
|
</div><!-- end .column-6 -->
|
|
|
|
</div><!-- end .row-12 -->
|
|
|
|
|
|
</div>
|
|
|
|
|
|
</div><!-- end .column-12 -->
|
|
|
|
</div><!-- end .row-12 -->
|
|
|
|
<!-- #EndEditable -->
|
|
</div><!-- end #content -->
|
|
|
|
<!-- PAGE FOOTER -->
|
|
<ssa-footer class="print-hide"><noscript><footer class="footer" id="footer" role="contentinfo"><a href="/menu#footer">Footer menu</a></footer></noscript></ssa-footer><script src="https://www.ssa.gov/legacy/components/dist/ssa-footer.js"></script>
|
|
|
|
</div><!-- end #page -->
|
|
|
|
</body>
|
|
</html>
|