WASHINGTON–(ENEWSPF)–May 31, 2013. The Social Security and Medicare Boards of Trustees met this afternoon to complete their annual financial review of the programs and to transmit their Reports to Congress. I’d like to welcome my fellow Trustees. I also want to acknowledge the chief actuaries, Stephen Goss and Paul Spitalnic, and their staffs. Thank you all for your hard work.
Today’s reports make clear that while both Social Security and Medicare have sufficient resources to meet their obligations for at least the next decade, it is important that we put in place reforms to strengthen these programs. Fundamentally, Social Security and Medicare benefits are secure today, but reform will be needed so that they will continue to be there for current and future retirees.
When considered on a combined basis, Social Security’s retirement and disability programs have dedicated resources sufficient to cover benefits for the next 20 years. But, as was true last year, it is projected that the combined Social Security Trust Funds will be exhausted in 2033, and incoming revenues will be insufficient to maintain payment of full benefits starting in that year. Medicare’s Hospital Insurance (HI) Trust Fund is projected to exhaust its assets in 2026, two years later than was projected in last year’s report, and nine years later than was projected in the last report released prior to passage of the Affordable Care Act.
Social Security’s Disability Insurance (DI) program faces the most immediate financing shortfall of any of the separate trust funds. The Trustees project trust fund depletion in 2016, the same year projected in the last Trustees Report. While legislation is needed to address all of Social Security’s financial imbalances, the need has become most immediate with respect to the program’s disability insurance component.
The combined Old Age, Survivors, and Disability Insurance Trust Fund has accumulated $2.7 trillion in assets, and the program has sufficient funds to pay full benefits until 2033, the same year projected last year. The 1983 reforms to the program ensured that these Trust Fund balances would build up over time. Social Security’s estimated 75-year actuarial deficit is 2.72 percent of taxable payroll, up 0.05 percentage points from last year’s estimate. The slight worsening in Social Security’s projected finances can be explained entirely by the one year extension of the projection period to 2087.
The HI Trust Fund is projected to have sufficient assets to pay full benefits until 2026. The projected 75-year actuarial deficit in the HI Trust Fund is 1.11 percent of taxable payroll, down from 1.35 percent projected in last year’s report. The modest improvement in HI’s projected finances is principally due to new data and technical revisions to the Trustees projection methods.
Part B of Supplementary Medical Insurance (SMI), which pays doctors’ bills and other outpatient expenses, and Part D, which provides access to prescription drug coverage, are both projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet the next year’s expected costs. However, the aging population and rising health care costs will cause SMI costs to grow steadily from 2.0 percent of GDP in 2012 to approximately 3.3 percent of GDP in 2035 and 4.0 percent of GDP by 2087. Roughly three-quarters of these costs will be financed from general revenues and about one-quarter from premiums paid by beneficiaries.
Despite the projection that Social Security can continue to pay full benefits for 20 years, and HI for 13 years, the sooner action is taken the more options for reform will be available, and the fairer reforms will be to our children and grandchildren. We must reform these programs to keep true to our commitments and ensure that the young as well as the old are confident of their retirement security.
Source: treasury.gov
