"Please hold absolutely still": This instruction is crucial for patients being examined by magnetic resonance imaging (MRI). It is the only way to obtain clear images for diagnosis. Up to now, it was therefore almost impossible to image moving organs using MRI. Max Planck researchers from Göttingen have now succeeded in significantly reducing the time required for recording images - to just one fiftieth of a second. With this breakthrough, the dynamics of organs and joints can be filmed "live" for the first time: movements of the eye and jaw as well as the bending knee and the beating heart. The new MRI method promises to add important information about diseases of the joints and the heart. In many cases MRI examinations may become easier and more comfortable for patients.
(NMR in Biomedicine 2010, Journal of Cardiovascular Magnetic Resonance 2010)
A process that required several minutes until well into the 1980s, now only takes a matter of seconds: the recording of cross-sectional images of our body by magnetic resonance imaging (MRI). This was enabled by the FLASH (fast low angle shot) method developed by Göttingen scientists Jens Frahm and Axel Haase at the Max Planck Institute for Biophysical Chemistry. FLASH revolutionised MRI and was largely responsible for its establishment as a most important modality in diagnostic imaging. MRI is completely painless and, moreover, extremely safe. Because the technique works with magnetic fields and radio waves, patients are not subjected to any radiation exposure as is the case with X-rays. At present, however, the procedure is still too slow for the examination of rapidly moving organs and joints. For example, to trace the movement of the heart, the measurements must be synchronised with the electrocardiogram (ECG) while the patient holds the breath. Afterwards, the data from different heart beats have to be combined into a film.
Future prospect: extended diagnostics for diseases
The researchers working with Jens Frahm, Head of the non-profit "Biomedizinische NMR Forschungs GmbH", now succeeded in further accelerating the image acquisition process. The new MRI method developed by Jens Frahm, Martin Uecker and Shuo Zhang reduces the image acquisition time to one fiftieth of a second (20 milliseconds), making it possible to obtain "live recordings" of moving joints and organs at so far inaccessible temporal resolution and without artefacts. Filming the dynamics of the jaw during opening and closing of the mouth is just as easy as filming the movements involved in speech production or the rapid beating of the heart. "A real-time film of the heart enables us to directly monitor the pumping of the heart muscle and the resulting blood flow - heartbeat by heartbeat and without the patient having to hold the breath," explains Frahm. The scientists believe that the new method could help to improve the diagnosis of conditions such as coronary heart disease and myocardial insufficiency. Another application involves minimally invasive interventions which, thanks to this discovery, could be carried out in future using MRI instead of X-rays. "However, as it was the case with FLASH, we must first learn how to use the real-time MRI possibilities for medical purposes," says Frahm. "New challenges therefore also arise for doctors. The technical progress will have to be ‘translated’ into clinical protocols that provide optimum responses to the relevant medical questions."
Less is more: acceleration through better image reconstruction
To achieve the breakthrough to MRI measurement times that only take very small fractions of a second, several developments had to be successfully combined with each other. Whilst still relying on the FLASH technique, the scientists used a radial encoding of the spatial information which renders the images insensitive to movements. Mathematics was then required to further reduce the acquisition times. "Considerably fewer data are recorded than are usually necessary for the calculation of an image. We developed a new mathematical reconstruction technique which enables us to calculate a meaningful image from data which are, in fact, incomplete," explains Frahm. In the most extreme case it is possible to calculate an image of comparative quality out of just five percent of the data required for a normal image - which corresponds to a reduction of the measurement time by a factor of 20. As a result, the Göttingen scientists have accelerated MRI from the mid 1980s by a factor of 10000.
Although these fast MRI measurements can be easily implemented on today’s MRI devices, something of a bottleneck exists when it comes to the availability of sufficiently powerful computers for image reconstruction. Physicist Martin Uecker explains: "The computational effort required is gigantic. For example, if we examine the heart for only a minute in real time, between 2000 and 3000 images arise from a data volume of two gigabytes." Uecker consequently designed the mathematical process in such a way that it is divided into steps that can be calculated in parallel. These complex calculations are carried out using fast graphical processing units that were originally developed for computer games and three-dimensional visualization. "Our computer system requires about 30 minutes at present to process one minute’s worth of film," says Uecker. Therefore, it will take a while until MRI systems are equipped with computers that will enable the immediate calculation and live presentation of the images during the scan. In order to minimise the time their innovation will take to reach practical application, the Göttingen researchers are working in close cooperation with the company Siemens Healthcare.
Through the eHealth Initiative (eHI) 2010 National Survey on Health Information Exchange, 18 health information exchange initiatives were identified as being sustainable. These initiatives are operational, are not dependant on federal funding, and have broken even through operational revenue. Watch the eHI video below as Bill Beighe, CEO, Santa Cruz HIE discusses how his organization has succeeded and created a sustainable business model.
Santa Cruz HIE has been exchanging data in a multi-stakeholder environment for more than a decade, but now data needs to be to be seamlessly exchanged across the entire spectrum of care in order to achieve Meaningful Use. With over 300 providers, 42 specialties, and 100 locations, Physicians Medical Group of Santa Cruz County (PMG) is the organization that supports and connects them all to each other via the Santa Cruz HIE. Santa Cruz HIE uses the Axolotl HIE solution.
The Health Information Exchange Workgroup of Health IT Policy Committee met on August 26, 2010. The presentation is available below with audio included.
Human-computer Information Retrieval (HCIR) combines research from the fields of human-computer interaction (HCI) and information retrieval (IR), placing an emphasis on human involvement in search activities.
The HCIR workshop has run annually since 2007. The workshop unites academic researchers and industrial practitioners working at the intersection of HCI and IR to develop more sophisticated models, tools, and evaluation metrics to support activities such as interactive information retrieval and exploratory search. It provides an opportunity for attendees to informally share ideas via posters, small group discussions and selected short talks.
Researchers and practitioners are invited to present interfaces (including mockups, prototypes, and other early-stage designs), research results from user studies of interfaces, and system demonstrations related to the intersection of Human Computer Interaction (HCI) and Information Retrieval (IR). The intent of the workshop is not archival publication, but rather to provide a forum to build community and to stimulate discussion, new insight, and experimentation on search interface design. HCIR 2010 was held in conjunction with the Information Interaction in Context Symposium.
The Whitehouse has released the new report "Recovery Act Innovation." The full report is embedded and then below that is Vice-President Biden's comments.
“Approximately $2 billion is being spent largely to support ready hospitals, providers, states and other parties to adopt health IT," the report states. "The remaining funds will be used to incentivize physicians and providers to adopt health IT in 2011 and beyond.” The report gives an overview of the work of the Beacon Communities and some groundbreaking research by the NIH that the report states, "as a result of these efforts, the number of complete human genomes anticipated to be sequenced in the next few years is expected to dwarf, by 50 times or so, the number of complete human genomes that have been sequenced to date."
