In this appendix, the Trustees present long-range actuarial estimates for the OASDI and Hospital Insurance (
HI) programs both separately and on a combined basis. These estimates facilitate analysis of the adequacy of the income and assets of these programs relative to their cost under current law. This appendix does not include estimates for the Supplementary Medical Insurance (
SMI) program because adequate financing is guaranteed in the law, and because the SMI program is not financed through a payroll tax. For more information on Medicare estimates, please see t
he 2012 Medicare Trustees Report.
The emphasis in this appendix on combined operations, while significant, should not obscure the analysis of the financial status of the individual trust funds, which are legally separate and cannot be commingled. In addition, the factors which determine the costs of the OASI, DI, and HI programs differ substantially.
Comparing cost and
income rates for the OASDI and HI programs as percentages of
taxable payroll requires a note of caution. The taxable payrolls for the HI program are larger than those estimated for the OASDI program because: (1) a larger maximum taxable amount was established for the HI program in 1991, with the maximum eliminated altogether for the HI program in 1994; (2) a larger proportion of Federal, State, and local government employees are covered under the HI program; and (3) the earnings of railroad workers are included directly in the HI taxable payroll but not in the OASDI taxable payroll. (Railroad contributions for the equivalent of OASDI benefits are accounted for in a
net interchange that occurs annually between the OASDI and
Railroad Retirement programs.) As a result, the HI taxable payroll is about 26 percent larger than the OASDI taxable payroll throughout the long-range period. Nonetheless, in this section the separately derived rates for the programs are added to produce combined OASDI and HI rates.
As with the OASI and DI Trust Funds, income to the HI Trust Fund comes primarily from
contributions paid by employees, employers, and self-employed persons. Table
VI.F1 shows the OASDI and HI contribution rates that are authorized in the
Federal Insurance Contributions Act.
Table VI.F2 shows the Trustees’ estimates of annual income rates and cost rates for the OASDI program, the HI program, and the combined OASDI and HI programs, under the low-cost, intermediate, and high-cost sets of assumptions described earlier in this report. The income rates reflect the tax rates shown in table
VI.F1. For the HI program, the income rates beginning in 2013 reflect: (1) the additional 0.9 percent tax on employees for relatively high earnings; and (2) the portion of total payroll to which the 0.9 percent rate applies. Annual income and cost rates indicate the cash-flow operation of the programs. Therefore, income rates exclude
interest earned on trust fund assets. Table
VI.F2 also shows annual balances, which are the differences between annual income rates and cost rates. Estimates shown for the combined trust funds are theoretical because there is no current statutory authority for borrowing by or transfers among these trust funds.
The Trustees project that the combined OASDI and HI cost rate will rise generally above current levels under the intermediate and high-cost sets of assumptions, with the greatest increase occurring during the period 2018-35. Under both the intermediate and the high-cost assumptions, the Trustees project annual deficits for the combined programs in each year of the 75-year projection period. Under the intermediate assumptions, the combined cost rate increases by 37 percent from its current level by 2086, while under the high-cost assumptions, the cost rate more than doubles by 2086. Under the low-cost assumptions, the combined cost rate decreases by 7 percent by the end of the period, with positive annual balances in all years except for 2012‑15 and 2023‑50.
Table VI.F3 shows summarized values over the 25-year, 50-year, and 75-year
valuation periods. For each of those periods, the
summarized income rates include beginning fund balances, and the
summarized cost rates include the cost of accumulating an ending fund balance equal to 100 percent of annual cost at the end of the period. Estimates for the combined trust funds are theoretical because there is no authority for borrowing by or transfers among these trust funds.
The Trustees project that the combined OASDI and HI system will experience large
actuarial deficits for the 25-year, 50-year, and 75-year valuation periods under the high-cost assumptions. Actuarial deficits under the intermediate assumptions are smaller than those for the high-cost assumptions for all three valuation periods. The combined OASDI and HI system has a positive actuarial balance under the low-cost assumptions for all three valuation periods.
