Unchanged from last year’s projection, Social Security’s combined retirement and disability programs have dedicated resources sufficient to cover benefits for the next 19 years, until 2033. However, the projected depletion date for Social Security's Disability Insurance Trust Fund is much sooner, according to the Social Security and Medicare Trustees report released Monday.
“Social Security’s disability program alone has dedicated funds sufficient to cover all scheduled benefits for only two years,” said Treasury Secretary and Managing Trustee Jacob Lew during a press briefing to discuss the annual report. “As was true last year, beginning in 2016, projected tax income will be sufficient to finance about 80% of scheduled benefits. Legislation will be needed to avoid disruptive reductions in benefit payments to this vulnerable population.”
While the projections in this year’s reports for Social Security are essentially the same as last year, the projections for Medicare have shown some improvement.
According to the report, the Medicare Hospital Insurance Trust Fund will have sufficient funds to cover its obligations until 2030, four years later than was projected last year, and 13 years later than was projected in the last report issued prior to passage of the Affordable Care Act.
“As today’s reports make absolutely clear, Social Security and Medicare are fundamentally secure, and they will remain fundamentally secure in the years ahead,” Lew said. “The reports also remind us of something we all understand: we must reform these programs if we want to keep them sound for future generations.”
“The long-term looks very similar to last year, but the short term picture has grown more urgent.” In public trustee Charles Blahous’ statements on Social Security during the public hearing, he said,
In the 2014 annual report to Congress, the Trustees reported that the combined trust fund reserves are still growing and will continue to grow through 2019. Beginning with 2020, though, the cost of the program is projected to exceed income. And, as projected, when the combined trust fund reserves become depleted in 2033, there will be sufficient income coming in to pay 77% of scheduled benefits. Once exhausted, the report stated, the annual revenues from the dedicated payroll tax will be sufficient to fund three-quarters of scheduled benefits through 2088.
Program costs are projected to exceed noninterest income throughout the remainder of the 75-year period, as this year’s report projected the actuarial deficit over that time to be 2.88% of taxable payroll, 0.16 percentage point larger than in last year’s report.
Current projections in this year’s report show that the “annual cost of Social Security benefits expressed as a share of workers’ taxable earnings will grow rapidly from 11.3% in 2007, the last prerecession year, to roughly 17.1% in 2037, and will then decline slightly before slowly increasing after 2050.”
According to this year’s Medicare report, after the projected depletion date of the Medicare Hospital Insurance (HI) Trust Fund in 2030, the projected portion of scheduled benefits that can be financed with dedicated revenues is 85% in 2030 and declines slowly to about 75% in 2050 and beyond.
Also improved from last year’s report, the 75-year actuarial deficit in the HI Trust Fund is projected at 0.87% of taxable payroll, down from 1.11% in the previous year. According to the report, “this improved outlook for HI is primarily due to lower than expected spending in 2013 for most HI service categories, which reduced the base period expenditure level and contributed to the Trustees’ decision to lower projected near-term spending growth.”
Medicare spending per beneficiary has grown slowly over the past few years and is projected to continue to grow slowly,contributing to the improved outlook.
“The outlook for Medicare has consistently improved since the passage of the Affordable Care Act, and this year, the Trustees have reduced the projections for near-term spending growth,” Lew said during his statement.
As stated in the report, per capita Medicare spending growth has averaged 0.8% annually for the past four years, which is much slower than the average 3.1% annual increase in per capita GDP and national health expenditures over the same period.
The report also states that both supplementary medical insurance (Part B), which pays doctors’ bills and other outpatient expenses, and prescription drug coverage (Part D) are “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.”
The Board of Trustees comprises six members. Four serve by virtue of their positions with the federal government: Jacob J. Lew, Secretary of the Treasury and Managing Trustee; Carolyn W. Colvin, Acting Commissioner of Social Security; Sylvia M. Burwell, Secretary of Health and Human Services; and Thomas E. Perez, Secretary of Labor. The two public trustees are Charles P. Blahous III and Robert D. Reischauer.
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