In this appendix, long-range actuarial estimates for the OASDI and Hospital Insurance (
HI) programs are presented 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. Estimates for the Supplementary Medical Insurance (
SMI) program are not included in this appendix 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 2011 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 and combining cost and
income rates for the OASDI and HI programs as percentages of
taxable payroll require 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 being eliminated altogether for the HI program in 1994; (2) a larger proportion of Federal, State, and local government employees have their wages 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 for employees and their employers that are authorized in the
Federal Insurance Contributions Act for these programs.
Table VI.F2 shows estimated annual income rates and cost rates for the OASDI program, the HI program, and the combined OASDI and HI programs, based on the low-cost, intermediate, and high-cost sets of assumptions (alternatives I, II, and III) described earlier in this report. All of the tax rates shown in table
VI.F1 are reflected in the income rates. For the HI program, the additional 0.9 percent tax on employees for relatively high earnings is included by increasing the rate shown. That is, HI taxable payroll represents all earnings subject to the payroll tax for the HI program, and the effective tax rate included in the income rate is 2.9 percent through 2012 with an increase thereafter based on the portion of the total payroll to which the 0.9 percent applies. These annual rates are intended to indicate the cash-flow operation of the programs. Therefore, income rates exclude
interest earned on trust fund assets. Table
VI.F2 also shows the differences between income rates and cost rates, called balances. Estimates shown for the combined trust funds are theoretical because no authority currently exists for borrowing by or transfers among these trust funds.
The combined OASDI and HI cost rate is projected to rise generally above current levels under the intermediate and high-cost sets of assumptions, with the greatest increase occurring during the period 2015-30. Under both the intermediate and the high-cost assumptions for the combined programs, annual deficits are projected to occur for each year of the 75-year projection period. Under the intermediate assumptions, the combined cost rate increases by 31 percent from its current level by 2085, while under the high-cost assumptions, the cost rate is projected to more than double by the end of the projection period. Under the low-cost assumptions, the combined cost rate is projected to decrease by 12 percent by the end of the period, with positive annual balances in all years except for 2011‑13 and 2023‑42.
In table VI.F3, values are summarized over the 25-year, 50-year, and 75-year
valuation periods (for which beginning fund balances are included in the
summarized income rates, and the cost of accumulating an ending fund balance equal to 100 percent of annual cost by the end of the period is included in the
summarized cost rates). Estimates shown for the combined trust funds are theoretical because no authority currently exists for borrowing by or transfers among these trust funds.
Under the high-cost assumptions, the combined OASDI and HI system is projected to experience large
actuarial deficits for the 25-year, 50-year, and 75-year valuation periods. Under the intermediate assumptions, actuarial deficits smaller than those for the high-cost assumptions are projected for all three valuation periods. Under the low-cost assumptions, the combined OASDI and HI system is projected to have a positive actuarial balance for all three valuation periods.
