185 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Social Insurance

The social insurance programs consisting of Social Security, Medicare, Railroad Retirement, Black Lung, and UI were

developed to provide income security and health care coverage to citizens under specific circumstances as a responsibility of

the government. Because taxpayers rely on these programs in their long-term planning, social insurance program information

should indicate whether the current statutory provisions of the programs can be sustained, and more generally what effect

these provisions likely have on the government’s financial condition. The resources needed to run these programs are raised

through taxes and fees. Eligibility for benefits depends in part on earnings and time worked by the individuals. Social

Security benefits are generally redistributed intentionally toward lower-wage workers (i.e., benefits are progressive). In

addition, each social insurance program has a uniform set of eligibility events and schedules that apply to all participants.

RSI material is generally drawn from the 2020 Annual Reports of the Boards of Trustees’, which represents the official

government evaluation of the financial and actuarial status of the Social Security and Medicare Trust Funds. Unless

otherwise noted, all data are for calendar years, all projections are based on current law and the Trustees intermediate set of

assumptions. The one exception is that the projections disregard benefit payment reductions that would result from the

projected depletion of the OASDI and HI Trust Funds. Under current law, benefit payments would be reduced to levels that

could be covered by incoming tax and premium revenues when the trust fund balances have been depleted.

Social Security and Medicare

Social Security

The OASI and DI Trust Funds were established on January 1, 1940 and August 1, 1956 respectively as separate 

accounts in Treasury. The OASI fund pays cash retirement benefits to eligible retirees and their eligible dependents and 

survivors, and the much smaller DI fund pays cash benefits to eligible individuals who are unable to work because of medical 

conditions and certain family members of such eligible individuals. All financial operations of the OASI and DI Programs are 

handled through these respective funds. The two funds are often referred to as the combined OASDI Trust Funds or “Social 

Security”. At the end of calendar year 2019, Social Security benefits were paid to approximately 64 million beneficiaries.

The events that trigger benefit payments are quite different however, both trust funds have the same dedicated financing 

structure: taxes paid by workers, their employers, and individuals with self-employment income, based on work covered by 

the Social Security Program. Currently, employers and employees each pay 6.2 percent of taxable earnings, and the selfemployed pay 12.4 percent of taxable earnings. Payroll taxes are levied on wages and net earnings from self-employment up 

to a specified maximum annual amount, referred to as maximum taxable earnings ($137,700 in 2020), that increases each 

year with economy-wide average wages.

Legislation passed in 1984 subjected up to half of Social Security benefits to income tax and allocated the revenue to 

the OASDI Trust Funds. In 1993 legislation increased the potentially taxed portion of benefits to 85 percent and allocated the 

additional revenue to the Medicare’s HI Trust Fund.

Medicare

The Medicare Program, created in 1965, has two separate trust funds: the HI Trust Fund (otherwise known as Medicare 

Part A) and the SMI Trust Funds (which consists of the Medicare Part B and Part D11 accounts). HI helps pay for inpatient 

hospital skilled nursing facility, home health, and hospice. SMI helps pay for hospital outpatient services, physician services, 

and assorted other services and products through Part B and for prescription drugs through Part D.

Though the events that trigger benefit payments are similar, HI and SMI have different dedicated financing structures. 

Similar to Social Security, HI is financed primarily by payroll contributions. Currently, employers and employees each pay 

1.45 percent of earnings, while self-employed workers pay 2.9 percent of their net earnings. SMI is financed primarily by 

direct transfers from the General Fund. Additional financing sources include premiums paid by beneficiaries and, for Part D 

state transfers. 

11 Medicare legislation in 2003 created the new Part D account in the Medicare Part B and D Trust Fund to track the finances of a new prescription drug 

benefit that began in 2006. As is the case for Medicare Part B, a little less than three-quarters of revenues to the Part D account will come from future 

transfers from the General Fund. Consequently, the nature of the relationship between the Medicare Part B and D Trust Fund and the federal budget 

described below is largely unaffected by the presence of the Part D account though the magnitude will be greater.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 186

Surplus 

Borrowed

Interest 

Credited

Benefit 

Taxes

Interest 

Credited

Surplus 

Borrowed

E

X

P

E

N

D

I

T

U

R

E

S

General

Government

Expenditures,

Net Interest

SMI Trust

Fund 

Account

Other

Government

Accounts

HI, OASDI

Trust Fund 

Accounts

M

E

A

N

S

O

F

F

I

N

A

N

C

I

N

G

SMI

Premiums and 

State Transfers

Income Taxes,

Benefit Taxes, 

Other Revenues,

Borrowing from

the Public

Payroll Taxes and

HI

Premiums

HI, OASDI, SMI

Benefits

Other 

Government 

Transfers

Social Security, Medicare, and Government-wide Finances

Figure 1—Social Security, Medicare, and Government-wide Finances

• Other Government Transfers: Intra-governmental transfers to the Medicare “Parts B and D” Trust Fund from other government 

accounts.

• Surplus Borrowed: Program revenue loaned to the General Fund and treated as if it borrowed the money from the public

• Interest Credited: Interest earned when the excess of program revenue over expenses is loaned to the General Fund becoming a 

future obligation to the General Fund.

The current and future financial status of the separate Social Security and Medicare Trust Funds is the focus of the 

Social Security and Medicare Trustees’ Reports, a focus that may appropriately be referred to as the “trust fund perspective.” 

In contrast, the government primarily uses the budget concept, appropriately referred to as the “budget perspective” or the 

“government-wide perspective” as the framework for budgetary analysis and presentation. It represents a comprehensive 

display of all federal activities, regardless of fund type or on- and off-budget status and has a broader focus than the trust 

fund perspective. Social Security and Medicare are among the largest expenditure categories of the U.S. federal budget. This 

section describes the important relationship between the trust fund perspective and the government-wide perspective.

