Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance > Medicare Planning

SSDI: Still on track to go broke in late 2016

Your article was successfully shared with the contacts you provided.

Managers of the fund that supports the Social Security Disability Insurance (SSDI) program say it’s still on track to run dry in “late 2016″ — around election time.

See also: Social Security disability could be broke by 2016 elections

The trustees of the SSDI trust fund and the main Medicare Part A hospitalization trust fund talk about the funds’ finances in new annual reports.

The SSDI program should take in enough revenue to cover about 81 percent of claims if Congress makes no changes, the trustees say. SSDI’s reserves now amount to less than 40 percent of the program’s annual costs, the trustees say.

The actual results could be worse than the projections, because the trustees assume that real, inflation-adjusted interest rates on fund assets will be about 2.4 percent to 3.4 percent. The average inflation-adjusted rate for the 10-year period ending 2012 was just 1.33 percent.

The actual real interest rate on fund assets was negative 0.75 percent in 2011 and positive 0.32 percent in 2012, the trustees say.

“These swings partly reflect volatility in energy prices,” the trustees say.

See also: Rand Paul: Advocates for the disabled should help brainstorm ways to cut Social Security spending

The trustees of the main Medicare hospitalization fund say that fund will be empty in 2030. The trustees gave the same Medicare fund depletion date a year ago.

If Medicare Part A costs are high, the fund could be empty as soon as 2022, the trustees say.

When the Medicare Part A trust fund runs out, the program could collect enough tax revenue to pay about 86 percent of its claims.

The Medicare Part B physician services and Medicare Part D drug programs rely on premiums for a given year to pay the claims incurred during that year and do not use the kinds of large trust fund programs that the SSDI and Medicare Part A programs use.

Over a 75-year period, the Medicare Part A fund’s actuarial deficit should amount to about 0.68 percent of taxable payroll, down from a projection of 0.87 percent of taxable payroll given a year ago. The fund looks better partly because it seems as if health care costs could grow more slowly than expected, the trustees say.

But the real gap likely will be bigger than projected, because Congress requires the trustees to assume that Medicare will be able to hold down provider reimbursement costs, but Congress has not demonstrated much ability to let laws that could hold down Medicare provider reimbursement costs take effect, the trustees say.

See also: So Much for Trust


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.