[House Document 118-23]
[From the U.S. Government Publishing Office]



118th Congress, 1st Session - - - - - - - - - - - - House Document 118-23
__________________________________________________________________________
 
NOTIFICATION LETTER FROM THE BOARD OF TRUSTEES OF THE FEDERAL HOSPITAL 
                          INSURANCE TRUST FUND

                               __________

                             COMMUNICATION

                                  from

  THE BOARD, THE BOARD OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE 
                               TRUST FUND

                              transmitting

NOTIFICATION LETTER FROM THE BOARD OF TRUSTEES OF THE FEDERAL HOSPITAL 
INSURANCE TRUST FUND, PURSUANT TO 42 U.S.C. 1395i(b)(2); AUG. 14, 1935, 
  CH. 531, TITLE XVIII, SEC. 1817(b)(2) (AS AMENDED BY PUBLIC LAW 108-
173, SEC. 801(d)(1)); (117 STAT. 2359) AND 42 U.S.C. 1395t(b)(2); AUG. 
 14, 1935, CH. 531, TITLE XVIII, SEC. 1841(b)(2) (AS AMENDED BY PUBLIC 
             LAW 108-173, SEC. 801(d)(2)); (117 STAT. 2166)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


April 3, 2023.--Referred to the Committee on Ways and Means and ordered 
                             to be printed
                             
     BOARD OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE TRUST FUND

                                    Washington, DC, March 31, 2023.
Hon. Kevin McCarthy,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: In accordance with the requirements of 
section 709 of the Social Security Act, ``Recommendations by 
Board of Trustees to Remedy Inadequate Balances in the Social 
Security Trust Funds,'' we are writing to notify you that we 
project that the asset reserves held in the Federal Hospital 
Insurance (HI) Trust Fund will become inadequate under the 
meaning of this section within the next 10 years. As shown in 
the 2023 Medicare Trustees Report, which we are issuing today 
and a copy of which is attached, the projected reserves 
expressed as a percentage of annual program cost (the balance 
ratio) of the HI trust fund fall below 20 percent by the 
beginning of calendar year 2030 based on our intermediate set 
of economic, demographic, and programmatic assumptions. 
Moreover, we project that the reserves of the HI trust fund 
will be depleted soon afterwards, during 2031, and about 89 
percent of benefits scheduled in current law will be payable at 
that time if no legislative action is taken.
    Background--Section 709 of the Social Security Act 
specifies:

          If the Board of Trustees . . . determines at any time 
        that the balance ratio of any such Trust Fund for any 
        calendar year may become less than 20 percent, the 
        Board shall promptly submit to each House of the 
        Congress a report setting forth its recommendations for 
        statutory adjustments affecting the receipts and 
        disbursements of such Trust Fund necessary to maintain 
        the balance ratio of such Trust Fund at not less than 
        20 percent, with due regard to the economic conditions 
        which created such inadequacy in the balance ratio and 
        the amount of time necessary to alleviate such 
        inadequacy in a prudent manner. The report shall set 
        forth specifically the extent to which benefits would 
        have to be reduced, taxes . . . would have to be 
        increased, or a combination thereof, in order to obtain 
        the objectives referred to in the preceding sentence.