"In addition to the $4.4 billion provided to the Department of Commerce, $2.5 billion in funds was provided to the Department of Agriculture to increase broadband access in rural America," says the report. Expanding broadband will enable the adoption of electronic health-record systems, e-prescribing, and e-care, the report claims. The administration projects that e-prescribing technology alone will help prevent 10 million outpatient medication errors by 2013. The Veterans Affairs Department "has dramatically decreased unnecessary hospitalizations through a wide-ranging effort to help veterans manage chronic conditions at home" by using remote monitoring tools enabled by increased broadband capacity.
The White House
Office of the Vice President
For Immediate Release
August 24, 2010
Remarks by Vice President Joe Biden at the Recovery Act Innovation Report Event
Recovery Act Innovation Report Event South Court Auditorium, Eisenhower Executive Office Building
As Prepared for Delivery—
Let me start by addressing a couple of items from the news this morning.
First, as of today, we have officially reduced the number of U.S. troops in Iraq below 50,000, meeting a commitment President Obama made before taking office – and meeting it ahead of schedule. Next week, as you know, the U.S. military will end its combat mission in Iraq, with the remaining troops advising and assisting Iraqi forces. This is a remarkable milestone in a war that began more than seven years ago. We owe a debt of gratitude to our military.
Second, I want to respond to the remarks made this morning by Mr. Boehner, the Republican leader in the House.
After months of promising a look at his party’s agenda and their plans for America, he made what was billed as a major economic address. And his chief proposal apparently was that the President should fire his economic team. Very constructive advice, thanks.
So, let's just review a little history here: For eight years before we arrived, Mr. Boehner and his party ran this economy and the middle class into the ground.
They took the $237 billion surplus they inherited from the Clinton Administration and left us with a $1.3 trillion deficit, and, in the process, quadrupled the national debt – all before we had turned on the lights in the West Wing.
They gave free rein to the special interests to write their own rules at the expense of everybody else.
And the sum total of it was the greatest economic crisis since the Great Depression—a crisis that wreaked havoc on families and businesses across this country--a crisis from which we are still digging out.
The head of their campaign committee, Representative Pete Sessions, said that if they were to take control of Congress this fall—which, by the way, they won't—that they would go back to "the exact same agenda" they were pushing before President Obama took office.
They think the policies they had in place during the Bush years—the ones Mr. Boehner helped craft and sell—were the right ones. Well, let me tell you, there are millions and millions of Americans who saw their paychecks shrink or their jobs, houses, and savings vanish. Mr. Boehner is nostalgic for those good old days…the American people are not.
They don't want to go back. They want to move forward.
Now let me respond to a few specific points Mr. Boehner raised:
On taxes, let's be clear on what this debate is all about: the big tax cuts of the last decade are scheduled to expire. This President says the middle class can't afford higher taxes in the midst of this recession. They've borne the brunt of it.
So the President proposes we extend the tax cuts for 98 percent of Americans.
What Mr. Boehner wants to do is extend the tax cut to the other two percent. That means we’re going to have to borrow $700 billion we don’t have to give a $100,000 a year tax cut to millionaires.
This is a tax cut they don’t need, and they won’t use to create jobs or economic growth.
So to justify that, he has created this myth that a tax cut for millionaires is actually a tax cut for small business.
There aren't three percent of small businesses in America that would qualify for that tax cut. It's a Wall Street tax cut, not a Main Street tax cut. At the same time, they’re blocking the genuine $12 billion tax cut for small businesses we proposed.
Also, he wants to give U.S. companies that shift jobs and profits overseas a tax credit for taxes they don’t even pay.
We've seen this movie before, Mr. Boehner. We know how it turns out. And the American people deserve something different and something better.
The rest of his so-called plan doesn’t offer any real economic agenda, it merely is a list of things he thinks the President shouldn’t do.
So after all of this buildup and hype, all we know is what John Boehner and his Republican colleagues are against. We still haven’t heard what they’re for.
So let’s be clear about the kind of change this administration supports.
Today, Secretary Duncan will make an announcement about Race to the Top, which is our plan to reward states that are willing to take bold steps and change the way we educate our children.
It’s striking that Mr. Boehner’s economic address was devoid of any proposal to improve America’s schools.
And another key to our economic future that Mr. Boehner ignored is what we’re here to discuss: innovation.
Let me tell you basic formula:
Government plants the seeds, the private sector makes them grow, and we launch entire industries, create hundreds of thousands jobs, and spark new forms of commerce that were once unimaginable, allowing us to dominate the 21st century like we did in the 20th.
You know, Secretary Chu is really the perfect person to talk about innovation with us today. From what I understand, you don’t win a Nobel Prize for repeating the formulas of the past. You win one for doing something that’s never been done before. You win one for innovating.
And more than ever, America needs to innovate. I’ve been all over this country, and talked to a lot of people, and I’ve not yet found anyone who has said to me: Just bring us back to where we were. Just bring the economy back to what it was before the beginning of this recession.
Because not only were families struggling before the beginning of this great recession —America was stagnating.
We were seeing big challenges getting bigger —climate change, our dependence on foreign oil, the erosion of our manufacturing base.
And at the same time, Americans were losing jobs, and losing hope.
So when we passed the Recovery Act, our goals were three-fold:
• To rescue a rapidly deteriorating economy; • To put the country on a path to recovery by getting Americans back to work quickly; and • To reinvest in the country’s long-term economic future.
On the first two counts, we’re making progress: We’ve created 3 million jobs, and we’re adding jobs every month. The economy has been growing for a full year.
In the last six months of the Bush Administration, we lost 3 million private sector jobs. In the first seven months of this year, we created 630,000 private sector jobs.
We’re turning this around.
Now, it’s not happening as fast as any of us would like, and certainly not fast enough for the millions of folks who are still out of work. But there isn’t any doubt – we’re moving in the right direction.
It’s that third part of our strategy that we’re here to report on today.
As I said, it’s not enough just to rebuild the industries of the 20th century.
We knew we had to lay the foundation for a new, more robust American economy, one that was ready to meet the challenges of the 21st century—which are different from the ones we face in the 20th. And, like those before us, we know we have to innovate.
Since its birth, the United States has been a nation built on discovery and innovation. In fact, our very roots are in innovation. We’re innovators — that’s who we are. We’re tinkerers and inventors, explorers and entrepreneurs.
It was in this spirit of taking bold steps forward amid daunting adversity that President Obama signed the Recovery Act.
Today, I am proud to release this report on how the down payments we have made to entrepreneurs and innovators through the Recovery Act are transforming the American economy.
The report has a lot of details, but I can summarize it very briefly:
The first point I want to make is, our investments in innovation are creating jobs, creating new industries, making existing industries more competitive, and, in the process, they’re driving down costs for new technologies that are badly needed, and helping our nation reassert our place as the world’s center for inventors and entrepreneurs.
This report focuses on our investments in four main areas Think of them as seed money:
1. Modernizing transportation, including advanced vehicle technology and high-speed rail; 2. Jumpstarting the renewable energy sector through wind and solar energy; 3. Investing in groundbreaking medical research; and 4. Building a platform that will enhance the private sector’s ability to innovate, through investments in broadband and the Smart Grid, by giving them the tools they need to grow.
