## Status of the Social Security and Medicare Programs

- Office of the Chief Actuary
- 2022 Trustees Report
- Actuarial Publications

## A SUMMARY OF THE 2022 ANNUAL REPORTS

Each year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs. The Trustees Reports include extensive information about the current operations of these important social insurance programs and careful analysis of their outlook. We believe the reports fully and fairly present the current and projected financial condition of the programs. This summary of the 2022 reports presents results based on the intermediate set of assumptions, which represents our best estimates of likely future demographic, economic, and program-specific conditions.1 

Social Security and Medicare both face long-term financing shortfalls under currently scheduled benefits and financing. Costs of both programs will grow faster than gross domestic product (GDP) through the mid-2030s primarily due to the rapid aging of the U.S. population. Medicare costs will continue to grow faster than GDP through the late 2070s due to projected increases in the volume and intensity of services provided.        

The projections presented include our best estimates of the effects of the COVID-19 pandemic. Economic recovery from the 2020 recession has been stronger and faster than assumed in last year's reports, with positive effects on the projected actuarial status of the trust funds in these reports.        

At this time, there is no consensus among experts on the lasting effects of the COVID-19 pandemic. We currently assume that the pandemic will have no net effect on our long-range projections.  In addition, the assumptions for this report were determined in mid-February 2022. Developments since then have added to the uncertainty regarding the path of the COVID-19 pandemic and the economy in the near-term. The Trustees will continue to monitor these and any future developments and modify the projections in later reports as appropriate.         

Based on our best estimates, the 2022 reports determine:        

•		The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034, one year later than reported last year. At that time, the fund's reserves will become depleted and continuing tax income will be sufficient to pay 77 percent of scheduled benefits.       

•		The Disability Insurance (DI) Trust Fund, which pays disability benefits, is no longer projected to be depleted within the 75-year projection period. By comparison, last year's report projected that it would be able to pay scheduled benefits only until 2057.       

•		The OASI and DI funds are separate entities under law. The report also presents information that combines the reserves of these two funds in order to illustrate the actuarial status of the Social Security program as a whole. The hypothetical combined OASI and DI funds would be able to pay scheduled benefits on a timely basis until 2035, one year later than reported last year. At that time, the combined funds' reserves will become depleted and continuing tax income will be sufficient to pay 80 percent of scheduled benefits.      

•		The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028, two years later than reported last year. At that time, the fund's reserves will become depleted and continuing total program income will be sufficient to pay 90 percent of total scheduled benefits.      

•		The Supplemental Medical Insurance (SMI) Trust Fund is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year's expected costs. Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries.       

•		For the sixth consecutive year, the Trustees are issuing a determination of projected excess general revenue Medicare funding, as is required by law whenever annual tax and premium revenues of the combined Medicare funds will be below 55 percent of projected combined annual outlays within the next 7 fiscal years. Under the law, two such consecutive determinations of projected excess general revenue consitute a "Medicare funding warning." Under current law and the Trustees' projections, such determinations and warnings will recur every year through the 75-year projection period.      

Key Changes Since Last Year

The long-range 75-year actuarial deficit of the combined OASI and DI trust funds decreased from 3.54 to 3.42 percent of taxable payroll since the 2021 reports.2  As shown in Table 1, this result was due to the combined effects of changes in methodology, legislation, regulation, economic, demographic, and programmatic assumptions, and recent observed experience. The following changes had the largest effects on the actuarial deficit.      

•		One long-range ultimate assumption was changed. The disability incidence rate was reduced from 5.0 to 4.8 per thousand individuals who meet insured requirements but who are not receiving benefits, reflecting that program applications and incidence rates have continued to decline in recent years from a peak in 2010.    

•		Changes were made to near-term demographic data and assumptions to reflect updated birth and immigration data and to better reflect the expected effects of the recovery from the pandemic.    

•		Changes were made to near-term economic data and assumptions reflecting that the recovery of employment, earnings, and GDP from the 2020 recession has been faster and stronger than projected in last year's report, resulting in higher payroll tax receipts and higher revenue from income taxation of Social Security benefits. Real interest rates are projected to be slightly higher in the near term, lowering the present value of projected future deficits.    

•		The 75-year valuation period advanced from 2021-95 to 2022-96.	
| Item                                                         | OASI  | DI    | OASDI |
|--------------------------------------------------------------|-------|-------|-------|
| Actuarial balance shown in the 2021 Report                   | -3.46 | -0.08 | -3.54 |
|    Changes in actuarial balance due to changes in: |       |       |       |       Legislation / Regulation | .00 | .00 | .00 |
|       Valuation period                   | -.05  | -.01  | -.06  |
|       Demographic data and assumptions   | -.04  | .00   | -.04  |
|       Economic data and assumptions      | .13   | .00   | .13   |
|       Disability data and assumptions    | .00   | .08   | .07   |
|       Methods and programmatic data      | .01   | .00   | .01   |
|    Total change in actuarial balance               | .05   | .07   | .12   |