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5/12/2020 Statement by Secretary Geithner on the Releases of Social Security and Medicare Trustees Reports U.S. DEPARTMENT OF THE TREASURY Press Center Statement by Secretary Geithner on the Releases of Social Security and Medicare Trustees Reports 8/5/2010 TG-817 For the Social Security Report, visit link below. For the Medicare Report, visit link below. For the summaries of the Reports, visit link below. The Social Security and Medicare Boards of Trustees met this afternoon to complete their annual financial review of the programs and to transmit their Reports to Congress. I welcome my fellow Trustees. I also want to acknowledge the hard work and dedication of the chief actuaries, Stephen Goss and Richard Foster, and their staffs, who worked especially hard this year to incorporate the effects of health care reform in the reports. Seventy-five years ago this month, President Roosevelt signed the Social Security Act into law, creating the program that tens of millions of Americans now rely on to help them retire with economic security. Thirty years later, President Johnson signed amendments to that law creating Medicare, providing health insurance for our older Americans. And this year, President Obama signed the Affordable Care Act, giving Americans more control over their healthcare decisions, ending insurance company abuses, and taking major steps to bring down health care costs over the long term. The impact of health care reform is made clear by the Trustees Reports, which show some very positive developments for Social Security and especially Medicare. But they also remind us that we must continue to make progress addressing the financing challenges facing the long-term solvency of these programs. When we delivered our Reports last spring I argued that it was imperative that we gain control of Medicare costs by delivering health care services more efficiently, and that doing so requires a larger effort to control health care costs and improve quality more generally. With the recent enactment of the Affordable Care Act (ACA) , we have taken a huge step in that direction. This new law gives Americans more control over their healthcare decisions, ends insurance company abuses and will bring down health care costs over the long term. The Affordable Care Act has dramatically improved projected Medicare finances. Medicare's Hospital Insurance (HI) Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year, which is a record increase from one report to the next. In addition, the 75-year financial shortfall for HI has been reduced to 0.66 percent of taxable payroll from 3.88 percent of taxable payroll in last year's report, and the projected costs for the Medicare Supplementary Medical Insurance (SMI) program over the next 75 years, expressed as a share of GDP, are down 23 percent relative to the projections in the 2009 report Nearly all of these improvements in projected Medicare finances are due to the Affordable Care Act President Obama signed into law in March. As impressive as these achievements are, there is still work to be done. Although HI financing is projected to be sufficient until 2029, the HI Trust Fund balance is expected to fall below one year's projected expenditure beginning in 2012, which means the test for short-range financial adequacy is not met. And it is projected that SMI will continue to put increasing pressure on the federal budget and beneficiaries in the years ahead, though to a much lesser extent than was projected last year, prior to the passage of the Affordable Care Act. Over the next 75 years, SMI costs are expected to average 3.3 percent of GDP, which is 1.4 percentage points higher than the SMI cost share of GDP was in 2009, so additional reform measures will be needed. Those measures will be informed by experiments with alternative provider payment mechanisms and patient care models that are authorized in the ACA, as well as by the recommendations of the newly created Independent Payment Advisory Board. The Affordable Care Act also improves Social Security's finances. Starting in 2019, a new tax on high-cost health care plans is expected to result in a shift in labor compensation from health insurance to earnings, which are subject to Social Security and Medicare taxes. This factor more than accounts for the reduction in Social Security's actuarial deficit to 1.92 percent of taxable payroll from 2.0 percent of taxable payroll projected last year. The recession has, however, somewhat worsened Social Security's very near term outlook. Benefit payments are expected to exceed tax revenue for the first time this year, six years earlier than was projected last year, but the improving economy is expected to result in rough https://www.treasury.gov/press-center/press-releases/Pages/tg817.aspx 1/2 5/12/2020 Statement by Secretary Geithner on the Releases of Social Security and Medicare Trustees Reports balance between Social Security taxes and expenditures for several years before the retirement of the baby boom generation swells the beneficiary population and causes deficits to grow rapidly. It is projected that tax and interest income will be sufficient to pay benefits through 2024, after which the Trust Fund will be drawn down until depleted in 2037, the same date of Trust Fund exhaustion projected last year. After 2037, it is expected that tax income will be sufficient to finance more than three quarters of scheduled benefits. Despite the projection that Social Security can continue to pay full benefits for nearly 30 years, the sooner action is taken the more options for reform will be available and the fairer reforms will be to our children and grandchildren. Now that we have taken meaningful steps to put Medicare on a sustainable path and moved quickly and aggressively to rescue our economy and put us a path to continued future growth, we must work to address the other intermediate- and long-term fiscal imbalances that the federal government faces as well. To that end, the President has proposed some important steps to put us on a fiscally responsible path. First, the Administration's Budget puts a three-year freeze on non-security discretionary funding. The President reinstated pay-as-you budgeting that helped lead to the economic prosperity of the 1990s. And the President has appointed a bipartisan Fiscal Commission which will make further recommendations by the end of the year. These measures, along with further healing of our economy, will help make sure we have strong and sustainable growth that will benefit all Americans. ### LINKS Social Security Report Medicare Report Summaries of the Reports https://www.treasury.gov/press-center/press-releases/Pages/tg817.aspx 2/2
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