In each of these areas, we’re seeking game-changing breakthroughs. And in some cases, entire new American industries are being born—the very industries that are going to allow us to lead the world in the 21st Century.
I’d like to highlight just a bit of what’s happening in each of these areas.
First, modernizing transportation.
I know that we have several electric vehicle manufacturers, battery makers, and people working on charging infrastructure here today.
I was at a Jeep plant yesterday. Right now, we’re seeing that we did the right thing when we stepped in to give them American auto industry a second chance.
Our goal was not just to rebuild the auto industry of the past—but to create an American auto industry for the next century, that will dominate for decades to come.
I want to see a day when you can pop the hood on your electric car made in Smyrna, Tennessee, to check on your advanced battery made in Holland, Michigan, or Noblesville, Indiana, and an electric motor made in Longmont, Colorado, as you recharge your vehicle at an electric charging station in San Diego.
But we knew that day wasn’t going to come on its own. In the greatest automobile producing-country on Earth, we were manufacturing less than two percent of the world’s advanced vehicle batteries.
Thanks to the Recovery Act, that’s changing – in a big way. Because we provided $2 billion in seed money to 30 advanced battery and electric drive component factories, it brought more than $2 billion more in private capital off the sidelines. And, as a result, America is expected to have the capacity to produce 20 percent of the world’s advanced vehicle batteries by 2012. By 2015, it could be as much as 40 percent—because the private sector will continue to invest in these changes.
And more importantly, we’re on pace to reduce the cost of batteries for autos by 70% by 2015 – which will make electric vehicles cost-competitive with similar non-electric vehicles.
When you put it all together, it means that America will once again be able to provide “Wheels for the world” – the most advanced, efficient, competitive cars found anywhere—with a side benefit of not having to rely on foreign oil.
Second, we’re jumpstarting investment in renewable energy.
Three decades ago, the U.S. led the world in another arena - the development of renewable energy such as wind, solar, and geothermal power. Since that time, because of the failure to invest in these industries, we’ve fallen behind.
President Obama, Secretary Chu, and I set a goal of doubling U.S. renewable energy generation capacity from wind, solar, and geothermal by 2012.
We wanted to install as much renewable capacity in three years as the U.S. had in the previous thirty.
But we’re ahead of pace to meet it. In Pensacola, Florida, we’ve funded the largest photovoltaic power plant in North America, with over 90,000 solar panels—enough to provide energy for 3,000 homes.
And the Department of Energy is in the process of supporting what will be the world’s largest solar thermal facility – in the Mojave Desert. It will have 349,000 mirrors.
Because of projects like these, we are on pace to cut the cost of solar energy use in half by 2015 – leading us towards a day when solar power can be as cheap or cheaper than electricity from the grid, meaning that households can save money by using solar.
All told, the new generation capacity supported by the Recovery Act is going to power 16.7 million homes.
But we knew that generating renewable power was only half the story – that we had to reassert ourselves as renewable manufacturing leaders as well. So President Obama set a goal of doubling U.S. renewable manufacturing capacity by the end of 2011.
And, by the way, that means jobs.
We’re on track to meet that goal, too. We’re using a tax credit (48C) to increase incentives for renewable energy manufacturers to set up or relocate their businesses here in the US. Already, for example, it’s paid out $346 million in tax credits for wind alone, resulting in 52 wind manufacturing projects in the US.
And again, it’s not just government. It’s leveraging private capital: All in all, $46 billion in clean energy funds we’re providing in seed money alone will generate more than $100 billion in non-federal investment in new energy projects.
As a result, we are on pace to hit our target of doubling America’s renewable energy generation and manufacturing capacity by 2012.
Third, the Recovery Act is investing in groundbreaking medical research, with the goal of finding new ways to treat or prevent some of the world’s most daunting and debilitating diseases, to develop powerful new medicines, and even define strategies that will prevent disease from occurring in the first place—saving lives and saving hundreds of billions of dollars.
This disease prevention work is happening across the board: in human genome sequencing, cardiovascular disease, cancer, and autism.
Thanks to the Recovery Act, researchers at our National Institutes of Health will complete the sequencing on 50 times as many human genomes as we’ve sequenced to date – not only increasing our understanding of disease, but also bringing down the cost of doing this work and opening the door to a future of personalized medicine.
Thanks to Recovery Act funds, NIH will be able to sequence the genes of cancers that affect 10 million Americans – again, with the potential to start winning the war on cancer our nation declared in the early 1970s.
The first human genome map cost an estimated $2.7 billion. Today, a genome map stands at $48,000. Now, we stand on the verge of bringing the cost of a human genome map below $1,000 – fifty times cheaper than what is currently possible and with the potential to completely transform health care in America.
In the National Institutes of Health, we have one of the greatest assemblages of doctors and scientists in the world.
Through the Recovery Act, we’re giving them the tools to make the most profound innovation of all: improving and extending health and human life, while bringing down the cost in medicine.
The fourth area of investment is in building a platform for private sector innovation.
In all of these areas, the President and I recognize that the federal government’s role is limited. We provide the seeds, but it’s the private sector that makes them grow.
That’s why we’re investing so heavily in broadband. Thanks to $7 billion in Recovery Act investments, bringing $3 billion in private capital off the sidelines, approximately 2 million rural American households – and tens of thousands of community institutions – will have better access to broadband.
Farmers will be able to access real-time weather reports, water conditions, and crop prices, helping them be as competitive as possible in a global market.
As I said, we’re also investing more than $4 billion in Smart Grid, bringing more than $5 billion in capital off the sidelines. Smart grids provide real-time information on electricity use, so that consumers and businesses can make efficient energy choices on a truly reliable network.
A smart utility grid. Universal broadband. These are the foundation upon which innovative businesses can be built here in the U.S. – able to open their doors anywhere, and prosper everywhere.
And that’s really what this is about – giving American entrepreneurs the tools to do what they do best.
I know that there are several representatives of ARPA-E here today. The original ARPA was started in response to Sputnik. The goal of this new agency was to rejuvenate America’s military research and development capabilities.
In 1962, ARPA launched a nationwide effort to build a computer network called ARPA-NET.
By 1975, after spending just $25 million, ARPA researchers had done just that - and they’d created the basic structure of the modern Internet.
In the 1980’s, private industry dove in, and by 2009, the Internet was being used by approximately 27 percent of the world’s population, over 1.8 billion people. It’s the engine for hundreds of billions of dollars of commerce.
That was a relatively modest federal investment that allowed private industry to completely transform our economy.
That is exactly what we’re doing again. Our federal investment is bringing money off of the sidelines. For example, in scientific research, $2.9 billion in investment is being doubled by external investors. Or take clean energy, where a $46 billion investment is supporting more than $3 for every $1 we spent.
In fact, on $100 billion of Recovery Act investments, the private sector is investing $286 billion—three dollars for every dollar we spend
A couple of months ago, I visited a company called Cree, in Durham, North Carolina. I know we have some folks from Cree here today.