Figure 1 is a simplified depiction of the interaction of the Social Security and Medicare Trust Funds with the rest of the 

federal budget.12 The boxes on the left show sources of funding, those in the middle represent the trust funds and other 

government accounts, including the General Fund into which that funding flows, and the boxes on the right show simplified 

expenditure categories. The figure is intended to illustrate how the various sources of program revenue flow through the 

budget to beneficiaries. The general approach is to group revenues and expenditures that are linked specifically to Social 

Security and/or Medicare separately from those for other government programs.

Each of the trust funds has its own sources and types of revenue. With the exception of General Fund transfers to 

Medicare Parts B and D, each of these revenue sources represents revenue from the public that is dedicated specifically for 

the respective trust fund and cannot be used for other purposes. In contrast, personal and corporate income taxes as well as 

other revenue go into General Fund and are drawn down for any government program for which Congress has approved 

spending.13 The Medicare SMI Trust Fund is shown separately from the Social Security OASDI Trust Funds and the 

Medicare HI Trust Fund to highlight the unique financing of Medicare Parts B and D. Currently, it is the only one of the 

12 The federal budget encompasses all government financing and is synonymous with a government-wide perspective. 13 Other programs also have dedicated revenues in the form of taxes and fees (and other forms of receipt) and there are a large number of dedicated trust 

funds in the federal budget.
187 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

programs that is funded through transfers from the General Fund. The transfers are automatic and; their size depends on

program expenses, not on how much revenue comes into Treasury. If General Fund revenues become insufficient to cover 

both the mandated transfer to Medicare Parts B and D and expenditures on other general government programs, Treasury 

needs to borrow to make up the difference. In the longer run, if transfers to Medicare Parts B and D increase beyond growth 

in general revenues is as projected, then Congress must either raise taxes, cut other government spending, reduce Medicare 

Parts B and D benefits, or borrow even more.

Intra-governmental transfers (surplus) is a form of “borrowing/lending” between the government accounts. How loans 

from the trust funds to the General Fund and later repayments of those loans affect tax income and expenditures of the 

General Fund is uncertain. Two extreme cases encompass the possibilities. At one extreme, each dollar the trust funds loan to 

the General Fund might reduce borrowing from the public by a dollar at the time the loan is extended, in which case the 

General Fund could repay all trust fund loans by borrowing from the public without raising the level of public debt above the 

level that would have occurred in the absence of the loans. At the other extreme, the trust fund loans result in additional 

largess (i.e., higher spending and/or lower taxes) in General Fund programs at the time the loans are extended, but ultimately 

that additional largess is financed with additional austerity (i.e., lower spending and/or higher taxes). The actual impact of 

trust fund loans to the General Fund and their repayment on General Fund programs is at one of these two extremes or 

somewhere in between.

Actual dollar amounts roughly corresponding to the flows presented in Figure 1 are shown in the following table for FY 

2020. From the government-wide perspective, only revenues received from the public and state transfers less expenditures 

made to the public are important for the final balance. From the trust fund perspective which is captured in the bottom section 

of each of the three trust fund columns revenue also includes amounts transferred from the General Fund and interest earned 

from the lending/borrowing activity between the General Fund and the trust funds. Transfers to the SMI Program from the 

General Fund are obligated under current law and therefore, appropriately viewed as revenue from the trust fund perspective. 
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 188

Revenues and Expenditures for Medicare and Social Security Trust Funds and the Total

Federal Budget for the Fiscal Year ended September 30, 2020

Trust Funds

(In billions of dollars) HI SMI OASDI Total All Other Total1

Payroll taxes and other public 

revenues:

Payroll and benefit taxes ..................... 322.9 - 1,024.1 1,347.0 - 1,347.0

Premiums........................................... 6.6 123.0 - 129.6 - 129.6

Other taxes and fees........................... - 14.9 - 14.9 1,928.5 1,943.4

Total .................................................. 329.5 137.9 1,024.1 1,491.5 1,928.5 3,420.0

 Total expenditures to the public2 ........ 400.6 514.8 1,095.4 2,010.8 4,541.1 6,551.9

Net results for budget perspective3..... (71.1) (376.9) (71.3) (519.3) (2,612.6) (3,131.9)

Revenues from other government 

accounts:

Transfers ........................................... 1.4 357.5 9.0 367.9 (367.9)

Interest credits.................................... 5.3 2.2 78.8 86.3 (86.3)

Total ................................................. 6.7 359.7 87.8 454.2 (454.2)

Net results for trust fund 

perspective3 ........................................ (64.4) (17.2) 16.5 (65.1) N/A N/A

1 This column is the sum of the preceding two columns and shows data for the total federal budget. The figure $3,131.9 billion was the 

total federal deficit in FY 2020.

2 The OASDI figure includes $5.0 billion transferred to the RRB for benefit payments and is therefore an expenditure to the public.

3 Net results are computed as revenues less expenditures.

Transfers and interest credits received by the trust funds appear as a negative entry under “all other” and column.

are offset when summed for the total budget.

 "N/A" indicates not applicable.

Medicare Part A: Government-wide perspective-difference between expenditures made to the public and revenues was

$71.1 billion. Trust fund perspective-after revenues from transfers and interest from the General Fund, expenditures exceeded

revenues by $64.4 billion.

Medicare Parts B and D: Government-wide perspective-difference between expenditures made to the public and

revenues was $376.9 billion resulting in a net draw on the overall budget balance. Trust fund perspective-after revenues from

transfers and interest from the General Fund, revenues exceeded expenditures by $17.2 billion.

Social Security: Government-wide perspective-difference made to the public and revenues was $71.3 billion. Trust fund

perspective-after revenues from transfers and interest from the General Fund, revenues exceeded expenditures by $16.5

billion.

