NOTES TO THE FINANCIAL STATEMENTS 150

Note 25. Social Insurance

SOSI presents the projected actuarial PV of the estimated future revenue and estimated future expenditures of the Social

Security, Medicare, Railroad Retirement, and Black Lung social insurance programs which are administered by the SSA,

HHS, RRB, and DOL, respectively. Social Security and Medicare projections are based on current law and the Social

Security and Medicare trustees’ intermediate set of assumptions, except that the projections assume full Social Security and

Medicare Part A benefits are paid after fund depletion contrary to current law. The projections in the 2021 Trustees’ Report

are the first to include the Trustees best estimates of the effects of the COVID-19 pandemic and ensuing recession on the

Social Security and Medicare Projections. It should be noted that there is an unusually large degree of uncertainty with these

covid-related impacts and that future projections could change significantly as more information becomes available.

Contributions consist of: payroll, income, and excise taxes, premiums from, and state transfers on behalf of,

participants in Medicare, and miscellaneous reimbursements from the General Fund. Generally, beneficiaries finance the

remainder of Parts B and D costs via monthly premiums to these programs. With the introduction of Part D drug coverage,

Medicaid is no longer the primary payer of drug costs for full-benefit dually eligible beneficiaries of Medicare and Medicaid.

For those beneficiaries, states are subject to a contribution requirement and must pay a portion of their estimated foregone

drug costs into the Part D account (referred to as state transfers). By accounting convention, the General Fund transfers are

eliminated in the consolidation of the SOSI at the government-wide level. These General Fund transfers that are used to

finance Medicare Parts B and D are also shown as eliminations on these calculations. For the FYs 2021 and 2020, the

amounts eliminated totaled $43.2 trillion and $40.9 trillion, respectively.

The SOSI also includes projected general revenues that, under current law, would be used to finance the remainder of

the expenditures in excess of revenues for Medicare Parts B and D that is reported in the SOSI. Expenditures include benefit

payments scheduled under current law and administrative expenses. Current Social Security and Medicare Part A law

provides for full benefit payments only to the extent that there are sufficient balances in the trust funds. Social insurance

programs utilize “trust funds” to account for dedicated collections held for later use to accomplish the program’s purpose.

Expenditures reflect full benefit payments even after the point at which trust fund asset reserves are projected to be depleted.

Refer to the unaudited RSI–Social Insurance section for additional information on Social Security, Medicare, Railroad

Retirement, and Black Lung program financing and SSA’s, HHS’s, RRB’s, and DOL’s financial statements.

The estimates in the consolidated SOSI of the open group measures are for persons who are participants or eventually

will participate in the programs as contributors (workers) or beneficiaries (retired workers, survivors, dependents, and

disabled) during the 75-year projection period. The closed group comprises only current participants which are those who

have attained age 15 at the start of the projection period. Actuarial PV of estimated future income (excluding interest) and

estimated future expenditures for the Social Security and Medicare social insurance programs are presented for three different

groups of participants: 1) current participants who have not yet attained eligibility age; 2) current participants who have

attained eligibility age; and 3) new entrants, who are expected to become participants in the future. Current participants in the

Social Security and Medicare programs are the “closed group” of taxpayers and/or beneficiaries who are at least age 15 years

at the start of the projection period. Future participants for Social Security and Medicare include births during the projection

period and individuals below age 15 as of January 1 of the valuation year. Railroad Retirement’s future participants are the

projected new entrants as of October 1 of the valuation year.

The trust fund balances as of the valuation date for the respective programs, including interest earned, are shown in the

table below.7 The PV of estimated future expenditures in excess of estimated future revenue are calculated by subtracting the

actuarial PV of future scheduled contributions as well as dedicated tax income by and on behalf of current and future

participants from the actuarial PV of the future scheduled benefit payments to them or on their behalf. To determine a

program’s funding shortfall over any given period of time, the starting trust fund balance is subtracted from the PV of

expenditures in excess of revenues over the period. The portion of each trust fund not required to pay benefits and

administrative costs is invested, on a daily basis, in interest-bearing obligations of the U.S. government. The Social Security Act

authorizes the issuance by Treasury of special nonmarketable, intra-governmental debt obligations for purchase exclusively by

the trust funds. Although the special issues cannot be bought or sold in the open market, they are redeemable at any time at face

value and thus bear no risk of fluctuation in principal value due to changes in market yield rates. Interest on the bonds is credited

to the trust funds and becomes an asset to the funds and a liability to the General Fund. These Treasury securities and related

interest are eliminated in consolidation at the government-wide level. For additional information, see Note 23—Funds from

Dedicated Collections.