Their CEO, Chuck Swoboda, said: “The Recovery Act funding made it a straightforward decision to continue to invest in the U.S., both at our North Carolina facility and throughout our supply chain partners across the country.”
In his Nobel Prize lecture, Dr. Chu said, “As scientists, we hope that others take note of what we have done and use our work to go in directions we never imagined.”
Both had it exactly right, and it brings me back to where I started:
Government plants the seeds, the private sector makes them grow, and we launch entire industries, create hundreds of thousands jobs, and spark new forms of commerce that were once unimaginable.
That’s how we’ve led the world in the past. And that’s how we’ll dominate again in the future. Looking at all of you, I know that we’re already on our way.
Thank you. May God bless you all, and may God protect our troops.
There is bipartisan agreement that health IT can improve the quality of care and lower healthcare costs. In todays current partisan environment it is refreshing to find common ground across the political spectrum on such an important issue.
Two of my favorite sessions from the healthcare track at OSCON are from the very beginning of this important new segment of the open source and healthcare communities.
Tim O'Reilly introducing the healthcare track at OSCON 2010:
Deb Bryant of the OSU Open Source Lab kicks it off with her presentation: "Open Source Is Making a Difference in Health Information Technology (HIT) - So Can You"
Beginning in 2006, the State-Level HIE Consensus Project (SLHIE Project) convened a steering committee of 13 states to explore the developing roles, characteristics and challenges to achieve statewide HIE. In 2008, the SLHIE Project established the State-Level HIE Leadership Forum (Leadership Forum) as a way to broaden engagement among the growing number of public-private HIE efforts being organized across states. On August 6, 2010 the Leadership Forum held a webinar entitles "Patient Care Summary Exchange Guidance."
Medicare & Medicaid EHR Incentive Program Specifics for Eligible Professionals:
This session covers the portion of the program that specifically pertain to individual providers – eligibility, payment, what you need to register, timeline, meaningful use objectives and measures. This presentation was on August 10, 2010.
Medicare & Medicaid EHR Incentive Program Specifics for Hospitals:
This session covers the details of the program that specifically pertain to hospitals – eligibility, payment calculation, what you need to register, timeline, meaningful use objectives and measures. This presentation was on August 11, 2010.
I've been reading through the Medicare Trustees Report Summary and am increasingly confused. It seems that there is some merit to claims that there is double-counting to simultaneously pay for health reform and also strengthen Medicare's future. Both the CMS and the CBO have said that we cannot claim that the Medicare cuts enacted will simultaneously finance the new healthcare law, which is supposed to cover 30 million uninsured, and extend the solvency of the existing Medicare program.
As John Goodman points out on The Healthcare Blog, on page 281 of the full report, where Medicare’s chief actuary, Richard Foster's sign-off signature would normally appear, there is instead mention of an alternative report prepared by the office of the Medicare actuaries. This alternative report is below:
Each year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs. This message summarizes our 2010 Annual Reports.
The outlook for Medicare has improved substantially because of program changes made in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (the "Affordable Care Act" or ACA). Despite lower near-term revenues resulting from the economic recession, the Hospital Insurance (HI) Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year, and the 75-year HI financial shortfall has been reduced to 0.66 percent of taxable payroll from 3.88 percent in last year’s report. Nearly all of this improvement in HI finances is due to the ACA. The ACA is also expected to substantially reduce costs for the Medicare Supplementary Medical Insurance (SMI) program; projected program costs as a share of GDP over the next 75 years are down 23 percent relative to the costs projected for the 2009 report.
Much of the projected improvement in Medicare finances is due to a provision of the ACA that reduces payment updates for most Medicare goods and services other than physicians’ services and drugs by measured total economy multifactor productivity growth, which is projected to increase at a 1.1 percent annual rate on average. This provision is premised on the assumption that productivity growth in the health care sector can match that in the economy overall, rather than lag behind as has been the case in the past. This report notes that achieving this objective for long periods of time may prove difficult, and will probably require that payment and health care delivery systems be made more efficient than they are currently. To facilitate this outcome, the ACA establishes a broad program of research on innovative new delivery and payment models to improve the quality and cost-effectiveness of health care for Medicare — and, by extension, for the nation as a whole. The improvement in Medicare’s finances projected in this report highlights the importance of making every effort to make sure that ACA is successfully implemented. If health care efficiency cannot be substantially improved through productivity gains or other measures, then over time the statutory Medicare payment rates would become inadequate. In that situation, the payment update reductions might be suspended, in which case actual long-range costs would be larger than those projected under current law.
While the financial outlook for Medicare in this year’s report is substantially improved relative to last year, further reforms will be needed. It is expected that the HI Trust Fund balance will 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 ACA. 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 in 2009.
The financial outlook for Social Security is little changed from last year. The short term outlook is worsened by a deeper recession than was projected last year, but the overall 75-year outlook is nevertheless somewhat improved primarily because a provision of the ACA is expected to cause a higher share of labor compensation to be paid in the form of wages that are subject to the Social Security payroll tax than would occur in the absence of the legislation. The Disability Insurance (DI) Trust Fund, however, is now projected to become exhausted in 2018, two years earlier than in last year’s report. Thus, changes to improve the financial status of the DI program are needed soon.
Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983. The projected deficit of $41 billion this year (excluding interest income) is attributable to the recession and to an expected $25 billion downward adjustment to 2010 income that corrects for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink substantially for 2011 and to return to small surpluses for years 2012-2014 due to the improving economy. After 2014 deficits are expected to grow rapidly as the baby boom generation’s retirement causes the number of beneficiaries to grow substantially more rapidly than the number of covered workers. The annual deficits will be made up by redeeming trust fund assets in amounts less than interest earnings through 2024, and then by redeeming trust fund assets until reserves are exhausted in 2037, at which point tax income would be sufficient to pay about 75 percent of scheduled benefits through 2084. The projected exhaustion date for the combined OASI and DI Trust Funds is unchanged from last year’s report.
The long-run financial challenges facing Social Security and those that remain for Medicare should be addressed soon. If action is taken sooner rather than later, more options will be available and more time will be available to phase in changes so that those affected have adequate time to prepare.
Medicare
The projected 75-year actuarial deficit in the Hospital Insurance (HI) Trust Fund is 0.66 percent of taxable payroll, down substantially from 3.88 percent projected in last year’s report. The HI fund still fails the test of short-range financial adequacy, as projected annual assets drop below projected annual expenditures within 10 years — by 2012. The fund also continues to fail the long range test of close actuarial balance. The projected date of HI Trust Fund exhaustion is 2029, 12 years later than in last year’s report, at which time dedicated revenues would be sufficient to pay 85 percent of HI costs. The share of HI expenditures that can be financed with HI dedicated revenues is projected to decline slowly to 76 percent in 2045 and then to rise slowly, reaching 89 percent in 2084. Over 75 years, HI’s estimated actuarial imbalance is 23 percent as large as payroll taxes, and 16 percent as large as program outlays.
