The 2011 Trustees Reports: Same Song, Second Verse

Friday the 13th could not be a better day to release the 2011 Social Security and Medicare Trustees’ reports.  Entitlement programs are just bad luck for the long-term federal budget.  These annual reports from Social Security and Medicare actuaries estimate the amount of money needed (beyond workers’ payroll taxes and seniors’ Medicare premiums) needed to keep the Social Security and Medicare solvent so that you, your children and grandchildren will receive benefits. 

For the most part, the Trustees’ reports are reruns of last year.  First, let’s look at Social Security.  Actuaries estimate that the unfunded liabilities of Social Security are $17.9 trillion. This means that the government would need to have $17.9 trillion in the bank, today, earning interest at the government borrowing rate in order to fund these programs into the infinite horizon.  Oh, but lest I mention there is a $2.6 trillion trust fund that will take care of part of it this liability. Oh, really? Contrary to the mantra that this trust fund will be around until 2037, for all intents and purposes, that ship has sailed.  The trust fund money is nothing more than IOUs written to the Treasury while the money has been borrowed and spent on other programs.  Technically, this money belongs in the net unfunded liability column, bringing the total unfunded liability into the infinite horizon to $20.5 trillion.  The report also states t

hat an immediate hike in the payroll tax from

the current 12.4 percent to 16.2 percent will bring the fund into actuarial balance.  Who all’s in favor?  Raise your hand! (Do I not see any hands going up out there?)  Or Social Security could be brought into actuarial balance with an immediate benefit cut of almost 22 percent.  Any seniors out there willing to sacrifice $200 to $300 a month? (Still no hands going up…)

Moving on to Medicare, for the second year in a row, this report estimates the unfunded liabilities of Medicare much lower than in previous years at $38.3 trillion, about half of what it was two years ago but slightly more than last year.  This is mainly due to reforms under the Affordable Care Act.  But these reductions are based on wild assumptions, including physician fee cuts that for the past seven years, have never come to fruition.  In the past, physicians never sat idly back and allowed their Medicare reimbursements to be cut 30 percent, and they surely won’t capitulate now.  Furthermore, the Medicare trust fund is already being spent to cover the shortage in payroll tax revenue.  It is estimated to be exhausted by 2024, five years earlier than last year’s projection of 2029. 

Perhaps we should rejoice that the Medicare unfunded liability is much smaller this year than it was two years ago, but this comes at a human cost.  Richard Foster, the Chief Actuary for the Center for Medicare and Medicaid Services, notes that lower reimbursement fees for Medicare services could result in lack of access to care for seniors.  Is this the only alternative to common-sense Medicare reform? Let’s hope not.

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Comments (4)

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  1. Joe Barnett says:

    “….an immediate hike in the payroll tax from the current 12.4 percent to 16.2 percent will bring the [Social Security trust] fund into actuarial balance.”

    So with a huge tax increase, the federal government would have a lot more money to spend on other stuff….what a deal!

  2. Ken Shaw says:

    Appears to me that our dear government is living and desires to continue to live in a state of denial. The problem is that we are currently way over our head economically with an impending economic sunami, which will only escalate in its chaotic destructive affect, if we do not take the necessary, though unpopular decisions to drastically curtail our spending in every area of government. The price has to be paid, and the impact and extent will be far reaching, hitting every level and aspect of family and industry that exists. If and when the recovery, and the length of time that it takes to recover, will ensue and be accomplished, will depend upon how soon, if ever, we will engage and take the necessary steps. if we do not, the bottom will fall out sooner and with greater devastation than the naysayers could imagine, nor the alleged conspirators(elitists, globalists) would comprehend or desire.
    Not a good or desirable thing under any stretch of the imagination, or any comprehension of the most earthly “intelligent” mind.

  3. Elaine says:

    It really galls me to read this article. If Govt. had stayed off the SS interest fund, there would be no problem. Also, if the people on Medicaid were made to pay into it, there would be less people drawing the money that working people paid into the social security fund which was stolen by govt.
    SS monies paid into by working people, should be held in a separate fund like before Johnson, and the interest on this money left alone by govt. This is a travesty perpetrated by the federal govt and they should be made to pay it back and put into a SS fund only
    Stop the medicaid program, these people are drawing five times the amount monthly that I get and I paid into it for 45 years. Abominable. Forget the illegals, they are drawing this money and we the american people are being run under the bus, because of it.
    Stop all this travesty.

  4. [...] the payout structure in order to make this even beneficial, and it still wouldn't be nearly enough. For the most part, the Trustees’ reports [of 2011] are reruns of last year. First, let’s look at Social [...]