Cash Flow Projections

Economic and Demographic Assumptions. The Boards of Trustees of the OASDI and Medicare Trust Funds provide in

their annual reports to Congress short-range (10-year) and long-range (75-year) actuarial estimates of each trust fund.

Because of their inherent uncertainty in estimating 75 years into the future, the boards use three alternative sets of economic

and demographic assumptions to show a range of possibilities. The economic and demographic assumptions used for the

most recent set of intermediate projections for Social Security and Medicare are shown in the demographic and economic

assumption section of Note 23-Social Insurance.
189 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Worker-to-Beneficiary Ratio. For the most part, current workers’ pay for current benefits. The relatively smaller number 

of persons born after the Baby Boom will therefore finance the retirement of the Baby Boom generation. Chart 1 shows the 

estimated number of covered workers per OASDI beneficiary using the Trustees intermediate assumptions. Covered workers 

are persons having earnings creditable for OASDI purposes based on wages in covered employment or income from covered 

self-employment. The estimated number of workers per beneficiary declines from 2.8 in 2019 to 2.1 in 2094. A similar 

demographic pattern confronts the Medicare Program. In 2019 every HI beneficiary had about 3.0 workers to pay for his or 

her benefit and continues to decline until there are only 2.1 workers per beneficiary by 2094. 

Chart 1—Number of Covered Workers per OASDI Beneficiary

1970-2094
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 190

Social Security Projections

Income and Expenditures as a Percent of Taxable Payroll. Chart 2 shows annual non-interest income and expenditures 

expressed as percentages of taxable payroll. In all years of the projection period, estimated annual cost is more than estimated 

annual income excluding interest. After 2020, estimated cost, expressed as a percentage of taxable payroll, increases through 

about 2040 and is rising at the end of the 75-year period. The estimated income at the end of the 75-year period is sufficient 

to cover 73 percent of the estimated cost.

In any year, to meet all OASDI cost on a timely basis, the combined OASI and DI Trust Funds will need to redeem 

Treasury securities. This redemption differs from the situation of prior years when the combined OASI and DI Trust Funds 

had been net lenders to the General Fund. In 2035 the reserves in the combined OASI and DI Trust Funds are projected to

become depleted, at which time 79 percent of scheduled benefits would be payable. Because the program lacks the authority 

to borrow to continue paying benefits, benefit payments would be limited to the available noninterest income.

Solvency could be achieved by 1) increasing revenue equivalent to an immediate and permanent payroll tax rate 

increase of 3.14 percent points, or by 2) reducing scheduled benefits by an amount equivalent to an immediate and permanent 

reduction of about 19 percent applied to all current and future beneficiaries, or about 23 percent if the reductions were applied 

only to newly entitled beneficiaries. Alternatively, some combination of tax increases and benefit reductions could be 

adopted.

Chart 2—OASDI Income (Excluding Interest) and Expenditures

as a Percent of Taxable Payroll

1970-2094
191 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Income and Expenditures as a Percent of GDP. Chart 3 shows estimated annual non-interest income and expenditures, 

expressed as a percent of GDP. Analyzing these cash flows in terms of percentage of the estimated GDP, which represents 

the total value of goods and services produced in the U.S., provides a measure of the cost of the OASDI program in relation 

to the size of the national economy that must finance it.

In calendar year 2019, OASDI cost was about $1,059 billion, which was about 5.0 percent of GDP. The cost of the 

program (based on current law) rises to 5.9 percent by 2038, then declines to 5.8 percent by 2053, and then generally 

increases to 5.9 percent by 2094. The increase from 2020 to 2038 is projected to occur as baby boomers continue to become 

eligible for OASDI benefits, lower birth rates result in fewer workers per beneficiary, and beneficiaries continue to live 

longer.

Chart 3—OASDI Income (Excluding Interest) and Expenditures

as a Percent of GDP

1970-2094
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 192

Medicare Projections

Medicare Legislation. The projections presented here are based on current law, certain features of which may result in 

some challenges for the Medicare program. In 2010 the PPACA was signed into law and contains the most significant 

changes to health care coverage since the Social Security Act. The PPACA provided funding for the establishment of a Center 

for Medicare and Medicaid Innovation to test innovative payment and service delivery models to reduce program 

expenditures while preserving or enhancing the quality of care furnished to individuals. If the health sector cannot transition 

to more efficient models of care delivery and if the provider reimbursement rates paid by commercial insurers continue to be 

based on the same negotiated process used to date, then the availability, particularly with respect to physician services, and 

quality of health care received by Medicare beneficiaries would, under current law, fall over time compared to that received 

by those with private health insurance.

Incorporated in these projections is the sequestration of non-salary Medicare expenditures as required by the following

laws:

• BCA of 2011 (P.L. 112-25, enacted on August 2, 2011), as amended by the American Taxpayer Relief Act of 2012

(P.L. 112-240, enacted on January 2, 2013);

• Continuing Appropriations Resolution, 2014 (P.L. 113-67, enacted on December 26, 2013);

• Sections 1 and 3 of P.L. 113-82, enacted on February 15, 2014;

• Protecting Access to Medicare Act of 2014 (P.L. 113-93, enacted on April 1, 2014);

• BBA of 2015 (P.L. 114-74, enacted on November 2, 2015); and

• BBA of 2018 (P.L. 115-123, enacted on February 9, 2018).

• BBA of 2019 (P.L. 116-37, enacted on August 2, 2019).

The sequestration reduces benefit payments by 2 percent from April 1, 2013 through March 31, 2029, and by 4 percent

from April 1, 2029 through September 30, 2029. Due to sequestration, non-salary administrative expenses are reduced by an

estimated 5 to 7 percent from March 1, 2013 through September 30, 2029.

