Medicare Looking Better; Social Security Slightly Worse

The annual report of the Trustees of Social Security and Medicare is out. The report really is from the actuaries. It presents the financial condition of the “trust funds” based on current assumptions. The headline from the report almost always is the changes in the dates when the funds are estimated to be exhausted. In the latest report, the main Medicare hospitalization fund is estimated to last about four years longer than last year’s estimate, until 2030. After that the fund will be able to pay only 85% of promised benefits. The improvement in Medicare is due to slower increases in medical costs and lower use of services. Only a few years ago Medicare was supposed to be exhausted by 2016.

Social Security isn’t doing as well. The retirement benefits fund is slated to run out of money one year earlier than last year’s estimate, making it to 2034. The Social Security disability benefits fund is in far worse shape. The number of disability retirees skyrocketed in recent years. The current estimate is that the disability trust fund will exhaust its reserves in 2016.

From the pubic trustees’ section of the report:

Long before the reserves of the OASI and HI Trust Funds are depleted, the finances of Social Security and Medicare will be challenging because of the growing pressure these programs exert on the Federal budget. This is a central concern from the standpoint of program financing because the reserves of each of the various trust funds are invested wholly in U.S. Treasury securities. Monitoring interactions between the trust funds and the General Fund is one of our core duties. When lawmakers created the public trustee positions in 1983 pursuant to a recommendation of the Greenspan Commission, that commission made its recommendation to create public trustees in the “investment procedures” section of its report, rather than in those sections pertaining to actuarial balance. While the Greenspan Commission presented different opinions on the issue of whether Social Security should be included within the unified Federal budget, members of the commission agreed that it was important that Social Security’s impact on the budget be laid out in a transparent fashion. The minority advocated for Social Security’s “impact thereon to be seen more clearly” while the majority’s arguments included making clear “the effect and presence of any payments from the General Fund of the Treasury to the Social Security program.” Indeed, our public trustee positions exist in large part because of lawmakers’ concern that the economic and fiscal implications of the trust funds’ buildup and drawdown be fully understood and properly managed. One of the first actions taken by the program’s original two public trustees in 1985, the year of their first report, was to direct a study of these implications in response to the concerns.