Part B of Supplementary Medical Insurance (SMI), which pays for doctors’ bills and other outpatient expenses, and Part D, which pays for access to prescription drug coverage, are both projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet the next year’s expected costs. However, the aging population will result in SMI costs growing rapidly from 1.9 percent of GDP in 2009 to 3.5 percent of GDP in 2040; about three-quarters of these costs will be financed from general revenues and about one-quarter from premiums paid by beneficiaries. Relatively small amounts of SMI financing are received from special payments by States and from fees on manufacturers and importers of brand-name prescription drugs.
As occurred in 2010, it is expected that about one quarter of Part B enrollees will be subject to unusually large premium increases next year. This occurs because premium rates are set so that total premiums finance a specific share of Part B costs, and it is projected that the other three-quarters of Part B enrollees will not be subject to a premium increase in 2011 due to an expected zero Social Security benefit COLA in December 2010. A "hold-harmless" provision of current law limits those individuals’ premium increases to the increase in their Social Security benefits.
Social Security
The annual cost of Social Security benefits represented 4.8 percent of GDP in 2009 and is projected to increase gradually to 6.1 percent of GDP in 2035 and then decline to about 5.9 percent of GDP by 2050 and remain at about that level. The projected 75-year actuarial deficit for the combined Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds is 1.92 percent of taxable payroll, down from 2.00 percent projected in last year’s report.
The 0.08 percentage point reduction in the actuarial deficit reflects a 0.06 percentage point increase due to the change in the valuation date to 2010 and the inclusion of an additional year, 2084, in the projections, a 0.14 percentage point reduction due the ACA’s effect on the share of labor compensation that is subject to OASDI taxes, and other changes that net to zero. Although the combined OASDI program passes the short-range test of financial adequacy, the DI program does not; DI costs have exceeded tax revenue since 2005, and trust fund exhaustion is projected for 2018, two years earlier than was projected last year. In addition, OASDI continues to fail the long-range test of close actuarial balance. Projected OASDI tax income will be sufficient to finance about 75 percent of scheduled annual benefits in 2037 through 2084 after the combined OASI and DI Trust Funds are projected to be exhausted. Over 75 years, Social Security’s actuarial imbalance is 15 percent as large as payroll taxes, and 12 percent as large as program outlays.
Conclusion
The ACA makes significant progress toward making Medicare financially viable. But while it is projected that the Medicare HI Trust Fund is adequately financed until 2029, and the Social Security OASI and DI Trust Funds are adequately financed until 2040 and 2018, respectively, the significant longer term financial imbalances of the programs still need to be addressed. The sooner action is taken to address the long-run financial imbalances, the more reform options will be available, and the more time there will be to phase in changes so that those affected will have adequate time to prepare.
By the Trustees:
Timothy F. Geithner,
Secretary of the Treasury,
and Managing Trustee
Hilda L. Solis,
Secretary of Labor,
and Trustee
Kathleen Sebelius,
Secretary of Health
and Human Services,
and Trustee
Michael J. Astrue,
Commissioner of
Social Security,
and Trustee
A SUMMARY OF THE 2010 ANNUAL SOCIAL SECURITY
AND MEDICARE TRUST FUND REPORTS
Who Are the Trustees? There are six Trustees, four of whom serve by virtue of their positions in the Federal Government: the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two Trustees are public representatives appointed by the President, subject to confirmation by the Senate. The two Public Trustee positions are currently vacant.
What Are the Trust Funds? Congress established the trust funds in the U.S. Treasury to account for all program income and disbursements. Social Security and Medicare taxes, premiums, and other income are credited to the funds. Disbursements from the funds can be made only to pay benefits and program administrative costs. All excess funds must be invested in interest-bearing securities backed by the full faith and credit of the United States.
The Department of the Treasury currently invests all program revenues in special non-marketable securities of the U.S. Government on which a market rate of interest is credited. The trust funds represent the accumulated value, including interest, of all prior program annual surpluses and deficits, and provide automatic authority to pay benefits.
There are four separate trust funds. For Social Security, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits. (The two trust funds are often considered on a combined basis designated OASDI.) For Medicare, the Hospital Insurance (HI) Trust Fund pays for inpatient hospital and related care. The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts: Part B, which pays for physician and outpatient services, and Part D, which covers the prescription drug benefit.
What Were the Trust Fund Results in 2009? In December 2009, 42.8 million people received OASI benefits, 9.7 million received DI benefits, and 46.3 million were covered under Medicare. Trust fund operations, in billions of dollars, are shown below (totals may not add due to rounding). The OASI and SMI Trust Funds showed net increases in assets in 2009; DI and HI Trust Fund assets declined.
OASI
DI
HI
SMI
Assets (end of 2008)
$2,202.9
$215.8
$321.3
$60.3
Income during 2009
698.2
109.3
225.4
282.8
Outgo during 2009
564.3
121.5
242.5
266.5
Net increase in assets
133.9
-12.2
-17.1
16.3
Assets (end of 2009)
2,336.8
203.5
304.2
76.6
How Has the Financial Outlook for Social Security and Medicare Changed Since Last Year? Under the intermediate assumptions, the combined OASDI Trust Funds have a projected 75-year actuarial deficit equal to 1.92 percent of taxable payroll, 0.08 percentage point smaller than last year’s estimate. The main reason for the smaller deficit is the anticipated effect on the rate of growth in the average wage level of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. This legislation, referred to more briefly in this summary as the Affordable Care Act (ACA), slows the rate of decline in the share of employee compensation paid in wages covered by Social Security after 2018 when an excise tax on high-cost, employer-sponsored, health insurance plans begins, thereby increasing projected growth in the average real wage. The OASI Trust Fund and the combined OASI and DI Trust Funds are adequately financed over the next 10 years. Evaluated on its own, the DI Trust Fund does not meet the short-range test for financial adequacy because its assets are projected to fall below 100 percent of annual expenditures by the beginning of 2013, and to become exhausted in 2018.
Medicare’s HI Trust Fund has a projected 75-year actuarial deficit equal to 0.66 percent of taxable payroll under the intermediate assumptions, a large improvement from the 3.88 percent figure reported last year. That change is largely attributable to the ACA, which mandates a reduction in the growth in Medicare payment rates for most health service providers, reduces payments to Medicare Advantage plans, and imposes higher HI payroll taxes for high earners. Those factors slow the depletion of HI Trust Fund assets and delay the anticipated fund exhaustion date to 2029, 12 years later than reported last year. Even so, the HI Trust Fund fails the short-range test of financial adequacy because its assets are projected to fall to 94 percent of annual expenditures by the beginning of 2012. It is important to note that the substantially improved results for HI (and for SMI Part B, below) depend in part on the long-range feasibility of the lower increases in Medicare payment rates. Moreover, in the context of today’s health care system, these adjustments would probably not be viable indefinitely into the future. As a result, the actual future costs for Medicare are likely to exceed those shown by the current-law projections in this year’s report.
