What to Look for in the Social Security and Medicare Trustees Reports

August 4, 2010 at 11:27 am

The trustees of the Social Security and Medicare trust funds will release their annual reports tomorrow.  Although these reports generally come out by April 15, the trustees often miss that deadline.  This year, the trustees delayed the reports to give the actuaries at the Social Security Administration and the Centers for Medicare & Medicaid Services time to incorporate the effects of the Affordable Care Act (the recently enacted health reform legislation).

Here are a few things to anticipate and keep in mind about the reports to come tomorrow:

The Social Security and Medicare reports will provide some positive news.  By curbing cost growth in Medicare, health reform extended the solvency of Medicare’s Hospital Insurance trust fund for about a dozen years, and it also reduced the premiums that beneficiaries will have to pay for physician coverage.  In addition, as the trustees projected last year, Social Security will continue to be solvent for roughly another 25 years.  With modest adjustments, it can be solvent for the indefinite future.

Nevertheless, some who seek to convert Social Security and Medicare from universal social insurance programs to something narrower (or from “defined benefit” programs to “defined contribution” programs that carry much greater risk for beneficiaries) may try to use the trustees’ reports to send a very different message.  They may say that Social Security benefits — the foundation of retirement security — are unaffordable, even as they see no problem with extending the Bush-era tax cuts for upper-income taxpayers (a step that would create a funding hole nearly as big over the next 75 years as Social Security’s entire 75-year shortfall).

They likely also will try to make something of the fact that the recession will cause Social Security’s tax revenues to exceed its benefit outlays  this year, conveniently leaving out the program’s interest earnings and its $2.5 trillion trust fund, which is continuing to grow and will do so for another 15 years or so.

They may assert that the Medicare projections are unrealistic because Congress will not allow the Medicare savings in health reform to go into effect.  Such statements flatly ignore the historical record, which shows that the vast majority of the provisions that Congress enacted in the past 20 years to produce Medicare savings were successfully implemented.

They may contend that Medicare changes that helped to pay for health reform can’t also be counted to extend the life of Medicare’s Hospital Insurance trust fund.  If so, they likely will fail to mention that deficit-reduction legislation has been accounted for in exactly the same way in previous Congresses under both political parties.  For example, the Social Security Amendments of 1983 reduced the budget deficit at the same time as they improved the solvency of the Social Security trust funds.

But don’t confuse us with Dr. Pangloss.  The Social Security and Medicare trustees reports will remind us of major challenges ahead as our population ages and health care costs continue to rise.  Policymakers will need to shore up both programs for the long term.  In the case of Medicare — which is an inextricable part of our health care system — that will mean not only implementing the provisions of health reform, but also taking further giant steps to curb the growth of health costs system-wide as we learn more (partly from the research and pilot projects that health reform requires) about how to do so effectively.

We’ll have more to say about the trustees reports tomorrow afternoon.

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More About Paul N. Van de Water

Paul N. Van de Water

Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.

Full bio | Blog Archive | Research archive at CBPP.org

2 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. jonathan #

    You should also address an argument I hear advanced regularly, that the trust fund is an accounting illusion. I often hear that the system is going bankrupt because outflows will exceed inflows. They consider this dictionary form of insolvency – not paying your bills on a continuing basis – as equivalent to bankrupt, which is silly, but when called on it they say the trust fund doesn’t count because it’s an accounting fiction. As you know, GWBush raised this point. That is the actual main point on which the argument rests; since the trust funds are in US debt, they aren’t really trust funds because the government needs to be able to pay the debt. If you can’t address their main argument, you really aren’t gaining useful ground.

    • Paul Van de Water #

      Good suggestion, Jonathan. We’ll issue a paper on that topic soon.

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