If the Trustees’ Reports Hold Such Great News, Why Where They Not Released Until Now?

Because the news in them is not that great.  Consider:

Social Security (OASDI).  Total unfunded liabilities into the infinite horizon are $24.9 trillion.  (To learn more about unfunded liabilities, read the NCPA piece by Laurence Kotlikoff.)  This includes Social Security, Supplemental Security and Disability.  Including the “trust fund” as a liability (and it is since it is being spent on other programs) brings the unfunded liability to about $27.6 trillion.  This is worse than last year’s unfunded liability of nearly $26 trillion.  Nice.

Disability.  Although disability is part of OASDI described above, it is worth a special mention.  Disability expenditures are growing at a faster rate than Social Security retirement benefit expenditures.  According to the Trustees, the Disability component of the trust fund will be exhausted in 2016.  This is no improvement from last year.  In 2013, disability expenditures totaled $143.4 billion but payroll taxes to fund disability totaled only $111.2 billion.  The DI payroll tax revenue increased from the previous year, but sadly, the growth in benefits outpaced the growth in tax revenue. The trust fund shrank by $32 billion in just one year!  The sad thing is Disability is probably the easiest of all entitlement programs to reform, if there is political will to do it.

Medicare.   Medicare’s Hospital Insurance (Part A), which is funded through payroll taxes, has an unfunded liability of $1.9 trillion, nearly half of 2013’s projection.  Medicare Supplemental Insurance (paid for by seniors’ premiums) unfunded liability is $31.5 trillion, several trillion higher than last year’s projection.  Medicare’s Drug Program shows an unfunded liability of $14.2 trillion, nearly the same as last year’s projection.

Preliminary news reports suggested that the unfunded liability of Medicare is not that bad, because under the Affordable Care Act, physicians’ fees will be cut and the Independent Payment Advisory Board will implement further reductions in costs and services.  In other words, assumptions used to project these costs are based on current law.  But when was the last time physicians’ fees were reduced?  Not in over a decade and the Trustees know that.  In fact, the Trustees even admit as much on page 2, stating “In last year’s report, with one exception related to Part A…with the exception that the projections disregard payment reductions that would result from the depletion of the Medicare Hospital Insurance Trust Fund…The exception described above remains in this year’s report.” In this case, they provide an “illustrative alternative,” which shows that Medicare expenditures as a share of GPD will be project to be much higher over the next 75 years compared to “current law.”

So what to make of these reports?  An unfunded liability is an unfunded liability and there is nothing particularly good about it, even if it is reduced by a couple of trillion dollars.

For further analysis on the Medicare program, see the NCPA Health Blog.


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