The financial projections for the Medicare program reflect substantial, but very uncertain, cost savings deriving from 

current law provisions that lower increases in Medicare payment rates to most categories of health care providers, but such 

adjustments would probably not be viable indefinitely without fundamental change in the current delivery system. In view of 

the factors described above, it is important to note that Medicare’s actual future costs are highly uncertain for reasons apart

from the inherent challenges in projecting health care cost growth over time. For additional information refer to the 

“Medicare – Illustrative Alternative Scenario” section of Note 23—Social Insurance and HHS’s financial statement.

Changes in Projection Methods. The long-range cost growth rates must be modified to reflect demographic impacts. In 

the 2019 report and prior reports, these impacts reflected the changing distribution of Medicare enrollment by age and sex. 

For the 2020 report, these effects are being modified to estimate not only the changing distribution of Medicare enrollment by 

age and sex but also the beneficiary’s proximity to death, which is referred to as a TTD adjustment. The TTD adjustment 

reflects the fact that the closer an individual is to death, the higher his or her health care spending is. 
193 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Total Medicare. Chart 4 shows expenditures and current-law non-interest revenue sources for HI and SMI combined as 

a percent of GDP. Under the PPACA, beginning in 2013 the HI Trust Fund receives an additional 0.9 percent tax on earnings 

in excess of $250,000 for joint tax return filers and $200,000 for individual tax return filers. As a result of this provision, it is 

projected that payroll taxes will grow slightly faster than GDP. HI expenditures exceeded income each year from 2008 

through 2015. In 2016 and 2017, however, there were fund surpluses. In 2018 and 2019, expenditures again exceeded 

income, with trust fund deficits of $1.6 billion and $5.8 billion, respectively. General revenue transfers to the Part B account 

increased significantly in 2016, as required by the BBA of 2015 to compensate for premium revenue that was not received in 

2016 due to the hold harmless provision, which limited the Part B premium increase for a majority of beneficiaries. After 

decreasing from 2016 to 2017, general revenues will gradually increase as a share of Medicare financing from 2018 through 

2034 and grow to about 49 percent, stabilizing thereafter. SMI premiums will also grow in proportion to general revenue 

transfers, placing a growing burden on beneficiaries. High-income beneficiaries have paid an income-related premium for 

Part B since 2007 and for Part D since 2011. Medicare Part B and D general revenues equal 1.6 percent of GDP in 2019 and 

will increase to an estimated 3.1 percent in 2094 under current law.

Chart 4—Total Medicare (HI and SMI) Expenditures and Non-interest Income

as a Percent of GDP

1970-2094
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 194

Medicare, Part A Income and Expenditures as a Percent of Taxable Payroll. Chart 5 illustrates income (excluding 

interest) and expenditures as a percentage of taxable payroll. The projected HI cost rates shown in the 2020 report are lower

than those from the 2019 report for all years largely because of lower expenditures attributable to lower than projected 2019 

spending and the incorporation of TTD into the demographic factors used in the projection model. The standard HI payroll 

tax rate is scheduled to remain constant as is the additional earnings tax paid by high-income workers. Income from taxation 

of Social Security benefits will also increase faster than taxable payroll because the income thresholds determining taxable 

benefits are not indexed for price inflation. Since these income thresholds are not indexed, over time an increasing proportion 

of workers and their earnings will become subject to the additional HI tax rate. 

In 2020 and beyond, as indicated in Chart 5, the cost rate is projected to rise, primarily due to the continued retirements 

of those in the Baby Boom generation and partly due to an acceleration of health services cost growth. This cost rate increase 

is moderated by the accumulating effect of the productivity adjustments to provider price updates, which are estimated to 

reduce annual HI per capita cost growth by an average of 0.7 percent through 2029 and 1.0 percent thereafter. The percentage 

of expenditures covered by non-interest income is projected to decrease from 90 precent in 2026 to 78 percent in 2044 and 

then to increase to about 90 precent by the end of the projection period. 

Chart 5—Medicare Part A Income (Excluding Interest) and Expenditures

as a Percent of Taxable Payroll

1970-2094
195 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Medicare, Part A Income and Expenditures as a Percent of GDP. Chart 6 shows estimated annual non-interest income 

and expenditures, expressed as a percent of GDP, the total value of goods and services produced in the U.S. This measure 

provides an idea of the relative financial resources that will be necessary to pay for Medicare services. In 2019, the 

expenditures were $328.3 billion, which was 1.5 percent of GDP. This percentage is projected to increase steadily until about 

2045 and then remain fairly level throughout the rest of the 75-year period, as the accumulated effects of the price update 

reductions are realized. 

Chart 6—Medicare Part A Income (Excluding Interest) and Expenditures

as a Percent of GDP

1970-2094
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 196

Medicare Part B and Part D Premium as well as State Transfer Income and Expenditures as a Percent of GDP. Chart 7 

shows expenditures for the Part B and D Program expressed as a percent of GDP. It is important to examine the projected rise 

in expenditures and the implications for beneficiary premiums and General Fund transfers. 

In 2019, SMI expenditures were $467.9 billion, or about 2.2 percent of GDP. Under current law, they would grow to 

about 3.9 percent of GDP within 25 years and to 4.5 percent by the end of the projection period. To match the faster growth 

rates for SMI expenditures, beneficiary premiums, along with general revenue contributions, would increase more rapidly 

than GDP over time but at a slower rate compared to the last 10 years. Average per beneficiary costs for Part B and Part D 

benefits are projected to increase after 2019 by about 4.2 percent annually. The associated beneficiary premiums—and 

General Fund transfers would increase by approximately the same rate. The special state payments to the Part D account are 

set by law at a declining portion of the states’ forgone Medicaid expenditures attributable to the Medicare drug benefit. The

percentage was 90 percent in 2006, phasing down to 75 percent in 2015 and later. Then, after 2015, the state payments are 

also expected to increase faster than GDP.

