Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund will be “financially adequate” throughout the years 2014 to 2023, but it, along with trust funds covering Medicare’s hospital insurance and Social Security’s disability insurance (DI), will be depleted within the next 25 years, according to annual reports released today by the Medicare and Social Security Boards of Trustees.
When considered separately from the other funds, the OASI Trust Fund’s outgoing payments will exceed its income and interest by 2022 (payments began exceeding income excluding interest in 2010), according to the reports, and the fund will be depleted by 2034, one year earlier than what was projected in last year’s report. The OASI Trust Fund paid benefits to 47 million people in 2013, the trustees say.
The more urgent matter, according to the reports, is that the trust fund that finances the Social Security DI program, which paid benefits to 11 million people in 2013, will be depleted in 2016. This projection is unchanged from the trustees’ 2013 report.
The trustees note that lawmakers could address issues with the DI trust fund by repeating what they did in 1994, reallocating the payroll tax rate between the OASI and DI funds. Of the two funds, however, the OASI fund faces the larger long-term imbalance between income and obligations, the trustees note.
“As baby boomers receiving DI benefits reach Social Security’s full retirement age, the costs of their benefits shift from DI to OASI, increasing costs for the latter trust fund,” they wrote. “The DI Trust Fund’s impending reserve depletion signals that the time has arrived for reforms that strengthen the financing outlooks for OASI and DI alike.”
As for the trust fund that finances Medicare’s hospital insurance coverage for inpatient and related care, it will be depleted by 2030, but that’s four years later than had been projected in 2013. Trustees said they changed their prediction because of lower-than-forecast spending last year in most hospital insurance service categories.
Together, Medicare and Social Security accounted for 41 percent of federal expenditures in fiscal year 2013, according to the trustees, who note that 52.3 million people were covered under Medicare in 2013.
“Neither Medicare nor Social Security can sustain projected long-run program costs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers,” the trustees wrote. “If lawmakers take action sooner rather than later, more options and more time will be available to phase in changes so that the public has 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.”
Medicare spending per beneficiary has grown slowly over the past few years and is projected to continue to grow slowly over the next several years, according to the reports. During the past four years, per capita Medicare spending growth has averaged 0.8 percent annually. By comparison, 3.1 percent was the average annual increase in per capita gross domestic product and national health expenditures over the same period.
The benefits of this slower growth, according to the Centers for Medicare & Medicaid Services (CMS), accrue to both taxpayers and beneficiaries. For example, although the Part B premium for 2015 will not be determined until later this year, the preliminary estimate in the reports indicates that it will remain unchanged from the 2013 premium for the second consecutive year.
The trustees are Health and Human Services Secretary Sylvia M. Burwell, Treasury Secretary and Managing Trustee Jacob Lew, Labor Secretary Thomas Perez and Acting Social Security Commissioner Carolyn Colvin. Two other members are public representatives who are appointed by the president, subject to confirmation by the Senate; Charles Blahous III and Robert Reischauer began serving on Sept. 17, 2010. CMS Administrator Marilyn Tavenner is designated as secretary of the board.