7 Trust fund balances for the Railroad Retirement and Black Lung programs are not included, as these balances are less than $50.0 billion.
151 NOTES TO THE FINANCIAL STATEMENTS

Social Insurance Programs Trust Fund Balances 1

(In trillions of dollars) 2021 2020 2019 2018 2017

Social Security ................................................................ 2.9 ................................ 2.9 2.9................................ 2.9 ................................ 2.8 .

Medicare ................................................................0.3................................ 0.3 ................................ 0.3 0.3 ................................ 0.3 .........

1 As of the valuation date of the respective programs.

Medicare – Illustrative Alternative Scenario

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

specific provisions of the PPACA and the MACRA that lowered increases in Medicare payment rates to most categories of

health care providers. Certain features of current law may result in some challenges for the Medicare program including

physician payments, payment rate updates for most non-physician categories, and productivity adjustments. For those

providers affected by the productivity adjustments and the specified updates to physician payments, sustaining the price

reductions will be challenging, as the best available evidence indicates that most providers cannot improve their productivity

to this degree for a prolonged period given the labor-intensive nature of these services and that physician costs will grow at a

faster rate than the specified updates. As a result, actual Medicare expenditures are highly uncertain for reasons apart for the

inherent difficultly in projecting health care cost growth over time. Please refer to the unaudited RSI—Social Insurance and

HHS financial statements for additional information.

To help illustrate and quantify the potential magnitude of the cost understatement, the Trustees asked the Office of the

Actuary at CMS to prepare the following illustrative Medicare Trust Fund projections under a hypothetical alternative. This

scenario illustrates the impact that would occur if the payment updates that are affected by the productivity adjustments were

to gradually transition from current law to the payment updates assumed for private health plans, the physician updates

transition to the Medicare Economic Index, and the 5.0 percent bonuses paid to qualified physicians in advance APM did not

expire. The extent to which actual future Part A and Part B costs exceed the projected amounts due to changes to the

productivity adjustments and physician updates depends on what specific changes might be legislated and whether Congress

would pass further provisions to help offset such costs. This alternative was developed for illustrative purposes only and the

calculations have not been audited.
NOTES TO THE FINANCIAL STATEMENTS 152

Medicare Present Values (In trillions) (Unaudited)

2021 Consolidated Illustrative

SOSI Alternative

Current Law Scenario1, 2

Income:

 Part A ................................................................................................26.7 ................................................................ 26.8 ............

 Part B3................................................................................................14.5 ................................................................ 16.3 ...........

 Part D 4................................................................................................................................ 3.2 ................................ 3.2 ...........

 Total income ................................................................................................ 44.4 ...............................................................46.3 

Expenditures: 

 Part A ................................................................................................31.7 ................................................................ 37.3 ...........

 Part B ................................................................................................50.0 ................................................................ 56.2 ...........

 Part D ................................................................................................10.9 ................................................................ 10.9 ...........

 Total expenditures ................................................................................................ 92.6 ................................ 104.4.......................

Income less expenditures:

 Part A ................................................................................................(5.0) ................................................................ (10.5) ...........

 Part B ................................................................................................(35.5) ................................................................ (39.9) ............

 Part D ................................................................................................(7.7) ................................................................ (7.7) ...........

 Excess of expenditures over income (48.2) (58.1)

1These amounts are not presented in the 2021 Trustees' Report.

2At the request of the Trustees, the Office of the Actuary at CMS has prepared an illustrative set of Medicare Trust Fund projections that 

differ from current law. No endorsement of the illustrative alternative to current law by the Trustees, CMS, or the Office of the Actuary 

should be inferred.