Chart 7—Medicare Part B and Part D Premium and State Transfer

Income and Expenditures as a Percent of GDP

1970-2094
197 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Social Security and Medicare Sensitivity Analysis

Projections of the future financial status of the Social Insurance programs depend on many demographic and economic 

assumptions. The estimates presented here are based on the assumption that the trust funds will continue under current law 

except that the full amount of Social Security and Medicare HI scheduled benefits are paid after trust fund depletion contrary 

to current law. Income will depend on how these factors affect the size and composition of the working population and the 

level and distribution of wages and earnings. Similarly, the cost will depend on how these factors affect the size and 

composition of the beneficiary population and the general level of benefits.

Because actual experience is likely to differ from the estimated or assumed values of these factors, this section is 

included to illustrate the sensitivity of the long-range projections to changes in assumptions by analyzing key assumptions: 

average annual reduction in death rates for Social Security, average annual growth in health costs for Medicare, total fertility 

rate, real-wage differential, CPI change, net immigration, and real interest rate.

For this analysis, the intermediate assumptions are used as the reference point, and each selected assumption is varied 

individually. The variation used for each individual assumption reflects the levels used for that assumption in the low-cost 

and high-cost projections. For example, when analyzing sensitivity with respect to variation in real wages, income, and 

expenditure projections using the intermediate assumptions are compared to the outcome when projections are done by 

changing only the real wage assumption to either low-cost or high-cost alternatives.

The following tables show the PV of the estimated excess of Social Security and Medicare cost over income for the 75-

year period, using various assumptions, which are shown in parentheses. The low-cost alternative is characterized by 

assumptions that improve the financial status of the program (relative to the intermediate assumption) such as slower 

improvement in mortality (beneficiaries die younger). In contrast, assumptions under the high-cost alternative worsen the 

financial outlook. All PV are calculated as of January 1, 2020 and are based on estimates of income and cost during the 75-

year projection period 2020-2094. Refer to SSA’s and HHS’s unaudited RSI—Social Insurance section for additional 

information on the Social Insurance programs sensitivity analysis.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 198

Present Values of Estimated OASDI Expenditures in Excess of Income

Under Various Assumptions, 2020-2094

(Dollar values in billions; values of assumptions shown in parentheses)

Financing Shortfall Range

Assumption Low Intermediate High

Average annual reduction in death rates .................................... 16,817 19,696 22,891

(0.4) (0.8) (1.2)

Total fertility rate....................................................................... 17,815 19,696 21,554

(2.2) (2.0) (1.8)

Real-wage differential............................................................... 15,641 19,696 22,262

(1.8) (1.1) (0.5)

CPI change.............................................................................. 19,112 19,696 20,250

(3.0) (2.4) (1.8)

Net immigration1 ....................................................................... 18,854 19,696 20,502

(1,598,000) (1,261,000) (946,000)

Real interest rate...................................................................... 16,717 19,696 23,452

(2.8) (2.3) (1.8)

1 Amounts represent the average annual net immigration over the 75-year projection period.

Source: 2020 OASDI Trustees' Report and SSA.

The increase and decrease discussed below for each projection are relative to the changes shown in the table above over 

the 75-year projection period.

• The average annual reduction in death rates: If people die younger Social Security income relative to cost would 

decrease by $2,879 billion; if people live longer shortfall would increase by $3,195 billion.

• Total fertility rate: If there are more workers compared to beneficiaries Social Security income relative to cost 

would decrease by $1,881 billion; if there are fewer workers compared to beneficiaries the shortfall would increase 

by $1,858 billion. 

• Real-wage differential: Higher real wage growth results in faster income growth relative to expenditure growth; if 

real-wage growth is higher Social Security income relative to cost would decrease by $4,055 billion; if real-wage 

growth is lower the shortfall would increase by $2,566 billion. 

• CPI change: If the ultimate annual increase in the CPI percentage is higher Social Security income relative to cost 

would decrease by $584 billion; if the ultimate annual increase in the CPI percentage is lower shortfall would 

increase by $554 billion. 

• Net immigration: If there is a larger increase in immigration levels then Social Security income relative to cost 

would decrease by $842 billion; if there is a smaller increase in immigration levels the shortfall would increase by 

$806 billion.

• Real interest rate: If the ultimate real interest rate is higher then Social Security income relative to cost when 

measured in PV terms would decrease by $2,979 billion; if the ultimate annual real interest rate is lower, then the 

shortfall would increase by $3,756 billion.
199 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Present Values of Estimated Medicare Part A Expenditures in Excess of Income

Under Various Assumptions, 2020-2094

(Dollar values in billions; values of assumptions shown in parentheses)

Financing Shortfall Range

Assumption Low Intermediate High

Average annual growth in health costs....................................... (3,879) 4,800 18,727

(2.7) (3.7) (4.7)

Total fertility rate....................................................................... 4,142 4,800 5,449

(2.2) (2.0) (1.8)

Real wage differential .............................................................. 1,952 4,800 6,493

(1.8) (1.1) (0.5)

CPI change ............................................................................. 3,507 4,800 6,426

(3.0) (2.4) (1.8)

Net immigration........................................................................ 4,490 4,800 5,093

(1,598,000) (1,261,000) (946,000)

Real interest rate ..................................................................... 4,130 4,800 5,566

(2.8) (2.3) (1.8)

Source: CMS

The increase and decrease discussed below for each projection are relative to the changes shown in the table above over 

the 75-year projection period.