The SMI Trust Fund is adequately financed under current law because of the automatic financing established for Medicare Parts B and D. The ACA’s reductions in the Medicare payment rates to most service providers result in substantially lower projected costs for Part B than reported last year. Note, however, that Part B costs are almost certainly understated as a result of incorporating substantial reductions in physician fees during the next several years that would be required under current law, but are very unlikely to occur. The ACA is expected to have a much smaller net effect on projected Part D costs. Lower-than-anticipated drug spending in 2008 and 2009, and a lower projected rate of growth in Part D costs during the next decade, are partially offset by the ACA’s phasing out of the benefit formula coverage gap (or “donut hole”) during 2011-20. Part D costs are projected to grow at an average rate of 9.4 percent annually over the next decade. Despite the reductions in cost growth described in this year’s report, the SMI Trust Fund will require large increases in enrollee premiums and general revenue funding over the long-range projection period.
How Are Social Security and Medicare Financed? For OASDI and HI, the major source of financing is payroll taxes on earnings that are paid by employees and their employers. The self-employed are charged the equivalent of the combined employer and employee tax rates. During 2009, an estimated 156 million people had earnings covered by Social Security and paid payroll taxes; for Medicare the corresponding figure was 160 million. The payroll tax rates are set by law and for OASDI apply to earnings up to an annual maximum ($106,800 in 2010) that ordinarily increases with the growth in the nationwide average wage. When the cost-of-living adjustment (COLA) for December of any year is zero, which occurred in December 2009 and is projected for December 2010, the maximum taxable amount of earnings is not increased for the following year. This constraint will lower OASDI tax income in 2010 and 2011. In contrast, HI taxes are paid on total earnings. The payroll tax rates (in percent) for 2010 are:
OASI
DI
OASDI
HI
Total
Employees
5.30
0.90
6.20
1.45
7.65
Employers
5.30
0.90
6.20
1.45
7.65
Combined total
10.60
1.80
12.40
2.90
15.30
Starting in 2013, the ACA imposes an additional HI tax equal to 0.9 percent of earnings over $200,000 for individual tax return filers, and on earnings over $250,000 for joint return filers.
About 75 percent of SMI Part B and Part D expenditures are paid from Federal general fund revenues, with most of the remaining costs covered by monthly premiums charged to enrollees. Part B and Part D premium amounts are based on methods defined in law and increase as the estimated costs of those programs rise.
In 2010, the Part B standard monthly premium paid by about one-quarter of enrollees is $110.50. There is also an income-related premium surcharge for Part B beneficiaries whose modified adjusted gross income exceeds a specified threshold. In 2010, the initial threshold is $85,000 for individual tax return filers and $170,000 for joint return filers. Under the ACA, the thresholds are not indexed to inflation during 2011-19; thereafter, the thresholds will be inflation-adjusted each year. Income-related premiums range from $154.70 to $353.60 per month in 2010. Under a “hold-harmless” provision, about three quarters of enrollees continue to pay the 2009 premium rate of $96.40 due to the zero Social Security COLA.
In 2010, the Part D "base monthly premium" is $31.94. (Actual premium amounts charged to Part D beneficiaries depend on the specific plan in which they are enrolled and are expected to average around $30 for standard coverage.) Part D also receives payments from States that partially compensate for the Federal assumption of Medicaid responsibilities for prescription drug costs for individuals eligible for both Medicare and Medicaid. In 2010, State payments are estimated to cover 7 percent of Part D costs.
Income, by source, to each trust fund in 2009 is shown in the table below (totals may not add due to rounding).
Income, by source, to each trust fund in 2009 is shown in the table below (totals may not add due to rounding).
Source(in billions)
OASI
DI
HI
SMI
Payroll taxes
$570.4
$96.9
$190.9
—
General fund revenue
—
—
1.9
$209.8
Interest earnings
107.9
10.5
15.3
3.0
Beneficiary premiums
—
—
2.9
62.3
Taxes on benefits
19.9
2.0
12.4
—
Other
*
—
2.1
7.7
Total
698.2
109.3
225.4
282.8
* Less than $50 million.
What Were the Administrative Expenses in 2009? Administrative expenses charged to the trust funds, expressed as a percentage of total expenditures, were:
OASI
DI
HI
SMI
Administrative expenses 2009
0.6
2.3
1.3
1.3
How Are Estimates of the Trust Funds' Future Status Made? Short-range (10-year) and long-range (75-year) projections are reported for all funds. Estimates are based on current law and assumptions about factors that affect the income and outgo of each trust fund. Assumptions include economic growth, wage growth, inflation, unemployment, fertility, immigration, mortality, disability incidence and termination, as well as factors that affect the cost of hospital, medical, and prescription drug services.
Because the future is inherently uncertain, three alternative sets of economic, demographic, and programmatic assumptions are used to show a range of possibilities. The intermediate assumptions (alternative II) reflect the Trustees’ best estimate of future experience. The low-cost alternative I is more optimistic for trust fund financing, and the high-cost alternative III is more pessimistic; they show trust fund projections for more and less favorable conditions for trust fund financing than the best estimate. The assumptions are reexamined each year in light of recent experience and new information about future trends, and are revised as warranted. In general, greater confidence can be placed in the assumptions and estimates for earlier projection years than for later years. The statistics presented in this Summary are based on the intermediate assumptions.
What is the Short-Range Outlook (2010-19) for the Trust Funds? For the short range, the adequacy of the OASI, DI, and HI Trust Funds is measured by comparing their assets at the beginning of a year to projected costs for that year (the “trust fund ratio”). A trust fund ratio of 100 percent or more—that is, assets at least equal to projected costs for a year—is considered a good indicator of a fund’s short-term adequacy. That level of projected assets for any year means that even if expenditures exceed income, the trust fund reserves, combined with annual tax revenues, would be sufficient to pay full benefits for several years, allowing time for legislative action to restore financial adequacy.
By this measure, the OASI Trust Fund is financially adequate throughout the 2010-19 period, but the DI Trust Fund fails the short-range test because its projected trust fund ratio falls to 93 percent by the beginning of 2013, followed by exhaustion of assets in 2018. The HI Trust Fund also does not meet the short-range test of financial adequacy; its projected trust fund ratio falls to 94 percent by the beginning of 2012. In contrast with the 2017 fund exhaustion date reported last year, the ACA is expected to result in much smaller HI deficits for the next several years, followed by small annual surpluses through the remainder of the short-range period, which postpones trust fund exhaustion to 2029. Chart A shows the trust fund ratios through 2040, the expected year of OASI Trust Fund exhaustion, under the intermediate assumptions.