3Excludes $35.5 trillion and $39.9 trillion of General Revenue Contributions from the 2021 Consolidated SOSI Current Law projection and 

the Illustrative Alternative Scenario's projection, respectively; i.e., to reflect Part B income on a consolidated government-wide basis.

4Excludes $7.7 trillion of General Revenue Contributions from both the 2021 Consolidated SOSI Current Law projection and the Illustrative 

Alternative projection; i.e., to reflect Part D income on a consolidated government-wide basis.
153 NOTES TO THE FINANCIAL STATEMENTS

Demographic and Economic Assumptions

Social Security and Medicare – Demographic and Economic Assumptions

Demographic Assumptions

2021 2030 2040 2050 2060 2070 2080 2090 210013

Total Fertility Rate1 1.5 1.9 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Age-Sex Adjusted Death Rate2 908.3 741.5 683.0 630.3 583.7 542.3 505.5 472.7 443.3

Net Annual Immigration3 680 1,339 1,288 1,256 1,240 1,229 1,222 1,218 1,216

Period Life Expectancy at Birth - Male4 74.6 77.0 78.1 79.2 80.2 81.1 82.0 82.8 83.6

Period Life Expectancy at BirthFemale4 79.9 82.0 82.9 83.8 84.6 85.4 86.1 86.7 87.4

Economic Assumptions (percent change)

2021 2030 2040 2050 2060 2070 2080 2090 210013

Real Wage Differential5 3.2 1.2 1.2 1.1 1.2 1.2 1.1 1.1 1.2

Wages6 6.2 3.6 3.6 3.5 3.6 3.6 3.5 3.5 3.6

CPI7 3.1 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4

Real GDP8 4.4 2.0 1.9 2.0 2.0 1.9 2.0 2.1 2.0

Total Employment9 2.7 0.5 0.3 0.4 0.4 0.3 0.4 0.5 0.4

Avg. Annual Interest Rate (percent)10 1.5 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7

Real Interest Rate (percent)11 (2.0) 2.2 2.3 2.3 2.3 2.3 2.3 2.3 -

Per Beneficiary Cost - HI12 8.2 3.6 4.2 3.4 3.3 3.4 3.5 3.4 -

Per Beneficiary Cost - SMI Part B12 13.1 14 5.0 4.5 3.8 3.8 3.5 3.7 3.7 -

Per Beneficiary Cost - SMI Part D12 (0.2) 15 4.3 4.1 4.3 4.2 4.0 4.1 4.2 -

1Average number of children per woman.

2The age-sex-adjusted death rate per 100,000 that would occur in the enumerated population as of April 1, 2010, if that population were to experience the death 

rates by age and sex observed in, or assumed for, the selected year. 

3

Includes lawful immigration, net of immigration, as well as other, non-legal, immigration per thousand of persons. 

4Summary measure of average number of years expected prior to death for a person born on January 1 in that year, using the mortality rates for that year over 

the course of his or her remaining life. (Social Security)

5Difference between percentage increases in wages and the CPI.

6Average annual wage in covered employment.

7CPI represents a measure of the average change in prices over time in a fixed group of goods and services.

8Total dollar value of all goods and services produced in the U.S., adjusted to remove the impact of assumed inflation growth.

9Summary measure of total U.S. military and civilian employment. (Social Security)

10The average of the nominal interest rates, compounded semi-annually, for special public-debt obligations issuable monthly.

11Average rate of interest earned on new trust fund securities, above and beyond rate of inflation. (Medicare)

12These increases reflect the overall impact of more detailed assumptions that are made for each of the different types of service provided by the Medicare 

program. These assumptions include changes in the payment rates, utilization, and intensity of each type of service. (Medicare)

13The valuation period used for the 2021 Statement of Social Insurance extends to 2095 (Social Security). Medicare did not report assumptions for 2100. 

14Reflects the assumed return of healthcare services that were reduced or deferred in 2020 due to the COVID-19 pandemic. 

15Part D cost growth is projected to be negative in 2021 mainly due to higher assumed direct and indirect remuneration. 

