Tuesday, August 10, 2010

Social Security & Medicare Are Gonna be Alright... for now.

Last week the Medicare Trustees and the Social Security Trustees released their annual report of their respective trust funds.  The good news is that these programs will remain solvent for a couple of decades or so.  The bad news?  The actuaries still identify certain dates when the trust funds will run out.

To summarize news on Medicare "way better than last year".  Last years report suggested that Medicare would exhaust it's trust fund as of 2017.  However, that's been moved back 2029.  From their public release.

Despite lower near-term revenues resulting from the economic recession, the Hospital Insurance (HI) Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year, and the 75-year HI financial shortfall has been reduced to 0.66 percent of taxable payroll from 3.88 percent in last year’s report. Nearly all of this improvement in HI finances is due to the ACA. The ACA is also expected to substantially reduce costs for the Medicare Supplementary Medical Insurance (SMI) program; projected program costs as a share of GDP over the next 75 years are down 23 percent relative to the costs projected for the 2009 report.

The ACA was primarily responsible for the increase in stability for Medicare.  The ACA is the Affordable Care Act - the Health Insurance Reform that passed early this year.    That would be the one that conservatives claimed would kill medicare.

Meanwhile, the news on social security is almost no news.
Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983. The projected deficit of $41 billion this year (excluding interest income) is attributable to the recession and to an expected $25 billion downward adjustment to 2010 income that corrects for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink substantially for 2011 and to return to small surpluses for years 2012-2014 due to the improving economy. After 2014 deficits are expected to grow rapidly as the baby boom generation’s retirement causes the number of beneficiaries to grow substantially more rapidly than the number of covered workers. The annual deficits will be made up by redeeming trust fund assets in amounts less than interest earnings through 2024, and then by redeeming trust fund assets until reserves are exhausted in 2037, at which point tax income would be sufficient to pay about 75 percent of scheduled benefits through 2084. The projected exhaustion date for the combined OASI and DI Trust Funds is unchanged from last year’s report.

Social Security is still scheduled to exhaust it's trust fund starting in 2037.  That's a ways off, but still a problem that needs to be solved.

I'll leave you with the closing statement from the message from the Trustees to the public.
The ACA makes significant progress toward making Medicare financially viable. But while it is projected that the Medicare HI Trust Fund is adequately financed until 2029, and the Social Security OASI and DI Trust Funds are adequately financed until 2040 and 2018, respectively, the significant longer term financial imbalances of the programs still need to be addressed. The sooner action is taken to address the long-run financial imbalances, the more reform options will be available, and the more time there will be to phase in changes so that those affected will have adequate time to prepare.
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