Chart A—OASI, DI, and HI Trust Fund Ratios(Assets as a percentage of annual expenditures)
For SMI Part B, a less stringent annual "contingency reserve" asset test applies because the major portion of the financing for that account is provided by beneficiary premiums and Federal general fund revenue payments automatically adjusted each year to meet expected costs. Part D is similarly financed on an annual basis. Moreover, the operation of Part D through private insurance plans, together with a flexible appropriation for Federal costs, eliminates the need for a contingency reserve in that account. Note, however, that estimated Part B costs are unrealistically low for 2011 and beyond because the projections assume that current law will substantially reduce physician payments per service beginning in December 2010. Multiple years of substantial physician fee reductions are very unlikely to occur before legislative intervention, as evidenced by Congress overriding scheduled reductions for 2003 through November 2010. These understated physician payments affect projected costs for Part B, total SMI, and total Medicare.
In addition, a "hold-harmless" provision prevented premiums for most Part B enrollees from increasing in 2010 and is projected to do so again in 2011. This provision limits the premium increase to the dollar amount of a beneficiary’s cost-of-living adjustment (COLA). This year’s report projects a zero COLA for December 2010 and a small COLA increase (1.2 percent) for December 2011. The hold-harmless provision would limit the premium increases that could be charged to about three-quarters of Part B enrollees. To prevent asset exhaustion and maintain an adequate contingency reserve requires unusually large premium increases for Part B enrollees who are not subject to the hold-harmless provision (new enrollees each year and those who pay the income-related premium adjustment) and for State Medicaid programs that pay the full premium for dual Medicare-Medicaid beneficiaries. Monthly premiums are estimated to be $120.10 and $113.80 for 2011 and 2012, compared with $96.40 in 2009. This method of addressing a revenue shortfall caused by the hold-harmless provision is the only one available under current law.
The following table shows the projected income and outgo, and the change in the balance of each trust fund (except for SMI) over the next 10 years. SMI income and expenditures are shown in separate columns for Parts B and D. Changes in the SMI Trust Fund are not shown because of the automatic annual adjustments in program income to meet the following year’s projected expenditures.
ESTIMATED OPERATIONS OF TRUST FUNDS (In billions—totals may not add due to rounding)
Income
Expenditures
Change in fund
SMI
SMI
Year
OASI
DI
HI
B
D
OASI
DI
HI
B
D
OASI
DI
HI
2010
$686
$105
$218
$204
$61
$586
$128
$249
$220
$62
$100
-$23
-$32
2011
742
113
241
235
71
608
134
259
215
71
134
-21
-18
2012
790
118
254
264
78
638
141
271
226
78
151
-23
-17
2013
845
124
277
287
86
680
147
283
242
86
165
-23
-6
2014
902
131
297
312
93
728
153
296
260
93
174
-23
1
2015
959
137
316
364
103
780
160
305
276
102
179
-23
11
2016
1,019
144
337
333
113
836
167
321
293
112
183
-23
15
2017
1,078
150
357
395
124
897
174
338
314
123
181
-24
19
2018
1,137
a
378
436
136
962
182
358
338
136
175
a
20
2019
1,193
a
398
477
150
1,032
190
380
365
150
161
a
18
aThe DI Trust Fund is projected to be exhausted in 2018 under the intermediate assumptions. Certain trust fund operation values from 2018 forward are not meaningful under current law and are not shown in this table.
What is the Long-Range (2010-84) Outlook for Social Security and Medicare Costs? An instructive way to view the projected cost of Social Security and Medicare is to compare the cost of all scheduled benefits for the two programs with the gross domestic product (GDP), the most frequently used measure of the total output of the U.S. economy (Chart B).
Chart B—Social Security and Medicare Cost as a Percentage of GDP
Costs for both programs rise steeply between 2015 and 2030 because the number of people receiving benefits will increase rapidly as the large baby-boom generation retires. During those years, cost growth for Medicare is higher than for Social Security because of the rising cost of health services, increasing utilization rates, and anticipated increases in the complexity of services. Social Security’s projected annual cost increases to about 6.1 percent of GDP in 2035, then declines to 5.9 percent by 2050, and remains between 5.9 and 6.0 percent through 2084. Under current law, Medicare costs increase to 5.5 percent of GDP in 2035, and to 6.4 percent in 2084.
It is important to understand that the projected costs for OASDI and HI depicted in Chart B and elsewhere in this document reflect the full cost of scheduled current-law benefits without regard to whether the benefits would be fully payable. Current law precludes payment of any benefits beyond the amount that can be financed by the trust funds. Therefore, the amount of benefits that are payable in years after trust fund exhaustion is lower than shown, as described later in this summary.
The long-range cost outlook for Medicare is much improved from last year’s report due mainly to the ACA legislation. The 2009 report projected Medicare costs to increase to 7.2 percent of GDP by 2035, reaching 11.4 percent by the end of the 75-year projection period (2083). The new long-range projections assume that the ACA’s mandated reductions in health care cost growth are implemented over the full 75-year projection period. To illustrate the potential understatement of Medicare cost projections under current law, if such implementation were not possible and payment rate adjustments were gradually phased out during 2020-34, and if Medicare payment rates to physicians were updated using the Medicare Economic Index rather than declining by 30 percent under the current-law formula, then projected Medicare costs would represent about 11.0 percent of GDP in 2084.
In 2009, the combined cost of the Social Security and Medicare programs equaled 8.4 percent of GDP. Social Security’s cost amounted to 4.8 percent of GDP in 2009 and is projected to increase to 6.0 percent of GDP in 2084. Medicare’s cost was smaller in 2009—3.5 percent of GDP— but is projected to surpass the cost of Social Security in 2049. In 2084, the combined cost of the programs would represent 12.4 percent of GDP, assuming that all provisions of current law remain unchanged throughout this period.
Both Social Security and Medicare costs are projected to grow considerably faster than the economy over the next three decades, but tax income to the OASDI and HI Trust Funds will not. Tax income for Social Security will increase from 4.6 percent of GDP in 2010 to 4.8 percent in 2040, and then decrease to 4.6 percent by 2084. For the Medicare HI program, projected tax income equal to 1.3 percent of GDP in 2010 is expected to increase to 1.7 percent by 2040, and then to increase further to 1.8 percent by 2084.
What is the Outlook for OASDI and HI Costs Relative to Tax Income? Because the primary source of income for OASDI and HI is the payroll tax, it is customary to compare the programs’ income and costs expressed as percentages of taxable payroll (Chart C).
Chart C—Income and Cost Rates(Percentage of taxable payroll)
Both the OASDI and HI annual cost rates are projected to increase over the long run from their 2009 levels (13.00 and 3.69 percent). For OASDI, the income rate will increase little (from 13.07 percent in 2009 to 13.31 percent in 2084) because payroll tax rates are not scheduled to change. Income from the other tax source, taxation of OASDI benefits, will increase only gradually relative to taxable payroll as a greater proportion of Social Security benefits is subject to taxation in future years. The HI income rate is projected to increase gradually from 3.13 in 2009 to 4.30 in 2084 due to the ACA’s increase in payroll tax rates for high earners starting in 2013. Individual tax return filers with earnings above $200,000, and joint return filers with earnings above $250,000, will pay an additional 0.9 percent tax on earnings above the threshold. Because the thresholds are not indexed, an increasing fraction of earnings will be subject to the higher tax rate over time.