The Boards of Trustees8 of the Social Security 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. Significant uncertainty surrounds the

8 The boards are composed of six members. Four members serve by virtue of their positions in the federal government: the Secretary of the Treasury, who is

the Managing Trustee; the Secretary of Labor; the Secretary of HHS; and the Commissioner of Social Security. The President appoints and the Senate

confirms the other two members to serve as public representatives. These two positions are currently vacant.
NOTES TO THE FINANCIAL STATEMENTS 154

estimates, especially for a period as long as 75 years. To illustrate the range of uncertainty, the Trustees use three alternative

scenarios (low-cost, intermediate, and high-cost) that use specific assumptions. These assumptions include fertility rates,

rates of change in mortality, LPR and other than LPR immigration levels, emigration levels, changes in real GDP, changes in

the CPI, changes in average real wages, unemployment rates, trust fund real yield rates, and disability incidence and recovery

rates. The assumptions used for the most recent set of projections shown above in the Social Security and Medicare

demographic and economic assumption table are generally referred to as the “intermediate assumptions,” and reflect the

Trustees reasonable estimate of expected future experience. For additional information on Social Security and Medicare

demographic and economic assumptions, refer to SSA’s and HHS’s financial statements.

The RRB’s estimated future revenues and expenditures reflected in the SOSI are based on various economic, employment,

and other actuarial assumptions, and assume that the program will continue as presently constructed. For further details on

actuarial assumptions related to the program and how these assumptions affect amounts presented on the SOSI and SCSIA,

consult the Technical Supplement to the 28th Actuarial Valuation of the Assets and Liabilities Under the Railroad Retirement

Acts as of December 31, 2019 and RRB’s financial statements.

The BLDBP significant assumptions used in the projections are the coal excise tax revenue estimates, the tax rate

structure, the number of beneficiaries, life expectancy, federal civilian pay raises, medical cost inflation, and the interest rates

used to discount future cash flows.

Statement of Changes in Social Insurance Amounts

The SCSIA reconciles the change (between the current valuation and the prior valuation) in the PV of estimated future

revenue less estimated future expenditures for current and future participants (the open group measure) over the next 75 years

(except Black Lung which has a rolling 25-year projection period through September 30, 2046). The reconciliation identifies

several components of the changes that are significant and provides reasons for the changes. The following disclosures relate

to the SCSIA including the reasons for the components of the changes in the open group measure during the reporting period

from the end of the previous reporting period for the government’s social insurance programs.

All estimates relating to the Social Security and Medicare Programs in the SCSIA represent values that are incremental

to the prior change. In general, an increase in the PV of net cash flows represents a positive change (improving financing),

while a decrease in the PV of net cash flows represents a negative change (worsening financing). For additional information

regarding the estimates used to prepare the SCSIA, see SSA’s, HHS’S, RRB’s, and DOL’s financial statements.

Assumptions Used for the Components of the Changes

The PV included in the SCSIA are for the current and prior years and are based on various economic as well as

demographic assumptions used for the intermediate assumptions in the Social Security and Medicare Trustees’ Report for

these years. The Social Security and Medicare – Demographic and Economic Assumptions table summarizes these

assumptions for the current year.

PV as of January 1, 2020 and January 1, 2019 are calculated using interest rates from the intermediate assumption of the

2020 and 2019 Trustees’ Reports, respectively. All other PV in this part of the SCSIA are calculated as a PV as of January 1,

2021 and January 1, 2020 respectively.

For the period beginning on January 1, 2020 to the period beginning on January 1, 2021 (current year) and period

beginning on January 1, 2019 to the period beginning on January 1, 2020 (prior year) estimates of the PV of Social Security

and Medicare changes in social insurance amounts due to changing the valuation period, projection base, demographic data

and assumptions, methods, and law are presented using the interest rates under the intermediate assumption of the 2020 and

2019 Trustees’ Report respectively. Since interest rates are an economic estimate and all estimates in the table are

incremental to the prior change, the estimates of the PV of changes in economic and health care assumptions and all other PV

in this part of the SCSIA are calculated using the interest rates under the intermediate assumptions of the 2021 and 2020

Trustees’ Reports, respectively.

