*This is an archive page. The links are no longer being updated. 1992.04.02 : Annual Trust Fund Reports Contact: SSA Press Office (410) 965-8904 (202) 245-2359 HCFA Press Office (202) 245-6145 April 2, 1992 The Annual Reports of the Social Security and Medicare Boards of Trustees were released today, providing actuarial estimates of the financial status of the four Social Security and Medicare trust funds. The reports showed solvency well into the 21st century for the combined Social Security trust funds, although indicating a need to strengthen the financial position of Social Security's disability program. At the same time, the trustees found continued problems for financing of the Medicare program, with exhaustion of the Hospital Insurance Trust Fund estimated to occur at the start of the next decade. Under most likely assumptions, the combined Social Security funds are solvent to the year 2036, but Medicare's hospital insurance fund will be exhausted in the year 2002. The trustees stated that legislative action is needed to control Medicare costs. SOCIAL SECURITY FUNDS Under the intermediate, or more likely, assumptions, income to the Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds in calendar year 1992 will total about $338 billion and outgo will total about $291 billion. Estimates over the next 75 years show that the combined OASI and DI funds would continue to grow, as a percentage of annual expenditures, for the next 22 years and to decline thereafter until the funds under present assumptions would be exhausted in 2036. During 1992, approximately 132 million workers will be covered by the Social Security programs and almost 41 million individuals will receive benefits each month. "In the Social Security program, current projections indicate continued substantial growth of the trust funds over the next several decades, helping to ensure that Social Security can meet its financial commitments in the next century when today's younger workers become eligible for Social Security," HHS Secretary Louis W. Sullivan, M.D., said in releasing the annual report. In examining the long-term solvency of the OASDI program over the next 75 years, the trustees reported that the program is not considered in "close actuarial balance" because of projected declines in the OASDI trust funds in later years. However, the trustees project that the combined trust funds will have enough income to pay benefits for about the next 45 years. As a result, the trustees are recommending at this time that ways of addressing the long-term deficit continue to be studied and appropriate options be developed for future action. At the same time, the trustees reported that the DI trust fund is facing both a short- and long-term deficit which requires more immediate attention. Under the intermediate, or more likely, assumptions, the trustees report that the DI trust fund will be exhausted in 1997 under the current allocation of the OASDI 6.2 percent tax rate (5.6 percent OASI and .6 percent DI). During the history of the Social Security program, inadequate assets in either fund have frequently been remedied by reallocating part of the tax rates from the more adequately financed fund to the less adequately financed fund. This has provided additional income for the inadequate fund without requiring an increase in the overall Social Security tax rate. Therefore, the trustees recommended a careful analysis be conducted immediately of the disability program, including the allocation of the current OASDI tax rate, so that appropriate proposals could be developed that would strengthen the financial position of the DI trust fund. MEDICARE FUNDS The trustees concluded that Medicare's Hospital Insurance (HI) Trust Fund "is severely out of financial balance." Under optimistic assumptions, the HI fund would remain solvent until 2009. Under pessimistic assumptions, the fund could be exhausted as early as the year 2000, the report stated. The report noted that expenditures from the hospital trust fund represented 1.3 percent of the United States' Gross Domestic Product in 1991, but is estimated to grow to 4.7 percent of GDP in the year 2065. At the same time, the report said, the ratio of covered workers to HI enrollees will begin to decline rapidly early in the next century. While there are currently about four covered workers supporting each HI enrollee, there will be only about two covered workers supporting each enrollee by the middle of the next century. "Not only are the anticipated reserves and financing of the HI program inadequate to offset this demographic change, but under all the assumptions, the HI trust fund is projected to become exhausted even before the major demographic shift begins to occur," the report says. "With the magnitude of the projected actuarial deficit in the HI program and the high probability that the HI trust fund will be exhausted shortly after the turn of the century, the trustees urge the Congress to take additional actions designed to control HI program costs either through specific program legislation or as a part of enacting more comprehensive health care reform." In the Supplementary Medical Insurance report, the trustees noted that this trust fund is actuarially sound. However, they expressed concern with the rapid growth of the program. In the past five years, the program has grown 36 percent faster than the economy, despite efforts to control costs. The Board of Trustees is required by law to report annually to Congress on the current and estimated future of the financial condition of the trust funds. The reports use updated economic and demographic assumptions. The board has five members, three of whom serve as Cabinet Secretaries: Nicholas F. Brady, secretary of the treasury; Lynn Martin, secretary of labor; and Louis W. Sullivan, M.D., secretary of health and human services. The other two members, Stanford G. Ross and David M. Walker, were nominated by the President and confirmed by the Senate for four-year terms as public trustees. ###