What is the Long-Range Actuarial Balance of the OASI, DI, and HI Trust Funds? Another way to view the outlook for payroll tax financed trust funds is in terms of their actuarial balances for the 75-year valuation period. The actuarial balance of a fund is essentially the difference between annual income and costs, expressed as a percentage of taxable payroll, summarized over the 75-year projection period. (Because SMI is brought into balance annually through premium increases and general revenue transfers, actuarial balance is not an informative concept for that program.)
The OASI, DI, and HI Trust Funds all have actuarial deficits under the intermediate assumptions, as shown in the following table.
LONG-RANGE ACTUARIAL DEFICIT OF THE OASI, DI, AND HI TRUST FUNDS (As a percentage of taxable payroll)
OASI
DI
OASDI
HI
Actuarial deficit
1.62
0.30
1.92
0.66
The actuarial deficit can be interpreted as the percentage points that could be either added to the current-law income rate or subtracted from the cost rate for each of the next 75 years to bring the funds into actuarial balance. Actuarial balance is achieved if trust fund assets at the end of the period are equal to the following year’s expenditures. Note, however, that Social Security’s generally increasing annual deficits projected for 2016 through 2084 indicate that a single tax rate increase for all years sufficient to achieve actuarial balance would result in large annual surpluses early in the period, followed by increasing deficits later in the period. If the ACA’s mandated cost savings are realized, HI annual deficits begin to decrease after 2045 and the trust fund is projected to have a long-range actuarial deficit that is only one-sixth of the magnitude projected in last year’s Medicare Trustees Report. For illustration, if the lower payment updates for HI were gradually phased out in 2020-34, the actuarial deficit would be 1.91 percent of taxable payroll, substantially larger than projected under current law, but still only half of the level shown in the 2009 report.
What Are Key Dates in Long-Range OASI, DI, and HI Financing? When cost exceeds income excluding interest (Chart C), use of trust fund assets occurs in stages. For HI, non-interest income fell short of expenditures in 2008 and again in 2009, when the HI fund used interest income ($15 billion) and assets ($17 billion) to meet expenditures. This year’s report anticipates a large deficit for 2010, due mainly to the recession’s negative effect on payroll tax revenues, followed by periods of declining deficits (2011-14) and small surpluses (2015-19) as tax revenues increase with the economic recovery from the recession and the ACA’s deficit-reduction provisions take effect. In 2020, demographic change causes projected annual deficits to re-emerge and increase until 2045, after which the cost rate exceeds the income rate by decreasing amounts through 2084. In 2020, under current law, interest income will again be required to meet projected HI expenditures and beginning in 2022, drawdown of assets will again be required each year until the trust fund is exhausted in 2029, after which tax income is estimated to be sufficient to pay 85 percent of HI costs, declining to 77 percent in 2050, and then increasing to 89 percent by 2084.
For OASDI, annual cost will exceed tax income in 2010 by an estimated $41 billion, although the combined trust funds will continue to grow because projected interest earnings of $118 billion will substantially exceed $41 billion. This large cash-flow shortfall is mainly the result of revenue adjustments in 2010 of $25 billion for prior years for which estimated payroll tax allocations were too large. Annual cost is projected to exceed tax income by $7 billion in 2011, followed by three years of small surpluses before increasing annual shortfalls of tax income return permanently in 2015. The report indicates that annual OASDI income, including interest on trust fund assets, will exceed annual cost and trust fund assets will increase every year until 2025. At that time it will be necessary to begin drawing down trust fund assets to cover part of expenditures until assets are exhausted in 2037. After trust fund exhaustion, continuing tax income would be sufficient to pay 78 percent of scheduled benefits in 2037 and 75 percent in 2084. Although the projected exhaustion date for the DI Trust Fund is 2018, the value of the OASI Trust Fund would be sufficient at that point to make assets available to pay full DI benefits, but only with authorizing legislation.
The key dates regarding cash flows are shown in the following table.
KEY DATES FOR THE TRUST FUNDS
OASI
DI
OASDI
HI
First year outgo exceeds income excluding interest
2018
2005
2015
2020
First year outgo exceeds income including interest
2026
2009
2025
2022
Year trust funds are exhausted
2040
2018
2037
2029
How Do the Sources of Medicare Financing Change? As Medicare costs grow over time, general revenues and beneficiary premiums will play a larger role in financing the program. Chart D shows scheduled cost and current law non-interest revenue sources for HI and SMI combined as a percentage of GDP. The total cost line is the same as displayed in Chart B and shows Medicare cost rising to 6.4 percent of GDP by 2084. Revenue from taxes would increase from 1.3 percent of GDP in 2010 to 1.8 percent in 2084 under current law, while general fund revenue contributions are projected to increase from 1.4 percent of GDP in 2010 to 3.1 percent in 2084, and beneficiary premiums from 0.4 to 1.0 percent of GDP. Thus, the share of total non-interest Medicare income from payroll taxes and the taxation of benefits would fall substantially (from 43 percent to 30 percent) while general fund revenue would rise (from 43 to 51 percent), as would premiums (from 13 percent to 17 percent). These current-law funding relationships could change as a result of the need to address the projected annual HI Trust Fund deficits. By 2084 the Medicare program is projected to require general revenue transfers equal to 3.1 percent of GDP. Moreover, the HI deficit represents a further 0.2 percent of GDP in 2084, and there is no provision to finance this deficit under current law through general fund transfers or any other revenue source.
Chart D—Medicare Cost and Non-Interest Income by Source as a Percent of GDP
Chart D summarizes a much improved financial outlook for Medicare from the one described in last year’s report, largely due to the ACA’s mandated reduction in the rate of growth in health care costs. The transformation of the U.S. health care system that will be required to achieve those efficiency gains adds a new element of uncertainty to the Trustees’ projections. Even if the envisioned cost reductions are fully realized, additional steps will be required to address Medicare’s escalating cost.
The Medicare Modernization Act (2003) requires that the Board of Trustees determine each year whether the annual difference between program outlays and dedicated revenues (the bottom four layers of Chart D) exceeds 45 percent of total Medicare outlays within the first seven years of the 75-year projection period. In effect, the law sets a threshold condition that signals that a trust fund’s general revenue financing of Medicare is becoming excessive. In that case, the annual Trustees Report includes a determination of "excess general revenue Medicare funding." When that determination is made in two consecutive reports, a "Medicare funding warning" is triggered. The warning directs the President to respond by submitting proposed legislation within 15 days of the next budget submission to address the problem, and for Congress to consider the proposal on an expedited basis.
This year’s report projects the difference between outlays and dedicated financing revenues to exceed 45 percent in 2010, prompting a determination of "excess general revenue Medicare funding" for the fifth consecutive report. Another "Medicare funding warning" is triggered.
The 2010 Trustees Reports describe large long-term financial imbalances for Social Security and Medicare, and demonstrate the need for timely and effective action. The sooner that solutions are adopted, the more varied and gradual they can be.