Changes in Valuation Period

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

The effect on the 75-year PV of changing the valuation period from the prior valuation period (2020-2094) to the

current valuation period (2021-2095) is measured by using assumptions for the prior valuation and extending them to cover

the current valuation. Changing the valuation period removes small negative estimated net cash flow for 2020, replaces it

with a much larger negative net cash flow for 2095, and measures the PV as of January 1, 2021, one year later. As a result,
155 NOTES TO THE FINANCIAL STATEMENTS

the PV of estimated future net cash flows to decrease by $0.7 trillion and to decrease by $1.5 trillion for Social Security and

Medicare, respectively.

From the period beginning on January 1, 2019 to the period beginning on January 1, 2020

The effect on the 75-year PV of changing the valuation period from the prior valuation period (2019-2093) to the

current valuation period (2020-2094) is measured by using the assumptions for the prior valuation and extending them to

cover the current valuation. Changing the valuation period removes a small negative net cash flow for 2019, replaces it with a

much larger negative net cash flow for 2094, and measures the PV as of January 1, 2020, one year later. As a result, the PV

of the estimated future net cash flows to decrease by $0.6 trillion and to decrease by $1.6 trillion for Social Security and

Medicare, respectively.

Changes in Demographic Data, Assumptions, and Methods

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

For the current valuation (beginning on January 1, 2021), there were two changes to the ultimate demographic

assumptions and an associated change in methodology.

• The ultimate total fertility rate was increased in conjunction with switching from a period-based model to a cohortbased model for birth-rates.

• An additional cause of death category was added, by separating dementia out from the all-other-causes category, and

ultimate mortality improvement rates were updated for cardiovascular disease.

In addition to this ultimate demographic assumption change, the starting demographic values and the way those values

transition to the ultimate assumptions were changed.

• Birth rate data through the third quarter of 2020 indicated somewhat lower birth rates.

• Death rates increased significantly for 2020 and 2021 to account for elevated deaths during the COVID-19

pandemic.

The PVs of estimated income and expenditures are lower for Part A, Part B, and Part D. Overall, changes to these

assumptions caused the PV of the estimated future net cash flows to increase by $0.2 trillion and $1.3 trillion for Social

Security and Medicare, respectively.

From the period beginning on January 1, 2019 to the period beginning on January 1, 2020

For the current valuation (beginning on January 1, 2020), there were two changes to ultimate demographic assumptions

compared to prior valuation (beginning on January 1, 2019).

• The ultimate total fertility rate was lowered.

• The ultimate disability incidence rate was lowered, and the near‐term assumed disability incidence rates are

somewhat lower in the current valuation. (Medicare only)

In addition to this ultimate demographic assumption change, the starting demographic values and the way those values

transition to the ultimate assumptions were changed.

• Final birth rate data for 2018 and the first quarter of 2019 indicated somewhat lower birth rates.

• Incorporating mortality data obtained from the National Center for Health Statistics resulted in higher death rates for

all future years.

• The latest valuation included the impact of TTD on Medicare expenditures.

These changes especially the TTD assumption lowered Medicare expenditures for the current valuation period,

particularly for Part A, and resulted in a large increase in the estimated future net cash flow. For Social Security there were

no notable changes in demographic methodology. Overall, changes to these assumptions caused the PV of the estimated

future net cash flows to decrease by $0.4 trillion and to increase by $3.7 trillion for Social Security and Medicare,

respectively.

Changes in Economic Data, Assumptions, and Methods (Social Security Only)

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

For the current valuation (beginning on January 1, 2021), there were two changes to the ultimate economic assumptions

compared to prior valuation (beginning on January 1, 2020).

• The ultimate average real wage differential increased. Additionally, the real wage differential assumptions for the

first 10 years of the projection period were also increased.

• The ultimate age-sex-adjusted unemployment rate was reduced.

The higher real wage differential and the combined changes to the unemployment assumption and the labor force

methodology both increased the PV of estimated future net cash flows.
NOTES TO THE FINANCIAL STATEMENTS 156

In addition to these changes in ultimate economic assumptions, the starting economic values and the way these values

transition to the ultimate assumptions were changed.

• Near-term interest rates were adjusted downward. Real interest rates are now assumed to be negative for calendar

years 2021 through 2024, with a gradual rise to the ultimate real interest rate.

