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SESSION 001

Social Security and Medicare:

State of the Systems

Tim Sullivan, FCA, ASA

Lead Director Business Consulting, Medicare Duals

Aetna

Session Host Moderator

Ellen Kleinstuber, FCA, FSA, EA, MAAA

Principal, Chief Actuary

Bolton

@EllenKActuary
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are prohibited from engaging in any action which unreasonably restrains commerce or trade (i.e., competition). Per se violations 

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divide markets, to allocate production, or to impose boycotts. In essence, this means any concerted action that significantly

diminishes rivalry among competing firms.
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Disclaimer

The views expressed during this session are those of the individual 

presenter and do not necessarily represent the views of the Conference of 

Consulting Actuaries, any federal government agency, the employer of 

any panelists participating in this program, or those of any other panelist.
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Speakers

Stephen C. Goss, ASA, MAAA

Chief Actuary

Social Security Administration

@SocialSecurity

Frank Todisco, FCA, FSA, EA, MAAA

Chief Actuary

Government Accountability Office

@USGAO

Craig Rosenthal, FCA, FSA, EA, MAAA

Partner

Mercer

@Mercer_US

Dale Yamamoto, FCA, MAAA

Owner

Red Quill Consulting
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Steve Goss

Social Security Administration

Current State of Social Security
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The Current Financial/Actuarial Status of the OASDI Trust Funds:

Cost Is Rising as Percent of Payroll from 2010 to 2035; Birth Rates

Combined trust fund reserves projected to become depleted in 2034; 2033-35 for last 12 years
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But Wait—After the 1983 Amendments, the 1983 Trustees 

Report Projected Reserve Depletion in the Mid-2050’s...

• Lower birth rates were anticipated in 1983, and mortality 

projections were extremely accurate

• So over 80% of worsening in projections since 1983 TR was due 

to unanticipated economic experience

– Redistribution of earnings from 1983 to 2000 reduced taxable 

payroll, and payroll tax revenue, by 8%

– Depth of 2007-09 recession and slow recovery reduced employment 

and tax revenue
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Earnings “Dispersion” 

Between 1983 and 

2000 Lowered the 

Percent of Earnings 

Taxable from 90% to 

82.5%

Overall, average earnings 

increased more than expected, 

but real growth was 62% for 

the top 6% of workers, while 

only 17% for lower 94% of 

workers.
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The Reduced Share of Earnings Subject to Payroll Tax Explains Most of the 

Increase in Cost as Percent of Payroll, Compared to the Projection in 1983

But the depth of the 

2007-09 recession 

and slow recovery 

further reduced 

expected trust fund 

accumulation 

through 2019
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Mortality Experience: 

Ages 65 and Older:

Increased mortality in the nearterm to reflect the effects of the 

COVID-19 pandemic.

What will the net effect of the 

pandemic be on mortality in the 

future?

We assume offsetting effects for 

the residual population after the 

pandemic. 4,000

4,200

4,400

4,600

4,800

5,000

5,200

5,400

5,600

5,800

6,000

1990 1995 2000 2005 2010 2015 2020 2025

Age-Sex-Adjusted Death Rates (per 100,000)

Ages 65 and Older

2014TR

2017TR

2021TR

2022TR

2023TR

Actual
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Ratio of Age-Sex 

Adjusted Death Rates 

to Same Quarter in 

2019

Death rates for causes other 

than COVID have been about 

5% higher in the pandemic 

period through 2022 than they 

were in 2019.

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3

Ratio of Age-Sex-Adjusted Death Rates to Same Quarter in 2019 

Total: all causes

Total excluding 

COVID-19

Source: NCHS Quarterly Provisional Estimates as of March 20, 2023
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So, by 2034, We Need to Reduce Scheduled Benefits by OneFourth or Increase Revenue by One-Third

• Lower scheduled benefits:

– Increase NRA? Lower for retirees but not disabled; consider less increase for 

long-career workers at low-pay levels, similar to Simpson/Bowles 2010

– Chain-weighted CPI for COLA? Arguably “more accurate” for those with 

high income who shift consumption across non-substitutable goods and services

• Increase scheduled revenue:

– Raise the 12.4% tax rate or apply to some or all earnings above the current 

taxable maximum

– Take advantage of returns on private-sector investments—invest trust fund 

reserves, or tax investment income as in the 2010 ACA
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Benefit Replacement Rates for Retirees at Age 65 

Percent of late-career earnings (about the same as best 35 wage-indexed)

Note using 35-year CPI-indexed ignores increasing standard of living
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Current Law Scheduled Taxes and Benefits

But If Reduce Benefits 25% 

(or Increase Taxes 33%) for All 

Money’s Worth Ratios: Ratio of Present Value of Lifetime 

Benefits to Lifetime Payroll Tax 

Discounting at long-term US Treasury yields

Based on: Recurring Actuarial Note #7: www.ssa.gov/OACT/NOTES/ran7/
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What Is The Projected Cost of OASDI and Medicare as A Share of GDP?

Under current law, both rise similarly to 6 percent of GDP 

The Trustees also illustrate that Medicare would increase further without ACA
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How About National Health Expenditures?

How do we compare to other countries? Currently double per capita

Will NHE really continue rising from 18% to 30% or more of GDP?

From Living to 100 Conference January 2023, 

by Assia Billig, Chief Actuary, OSIF Canada

From AEI Roundtable September 22, 2023,

By Paul Spitalnic, Chief Actuary CMS
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A Note on Projected Federal Debt Held by the Public

Administration and CBO projections are VERY different—but both assume change in law to 

fully finance OASDHI by borrowing from the public after trust fund reserve depletion

In fact, trust funds cannot borrow and reserves even REDUCE borrowing from the public
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Appendix: Demographic Trends Affecting the Systems

• Employment

• Social Security retirement/commencement age

• Disability
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Ratio of Employment 

to Population

Recovered strongly from the 

brief but steep 2020 recession.

After the assumed slowdown in 

growth in 2023, the ratio is 

projected to return to about the 

peak level in 2019.
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Age of Starting Social Security Retirement Benefits
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Disability Incidence 

Rate Also Remains 

Historically Low

DI disabled worker incidence 

rate rose sharply in the 2008 

recession, and has declined 

since the peak in 2010 to 

extraordinarily low levels in 

2016 through 2022.

What will be the NET effect of 

COVID and post-COVID 

conditions?