The Board believes that issuing a report under this section, 
whenever the balance ratio of a trust fund is expected to fall 
below 20 percent within the next 10 years, provides reasonable 
advance notice and time for prudent action to alleviate 
inadequacy in the balance ratio. The annual report that the 
Board submits to the Congress under section 1817(b) of the 
Social Security Act (commonly referred to as the Trustees 
Report) provides a more extensive evaluation of the actuarial 
status of the trust funds through the next 75 years.
    The Hospital Insurance Trust Fund--Estimates in the 2023 
Trustees Report show that the HI trust fund is not adequately 
financed through the next 10 years under the intermediate 
assumptions (those representing the Trustees' best estimate of 
future economic and demographic trends), based on the meaning 
of section 709. Under the intermediate assumptions of the 2023 
Trustees Report, the HI trust fund reserves steadily decline 
after surpluses in 2023 and 2024, falling below 20 percent of 
annual cost by the beginning of calendar year 2030 and becoming 
depleted in 2031.
    Maintaining a Balance Ratio of at Least 20 Percent--To 
maintain a balance ratio of at least 20 percent, it would be 
necessary to either increase payroll tax revenue or reduce 
costs. For payroll tax revenue, the increases are calculated in 
order to achieve a stable HI balance ratio of 20 percent, 
beginning at the point when the balance is projected to fall 
below that level under current law. For reducing net costs, the 
reduction in the first year with a balance ratio below 20 
percent is calculated such that, in subsequent years, 
variations in reductions are minimized to achieve a balance 
ratio of exactly 20.0 percent in those later years. There are 
many other possibilities to maintain a balance ratio of at 
least 20 percent, including various combinations of payroll tax 
revenue increases and net cost reductions.
    The following table shows, for each year through the short-
range projection period or 2032, two alternatives--the 
additional payroll tax revenue amounts or the net cost 
reduction amounts--that would prevent the HI balance ratio from 
declining below 20 percent under the intermediate assumptions 
of the 2023 Trustees Report.

----------------------------------------------------------------------------------------------------------------
                                                                Additional payroll  tax
                         Calendar year                             revenue only  (in       Net cost reductions
                                                                       billions)          only\1\  (in billions)
----------------------------------------------------------------------------------------------------------------
2029..........................................................                    $25.3                    $11.7
2030..........................................................                     69.5                     71.1
2031..........................................................                     83.4                     73.5
2032..........................................................                    101.0                    137.9
    Total, 2029-2032..........................................                    279.1                    294.2
----------------------------------------------------------------------------------------------------------------
\1\Amounts shown for net cost reductions through changes in benefits are net of premiums and general revenue
  transfers.

    The additional payroll tax revenue amounts required to meet 
the 20-percent minimum HI balance ratio differ somewhat from 
the required net reductions in cost. Payroll tax revenue 
changes affect trust fund reserves (the numerator of the 
balance ratio) but have no effect on cost (the denominator); 
benefit changes needed to reduce net program cost affect both 
reserves and cost directly.
    Recommendation--Based on the intermediate projections in 
the 2023 Trustees Report, the HI trust fund reserves will fall 
below 20 percent of annual cost by the beginning of calendar 
year 2030 and will become depleted in 2031 in the absence of 
legislation to address this imbalance between scheduled 
benefits and revenue. We note that the results presented a year 
ago, based on the intermediate projections in the 2022 Trustees 
Report, indicated that the HI trust fund reserves would be 
depleted in 2028.
    Lawmakers need to take prompt action to strengthen the 
actuarial status of the HI trust fund. Lawmakers could choose 
(i) to increase revenues to the fund, (ii) to reduce cost 
through modification of the HI benefit levels or eligibility 
requirements, or (iii) to use a combination of methods to 
strengthen the fund's financial condition.
    The Board recommends that lawmakers enact timely 
legislation to make necessary adjustments for the HI program.
    A similar letter is being sent to the President of the 
Senate.
            Respectfully,
                                   Janet Yellen,
                                           Secretary of the Treasury, 
                                               and Managing Trustee of 
                                               the Trust Funds.
                                   Xavier Becerra,
                                           Secretary of Health and 
                                               Human Services, and 
                                               Trustee.
                                   Vacant,
                                           Public Trustee.
                                   Julie A. Su,
                                           Acting Secretary of Labor, 
                                               and Trustee.
                                   Kilolo Kijakazi,
                                           Acting Commissioner of 
                                               Social Security, and 
                                               Trustee.
                                   Vacant,
                                           Public Trustee.
                                   Chiquita Brooks-LaSure,
                                           Administrator, Centers for 
                                               Medicare & Medicaid 
                                               Services, and Secretary, 
                                               Boards of Trustees.

                                     [all]