• The level of potential GDP is assumed to be roughly 1.0 percent lower than the level beginning with the second

quarter 2020.

The changes to near-term interest rate and the starting values and near-term economic growth assumptions decrease the

PV of the estimated future net cash flows.

There were no additional notable changes in economic methodology. Overall, these changes decreased the PV of the

estimated future net cash flows by $1.2 trillion for Social Security.

From the period beginning on January 1, 2019 to the period beginning on January 1, 2020

For the current valuation (beginning on January 1, 2020), there were four changes to the ultimate economic assumptions

compared to prior valuation (beginning on January 1, 2019).

• The ultimate rate of price inflation (CPI for Urban Wage Earners and Clerical Workers) was lowered.

• The ultimate average real-wage differential was decreased. Most of this decrease is due to the repeal of the PPACA

excise tax, the effect of which is accounted for in the “Changes in Law or Policy” section.

• The ultimate age-sex adjusted unemployment rate was reduced, and long-term labor force participation rates were

reduced by age and sex such that projected employment rates remained essentially unchanged.

• The ultimate real interest rate was lowered.

In addition to these changes in ultimate assumptions, the starting economic values and the way these values transition to

the ultimate assumptions were changed. The most notable change was to include a 0.7 percent decrease in the estimated level

of potential GDP for the fourth quarter of 2019 and thereafter.

There were no notable changes in economic methodology. Overall, changes to these assumptions caused the PV of the

estimated future net cash flows to decrease by $1.8 trillion for Social Security.

Changes in Law or Policy

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

For Social Security, between prior valuation and the current valuation one change in policy is expected to have

significant effect on the long-range cost.

• The DACA policy extends indefinitely the ability of those qualifying to remain in the country and work lawfully. A

memorandum was issued on January 20, 2021.

Most of the provisions enacted as part of Medicare legislation since the prior valuation date have little or no impact on

the program. The following provisions did have financial impact.

• The CARES Act (P.L. 116-136, enacted on March 27, 2020) included provisions that affect the HI and SMI

programs.

• The Continuing Appropriations Act, 2021, and Other Extensions Act, (P.L. 116-159, enacted on October 1, 2020)

included provisions that affect the HI and SMI programs.

• The CAA, 2021 (P.L. 116-260, enacted on December 27, 2020) included provisions that affect the HI and SMI

Programs.

• An Act to Prevent Across-the-Board Direct Spending Cuts and for Other Purposes (P.L. 117-7, enacted on April 14,

2021) included provisions that affect the HI and SMI Programs.

Overall, the changes to these laws, regulations, and policies caused the PV of the estimated future net cash flows to

decrease by $0.1 trillion for Social Security and Medicare.

From the period beginning on January 1, 2019 to the period beginning on January 1, 2020

For Social Security, between prior valuation and the current valuation one new law and one new regulation were

enacted that are expected to have significant effects on the long-range cost.

• The PPACA, which was enacted in 2010, specified an excise tax on employer-sponsored group health insurance

premiums above a given level (commonly referred to as the “Cadillac” tax). On December 20, 2019, the PPACA’s

excise tax provision was repealed.

• On February 25, 2020, SSA published a final rule in the Federal Register that eliminates the inability to

communicate in English as an educational category in the disability determination and medical review process.

Most of the provisions enacted as part of Medicare legislation since the prior valuation date had little or no impact on

the program. The following provisions did have a financial impact.
157 NOTES TO THE FINANCIAL STATEMENTS

• The BBA of 2019 (P.L. 116-37, enacted on August 2, 2019) included one provision that affects the HI and SMI

Programs.

• The Future Consolidated Appropriations Act, 2020 (P.L. 116-94, enacted on December 20, 2019) included

provisions that affect HI and SMI programs.

Overall, the changes to these laws, regulations, and policies caused the PV of the estimated future net cash flows to

decrease by $0.3 trillion for Social Security and Medicare.

Changes in Methodology and Programmatic Data (Social Security Only)

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

Several methodological improvements and updates of program-specific data are included in the current valuation

(beginning on January 1, 2021) compared to the prior valuation (beginning on January 1, 2020). The most significant are

identified below.