• Average annual growth in health care costs: The financial status of the HI Trust Fund is extremely sensitive to the 

growth rates for health care service costs. Slower growth rates will produce a lower aggregate cost of providing 

covered health care services. If a slower growth rate is attained Medicare Part A income relative to cost would 

decrease by $8,679 billion; if the growth rate is higher the shortfall would increase by $13,927 billion.

• Total fertility rate: If there are more workers compared to beneficiaries Medicare Part A income relative to cost 

would decrease by $658 billion; if there are fewer workers compared to beneficiaries, the shortfall would increase 

by $649 billion.

• Real-wage differential: Faster real-wage growth results in smaller HI cash flow deficits. If real-wage growth is 

higher Medicare Part A income relative to cost would decrease by $2,848 billion; if real wage growth is lower, the 

shortfall would increase by $1,693 billion.

• CPI change: If the ultimate annual increase in the CPI percentage is higher Medicare Part A income relative to cost 

would decrease by $1,293 billion; if the ultimate annual increase in the CPI percentage is lower the shortfall would 

increases by $1,626 billion.

• Net immigration: If there is a larger increase in immigration levels then Medicare Part A relative to cost would 

decrease by $310 billion; if there is a smaller increase in immigration levels the shortfall would increase by $293 

billion.

• Real interest rate: If the ultimate real interest rate is higher then Medicare Part A income relative to cost, when 

measured in PV terms would decrease by $670 billion; if the ultimate real interest rate is lower, then the shortfall 

would increase by $766 billion.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 200

Present Values of Estimated Medicare Parts B and D Future Expenditures 

Less Premium Income and State Transfers Under Three Health Care Cost

Growth Assumptions, 2020-2094

(In billions of dollars)

Government-wide Resources Needed

Low Intermediate High

Medicare Program1 (2.7) (3.7) (4.7)

Part B........................................................................................... 23,507 33,085 48,271

Part D........................................................................................... 5,513 7,845 11,588

1 Annual growth rate is the aggregate cost of providing covered health care services to beneficiaries. The low and high scenarios

assume that costs increase 1 percent slower or faster, respectively, than the intermediate assumption.

Source: CMS

The table above shows the effects of various assumptions about the growth in health care costs on the PV of estimated

Part B and D expenditures in excess of income in the terms of government-wide resources needed due to the financing

mechanism (General Fund transfers) for Medicare Parts B and D. As with Part A, net Part B and D expenditures are very

sensitive in the health care cost growth assumption. If a slower growth rate is attained government-wide resources needed for

Part B would decrease by $9,578 billion and Part D by $2,332 billion; if the growth rate is higher, government-wide

resources needed would increase to $15,186 billion Part B and to $3,743 billion for Part D.

Sustainability of Social Security and Medicare

75-Year Horizon

According to the 2020 Medicare Trustees’ Report, the HI Trust Fund is projected to remain solvent until 2026 and,

according to the 2020 Social Security Trustees’ Report, the OASI and DI Trust Funds are projected to have sufficient asset

reserves to pay full benefits on time until 2034 and 2065, respectively. In each case, some general revenues must be used to

satisfy the authorization of full benefit payments until the year of trust fund depletion. This occurs when the trust fund

interest income and balances accumulated during prior years are needed to pay benefits, which leads to a transfer from

general revenues to the trust funds. Moreover, under current law, General Fund transfers to the SMI Trust Fund will occur

into the indefinite future and will continue to grow with the growth in health care expenditures.

The potential magnitude of future financial obligations under these three social insurance programs is, therefore,

important from a budget perspective as well as for understanding generally the growing resource demands of the programs on

the economy. From the 75-year budget perspective, the PV of the additional resources that would be necessary to meet

projected expenditures, for the three programs combined, is $65.4 trillion. To put this figure in perspective, it would represent

4.4 percent of the PV of projected GDP over the same period ($1,499 trillion). These resource needs would be in addition to

the payroll taxes, benefit taxes, and premium payments. Asset redemptions and Medicare Part B and D general revenue

transfers represent formal budget commitments, but no provision exists for covering the Medicare Part A and Social Security

Trust Fund deficits once assets are depleted.

The table below shows the magnitudes of the primary expenditures and sources of financing for the three trust funds

computed on an open-group basis for the next 75 years and expressed in PV. The data are consistent with the SOSI included

in the principal financial statements.

From the government-wide perspective, the PV of the total resources needed for the Social Security and Medicare

Programs over and above current-law funding sources (payroll taxes, benefit taxes, and premium payments from the public)

is $65,426 billion. From the trust fund perspective, which counts the trust funds ($3,201 billion) and the general revenue

transfers to the SMI Program ($40,930 billion) as dedicated funding sources, additional resources needed to fund the

programs are $21,295 billion.
201 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Present Values of Costs Less Revenues of 75-Year Open Group Obligations

HI, SMI, and OASDI as of January 1, 2020

SMI

(In billions of dollars) HI Part B Part D OASDI Total

Revenues from the public:

Taxes ..................................................................... 25,555 - - 73,899 99,454

Premiums and state transfers................................... - 13,511 3,190 - 16,701

Total....................................................................... 25,555 13,511 3,190 73,899 116,155

Total costs to the public ........................................... 30,355 46,596 11,035 93,595 181,581

Net results - budget perspective1 .............................. 4,800 33,085 7,845 19,696 65,426

Revenues from other government accounts ............. - 33,085 7,845 - 40,930

Trust fund balances as of 1/1/2020........................... 195 100 9 2,897 3,201

Net results - trust fund perspective1 .......................... 4,605 (100) (9) 16,799 21,295

1Net results are computed as costs less revenues and trust fund balances. Negative values are indicative of surpluses.

