[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.
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Additional payroll tax
Calendar year revenue only (in Net cost reductions
billions) only\1\ (in billions)
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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
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\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]