• The current valuation uses a 10.0 percent sample of all newly entitled worker beneficiaries in a recent year to project

average benefit levels of retired-workers and disabled-workers beneficiaries.

• Recent data and estimates indicated lower near-term and ultimate levels of revenue from taxation of Social Security

benefits than projected.

• The methodology for projecting retroactive benefits for retired workers was improved to better capture the different

rules for workers who become newly entitled prior to normal retirement age versus those who become entitled at or

after normal retirement age.

Overall, changes to these assumptions and methods caused the PV of the estimated future net cash flows to decrease by

$1.2 trillion for Social Security.

From the period beginning on January 1, 2019 to the period beginning on January 1, 2020

Several methodological improvements and updates of program-specific data are included in the current valuation

(beginning on January 1, 2020) compared to the prior valuation (beginning on January 1, 2019). The most significant are

identified below.

• The ultimate disability incidence rate was lowered and near term assumed disability incidence rates are somewhat

lower.

• The current valuation includes an improvement in the long-range model used for projecting the percentage of the

population that has fully-insured status.

• The current valuation uses a 10.0 percent sample of all newly entitled worker beneficiaries in a recent year to project

average benefit levels of retired-worker and disabled-worker beneficiaries.

Overall, changes to these assumptions and methods caused the PV of the estimated future net cash flows to increase by

$0.2 trillion for Social Security.

Changes in Economic and Other Health Care Assumptions (Medicare Only)

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

The economic assumptions used in the Medicare projections are the same as those used for the Social Security program

shown above while the health care assumptions are specific to the Medicare projections. The following health care

assumptions were changed in the current valuation.

• Slightly faster projected spending growth for outpatient services and for physician-administered drugs.

• Higher direct and indirect remuneration and shifts to Medicare Advantage offset higher gross drug prices.

Overall, these changes decreased the PV of the estimated future net cash flows by $3.8 trillion for Medicare.

From the period beginning on January 1, 2019 to the period beginning on January 1, 2020

The economic assumptions used in the Medicare projections are the same as those used for the Social Security program

shown above while the health care assumptions are specific to the Medicare projections. The following health care

assumptions were changed in the current valuation.

• Higher projected spending growth for Medicare Advantage beneficiaries.

• Faster projected growth for Part B drugs.

• Slower overall drug price increases and higher direct and indirect remuneration.

Overall, these changes decreased the PV of the estimated future net cash flows by $5.4 trillion for Medicare.
NOTES TO THE FINANCIAL STATEMENTS 158

Change in Projection Base (Medicare Only)

From the period beginning on January 1, 2020 to period beginning on January 1, 2021

Actual income and expenditures in 2020 were different than what was anticipated when the 2020 Trustees’ Report

projections were prepared. For Part A and Part B income and expenditures in 2020 were lower than anticipated based on

actual experience, mainly due to the impact of the COVID-19 pandemic. Part D was largely unaffected by the pandemic and

total income and expenditures were only slightly higher than the estimated based on actual experience. Actual experience of

the Medicare Trust Funds between January 1, 2020 and January 1, 2021 is incorporated in the current valuation and is more

than projected in the prior valuation. Overall, the net impact of the Part A, B, and D projection base change is an increase in

the estimated future net cash flows by $1.6 trillion for Medicare.

From the period beginning on January 1, 2019 to the period beginning on January 1, 2020

Actual income and expenditures in 2019 were different than what was anticipated when the 2019 Trustees’ Report

projections were prepared. Part A income and expenditures in 2019 were lower than anticipated based on actual experience.

For both Part B and Part D, total income and expenditures were higher than estimated based on actual experience. The net

impact of the Part A, B, and D projection base changes is an increase of $401.0 billion in the PV of the estimated future net

cash flows, including combined trust fund assets. Actual experience of the Medicare Trust Funds between January 1, 2019

and January 1, 2020 is incorporated in the current valuation and is more than projected in the prior valuation. Overall, the net

impact of the Part A, B, and D projection base change is an increase in the estimated future net cash flows by $0.1 trillion for

Medicare.