Source: 2020 OASDI and Medicare Trustees' Reports

Infinite Horizon

The 75-year horizon is consistent with the primary focus of the Social Security and Medicare Trustees’ Reports. Experts

have noted that limiting the projections to 75 years understates the magnitude of the long-range unfunded obligations because

summary measures (such as the actuarial balance and open-group unfunded obligations) reflect the full amount of taxes paid

by the next two or three generations of workers, but not the full amount of their benefits. One approach to addressing the

limitation of 75-year summary measures is to extend the projections horizon indefinitely, so that the overall results reflect the

projected costs and revenues after the first 75 years. The open-group infinite horizon net obligation is the PV of all expected

future program outlays less the PV of all expected future program tax and premium revenues. Such a measure is provided in

the following table for the three trust funds represented above.

From the budget or government-wide perspective, the values in line 1 plus the values in line 4 are summed in the last

line of the table and represent the value of resources needed to finance each of the programs into the infinite future. The total

resources needed for all the programs sums to $153.7 trillion in PV terms. This need can be satisfied only through increased

borrowing, higher taxes, reduced program spending, or some combination.

The second line shows the value of the trust fund at the beginning of 2020. For the HI and OASDI Programs this

represents the extent the programs are funded from the trust fund perspective. From that perspective, when the trust fund is

subtracted, an additional $53.0 trillion is needed to sustain the Social Security program into the infinite future, while the

Medicare Part A program reflects a projected surplus of $8.0 trillion over the infinite horizon. As described above, from the

trust fund perspective, the SMI Program is fully funded; from a government-wide basis, the substantial gap that exists

between premiums, state transfer revenue, and program expenditures in the Part B and D Program ($79.5 trillion and $26.0

trillion, respectively) represents future general revenue obligations of the federal budget.

In comparison to the analogous 75-year number in the table above, extending the calculations beyond 2094, captures the

full lifetime benefits, plus taxes and premiums of all current and future participants. The shorter horizon understates the total

financial needs by capturing relatively more of the revenues from current and future workers and not capturing all the

benefits that are scheduled to be paid to them.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 202

Present Values of Costs Less Tax, Premium and State Transfer Revenue

through the Infinite Horizon, HI, SMI, OASDI as of January 1, 2020

SMI

(In trillions of dollars) HI Part B Part D OASDI Total

Present value of future costs less future taxes, 

premiums, and state transfers for current participants

participants ................................................................ 13.1 26.9 5.7 41.8 87.5

Less current trust fund balance ................................... 0.2 0.1 - 2.9 3.2

Equals net obligations for past and current participants

participants ................................................................ 12.9 26.8 5.7 38.9 84.3

Plus net obligations for future participants .................... (20.9) 52.7 20.3 14.1 66.2

Equals net obligations through the infinite future for

all participants............................................................ (8.0) 79.5 26.0 53.0 150.5

Present values of future costs less the present

values of future income over the infinite horizon ........... (7.8) 79.6 26.0 55.9 153.7

Source: 2020 OASDI and Medicare Trustees' Reports
203 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Railroad Retirement, Black Lung, and Unemployment Insurance

Railroad Retirement

The RRB was created in the 1930s to establish a retirement benefit program for the nation’s railroad workers. The RRB

and the SSA share jurisdiction over the payment of retirement and survivor benefits. Railroad retirement pays full retirement

annuities at age 60 to railroad workers with 30 years of service and disability annuities based on total or occupational

disability. It also pays annuities to certain beneficiaries of deceased railroad workers.

Payroll taxes paid by railroad employers and their employees provide a primary source of income for the Railroad

Retirement and Survivors’ Benefit Program. Other sources of program income include: the RRB-SSA-CMS Financial

Interchanges with the Social Security and Medicare Trust Funds, federal income taxes on railroad retirement benefits,

appropriations, and earnings on investments.

Revenues in excess of benefit payments are invested to provide additional trust fund income. Legislation enacted in

2001 allowed for Railroad Retirement Account funds transferred to the NRRIT to be invested in non-governmental assets, as

well as in governmental securities.

Since its inception, NRRIT has received $21.3 billion from RRB and returned $26.9 billion. During FY 2020, the

NRRIT made net transfers of $2.3 billion to the RRB to pay retirement benefits. Administrative expenses of the trust are paid

out of trust assets. The balance as of September 30, 2020, and 2019, of non-federal securities and investments of the NRRIT

are disclosed in Note 7—Securities and Investments.

Black Lung

The Federal Coal Mine Health and Safety Act of 1969 created the BLDBP to provide compensation, medical, and

survivor benefits for eligible coal miners who are totally disabled due to pneumoconiosis (Black Lung Disease) arising out of

their coal mine employment and the BLDTF provides benefit payments when no responsible mine operator can be assigned

the liability.

Black lung disability benefit payments are funded by excise taxes from coal mine operators based on the domestic sale

of coal, as are the program’s administrative costs. These taxes are collected by the IRS and transferred to the BLDTF.

P.L. 110-343, Division B-Energy Improvement and Extension Act of 2008, enacted on October 3, 2008, among other

things, restructured the BLDTF debt by refinancing the outstanding high interest rate repayable advances with low interest

rate discounted debt instruments similar in form to zero-coupon bonds, plus a one-time appropriation. This Act also allowed

that any subsequent debt issued by the BLDTF may be used to make benefit payments, other authorized expenditures, or to

repay debt and interest from the initial refinancing.

Unemployment Insurance

The UI Program was created in 1935 to provide income assistance to unemployed workers who lose their jobs generally

through no fault of their own and are unemployed due to a lack of suitable work. The program protects workers during

temporary periods of unemployment through the provision of unemployment compensation benefits. The program is

administered through a unique system of federal and state partnerships established in federal law but executed through

conforming state laws by state officials. The federal government provides broad policy guidance and program direction

through the oversight of DOL, while program details are established through individual state UI statutes, administered

through state UI entities.

