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1991.05.17 :  Social Security Trust Fund Report

Contacts: SSA Press Office (301) 965-8904
HCFA Press Office (202) 245-6145
May 17, 1991

        The Social Security program, which currently pays old-
age, survivors, and disability benefits to more than 40 million
Americans, remains financially solvent and able to pay benefits
for many years into the 21st Century, the Social Security Board
of Trustees reported today.
        But in another report, the trustees said the Medicare
Hospital Insurance Trust Fund will likely be exhausted shortly
after the turn of the century and that "corrective action will be
needed very soon in order to avoid the need for potentially
precipitous changes later."
        "This report underlines the urgency of our task in
containing health care costs and spending our health care dollars
more effectively," HHS Secretary Louis W. Sullivan, M.D., said in
releasing the annual reports.
        "In the Social Security trust funds, current projections
indicate continued substantial growth 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," Secretary Sullivan
said.
        "But we are confronting bankruptcy in the primary
Medicare trust fund within 14 years unless we take effective
action to change the situation."
        The Annual Reports of the Social Security Board of
Trustees provide actuarial estimates of the financial status of
the Social Security and Medicare trust funds based on differing
economic and demographic assumptions.
        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 1991 will
total about $330 billion, and outgo will total about $273
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 25 years and to decline
thereafter until the funds are exhausted in 2041.
        However, according to the report, Hospital Insurance
Trust Fund exhaustion will occur in 2005, based on most likely
assumptions.  Using more optimistic assumptions, trust fund
exhaustion would occur in 2018; using more pessimistic
assumptions, the fund would be exhausted in 2001.

        The trustees say in their conclusion:

        "There are currently over four covered workers supporting
each Hospital Insurance (HI) enrollee.  This ratio will begin to
decline rapidly early in the next century.  By the middle of that
century, there will be only about two covered workers for
supporting each enrollee.  Not only are the anticipated reserves
and financing of the HI program inadequate to offset this
demographic change, but under all but the most optimistic
assumptions, the HI trust fund is projected to become exhausted
even before the major demographic shift begins to occur. 
Exhaustion of the fund is projected to occur shortly after the
turn of the century under the alternative II assumptions, and
could occur as early as 2001 if the pessimistic assumptions are
realized."
        The report describes the Supplemental Medical Insurance
trust fund as "actuarially sound," but expresses concerns about
"the rapid growth in the costs of the program.  Growth rates have
been so rapid that outlays have nearly doubled in the last five
years.  For the same period, the program grew 37 percent faster
than the economy as a whole." The SMI fund pays Medicare Part B
costs, including physician and outpatient expenses.  It is
supported primarily by general federal revenue funds (about 76
percent), in addition to beneficiary premiums (about 24 percent).

        During 1991, approximately 133 million workers will be
covered by the Social Security programs and over 40 million
beneficiaries will receive benefits each month.

        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 the
projected declines in the OASDI trust funds in the later years. 
However, because the intermediate estimates show that the overall
OASDI program will have enough income to pay benefits for about
the next 50 years, the trustees are not currently recommending
any changes in the overall financing or benefit provisions of the
Social Security program.  Nevertheless, the trustees state in
their report the need to strengthen the financial position of the
DI fund over both the short-term and the long-term, and further
add that the reallocation of contribution rates between the OASI
and DI funds would maintain the financial solvency of both
programs for many years into the future.

        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 annually
updated economic and demographic assumptions, reflecting the
nation's recent experience and available research.

        The board has five members, three of whom serve in an ex
officio capacity:  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, are representatives of the
public serving four-year terms.  



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