The UI Program is financed through the collection of federal and state unemployment taxes levied on subject employers

and deposited in the UTF and federal appropriations. The fund was established to account for the receipt, investment, and

disbursement of unemployment taxes. Federal unemployment taxes are used to pay for the administrative costs of the UI

Program, including grants to each state to cover the costs of state UI operations and the federal share of extended UI benefits.

Federal unemployment taxes are also used to fund an account within the UTF to make advances to state UI accounts when a

state’s UI account balance has been exhausted and the state is unable to make benefit payments.

Cash Flow Projections

Railroad Retirement Income and Expenditures. Railroad retirement cash flow projections are based on the intermediate

set of assumptions used in the RRB’s actuarial valuation of the program. Estimated railroad retirement expenditures are

expected to exceed estimated income (excluding interest) throughout most of the period, except in 2056 through 2059.

Sensitivity Analysis. The projections of the future financial status of the RRP depend on many economic and

demographic assumptions. For additional information on the sensitivity of the long-range projections of the RRP and how the

projections are impacted by changes in certain key assumptions, refer to RRB’s financial statements.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 204

Black Lung Projected Cash Inflows and Outflows, in Constant Dollars, for the Open Group. The significant

assumptions used in the projections show that cash outflows for benefit payments and administrative expenses will exceed

cash inflows from excise taxes for all years in the projection period.

Sensitivity Analysis. For the projected cash inflows and outflows with sensitivity analysis, in constant dollars for the

open group, the significant assumption for medical cost inflation was increased while other significant assumptions were left

unchanged. For additional information on the sensitivity of the projections of the BLDBP and how the projections are

impacted by changes in assumptions, refer to DOL’s financial statements.

Unemployment Insurance Projected Cash Inflows and Outflows, in Constant Dollars, Under Expected Economic

Conditions. The significant assumptions used in the cash flow projections of the UTF show total cash outflow exceeds total

cash inflow in FY 2021 and 2022 and total cash inflow exceeds total cash outflow in all other years in the projection period.

Sensitivity Analysis. The effect on the accumulated UTF assets of projected total cash inflows and cash outflows of the

UTF, in constant dollars, over the ten-year period ending September 30, 2030, are demonstrated in two sensitivity analysis.

Each sensitivity analysis uses an open group, which includes current and future participants in the UI Program. Sensitivity

Analysis I assumes lower rates of unemployment and Sensitivity Analysis II assumes higher rates of unemployment. In

Sensitivity Analysis I, there are net cash outflows in FY 2021 and 2022, but there is a net cash inflow FY 2023 and net cash

inflows continue through 2030. In Sensitivity Analysis II, net cash outflows, are projected in FY 2021 through 2024, but

inflows exceed outflows in FY 2025 through 2030; net cash inflows are reestablished in FY 2026 and peak in FY 2028 with a

decrease in unemployment rate in FY 2025 and then steadily downward in FY 2026 through 2030. For additional information

on the sensitivity of the projections of the UI Program, refer to DOL’s financial statements.

Sustainability

Sustainability of Railroad Retirement from a trust fund perspective, when the trust fund balance ($27.3 billion) and the

financial interchange and transfers ($85.9 billion) are included, the combined balance of the NRRIT, the Railroad Retirement

Account, and the Social Security Equivalent Benefit Account show a slight surplus ($1.3 billion). For additional information

related to the sustainability of the RRP, refer to RRB’s financial statements.

On September 30, 2020, total liabilities of the BLDTF exceeded assets by nearly $6.0 billion. This net position deficit

represents the accumulated shortfall of excise taxes necessary to meet benefit payments, administrative costs, and interest

expense incurred prior to and subsequent to the debt refinancing pursuant to P.L. 110-343. Prior to the enactment of P.L. 110-

343, this shortfall was funded by repayable advances to the BLDTF, which were repayable with interest. Pursuant to P.L.

110-343, any shortfall will be financed with debt instruments similar in form to zero-coupon bonds, with a maturity date of

one year and bear interest at Treasury’s 1-year rate.

The ability of the UI Program to meet a participant’s future benefit payment needs depends on the availability of

accumulated taxes and earnings within the UTF. The effect of projected benefit payments on the accumulated net assets of

the UTF is measured, under an open group scenario, which includes current and future participants in the UI Program. As of

September 30, 2020, total assets within the UTF exceeded total liabilities by nearly $7.3 billion. At the present time there is a

surplus; any surplus of tax revenues and earnings on these revenues over benefit payment expenses is available to finance

benefit payments in future periods when tax revenues may be insufficient.

For additional information related to the sustainability of the RRP, BLDBP, and UI refer to RRB’s and DOLs financial

statements.

Unemployment Trust Fund Solvency

Each state’s accumulated UTF net assets or reserve balance should provide a defined level of benefit payments over a

defined period. To be minimally solvent, a state’s reserve balance should provide for one year’s projected benefit payment

needs based on the highest levels of benefit payments experienced by the state over the last 20 years. A ratio of 1.0 or greater

indicates that the state UTF account balance is minimally solvent. States below this level are vulnerable to exhausting their

funds in a recession. States exhausting their reserve balance must borrow funds from either FUA or the private markets to

make benefit payments. During FY 2020, the balances in the FUA and EUCA were depleted and the FUA and EUCA

borrowed from the General Fund as advances from Treasury. FUA outstanding advances were $36.0 billion as of September;

the EUCA repaid its advances by September 30, 2020. Several Unemployment Programs were created due to the COVID-19

pandemic and funded by the CARES Act. Please refer to Note 28—COVID-19 Activity for additional information.

The results of DOL’s state by state analysis indicate 37 state UTF accounts and the accounts of the District of

Columbia, Puerto Rico, and the Virgin Islands were below the minimal solvency ratio of 1.00 at September 30, 2020.