Status of the 

Social Security 

and Medicare 

Programs

A SUMMARY OF THE

2018 ANNUAL REPORTS

Social Security and Medicare

Boards of Trustees

2018
The Social Security and Medicare Trustees Reports, as well as

this document, are available at the following addresses:

Social Security (OASDI): www.ssa.gov/OACT/TR/2018/

Medicare (HI and SMI): www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/

Summary: www.ssa.gov/OACT/TRSUM/

Other information about Social Security benefits and services is available at

www.ssa.gov or by calling toll-free 1-800-772-1213.

Other information about Medicare benefits and services is available at

www.cms.gov or by calling toll-free 1-800-633-4227.
A MESSAGE TO THE PUBLIC:

Each year the Trustees of the Social Security and Medicare trust funds 

report on the current and projected financial status of the two programs. 

This message summarizes the 2018 Annual Reports.

Both Social Security and Medicare face long-term financing shortfalls 

under currently scheduled benefits and financing. Lawmakers have a 

broad continuum of policy options that would close or reduce the longterm financing shortfall of both programs. The Trustees recommend that 

lawmakers take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more 

time will be available to phase in changes while giving the public adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income 

workers and people already dependent on program benefits.

Social Security and Medicare together accounted for 42 percent of Federal program expenditures in fiscal year 2017. The unified budget reflects 

current trust fund operations. Consequently, even when there are positive 

trust fund balances, any drawdown of those balances, as well as general 

fund transfers into Medicare’s Supplementary Medical Insurance (SMI) 

fund and interest payments to the trust funds that are used to pay benefits, 

increase pressure on the unified budget. Both Social Security and Medicare will experience cost growth substantially in excess of GDP growth 

through the mid-2030s due to rapid population aging caused by the large 

baby-boom generation entering retirement and lower-birth-rate generations entering employment. For Medicare, it is also the case that growth 

in expenditures per beneficiary exceeds growth in per capita GDP over 

this time period. In later years, projected costs expressed as a share of 

GDP rise slowly for Medicare and are relatively flat for Social Security, 

reflecting very gradual population aging caused by increasing longevity 

and slower growth in per-beneficiary health care costs.

Social Security

The Social Security program provides workers and their families with 

retirement, disability, and survivors insurance benefits. Workers earn 

these benefits by paying into the system during their working years. Over 

the program’s 83-year history, it has collected roughly $20.9 trillion and 
paid out $18.0 trillion, leaving asset reserves of $2.9 trillion at the end of 

2017 in its two trust funds. 

The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays 

retirement and survivors benefits, and the Disability Insurance (DI) Trust 

Fund, which pays disability benefits, are by law separate entities. However, to summarize overall Social Security finances, the Trustees have traditionally emphasized the financial status of the hypothetical combined 

OASI and DI Trust Funds. The combined funds—designated OASDI—satisfy the Trustees’ test of short-range (ten-year) financial adequacy 

because the Trustees project that the combined fund asset reserves at the 

beginning of each year will exceed that year’s projected cost throughout 

the short-range projection period. However, the funds fail the test of longrange close actuarial balance.

The Trustees project that the combined trust funds will be depleted in 

2034, the same year projected in last year’s report. The projected 75-year 

actuarial deficit for the OASDI Trust Funds is 2.84 percent of taxable 

payroll, up slightly from 2.83 percent projected in last year’s report. This 

deficit amounts to 1.0 percent of GDP over the 75-year time period, or 

21 percent of program non-interest income, or 17 percent of program 

cost. A 0.06 percentage point increase in the OASDI actuarial deficit 

would have been expected if nothing had changed other than the one-year 

shift in the valuation period from 2017 through 2091 to 2018 through 

2092. The effects of updated demographic, economic, and programmatic 

data, and improved methodologies, collectively reduced the actuarial 

deficit by 0.04 percent of taxable payroll, offsetting most of the effect of 

changing the valuation period.

Considered separately, the DI Trust Fund reserves become depleted in 

2032 and the OASI Trust Fund reserves become depleted in 2034. In last 

year’s report, the projected reserve depletion years were 2028 for DI and 

2035 for OASI. The change in the reserve depletion date for DI is largely 

due to continuing favorable experience for DI applications and benefit 

awards. In addition, average benefit levels for disabled-worker beneficiaries were lower than expected in 2017, and are expected to be lower in the 

future. Disability applications have been declining steadily since 2010, 

and the total number of disabled-worker beneficiaries in current payment 

status has been falling since 2014. The Trustees assume that the recent 
favorable experience with DI applications and awards is temporary, and 

that by 2027 DI incidence rates will return to levels projected in last 

year’s report. Accordingly, the projected 75-year actuarial deficit 

(0.21 percent of taxable payroll) for DI is little changed from last year 

(0.24 percent).

Social Security’s total cost is projected to exceed its total income (including interest) in 2018 for the first time since 1982, and to remain higher 

throughout the projection period. Social Security’s cost will be financed 

with a combination of non-interest income, interest income, and net 

redemptions of trust fund asset reserves from the General Fund of the 

Treasury until 2034 when the OASDI reserves will be depleted. Thereafter, 

scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 

2092. The ratio of reserves to one year’s projected cost (the combined 

trust fund ratio) peaked in 2008, generally declined through 2017, and is 

expected to decline steadily until the trust fund reserves are depleted 

in 2034.

Under current projections, the annual cost of Social Security benefits 

expressed as a share of workers’ taxable earnings will grow from 

13.7 percent in 2017 to roughly 16.8 percent in 2039, and will then 

decline slightly before slowly increasing after 2051. Expressed as a share 

of GDP, program costs equaled 4.9 percent of GDP in 2017, and the 

Trustees project these costs will increase to 6.1 percent of GDP by 2038, 

decline to 5.9 percent of GDP by 2052, and thereafter rise slowly, reaching 6.1 percent by 2092. 

Medicare 

The Medicare program has two separate trust funds, the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) 

Trust Fund. HI, otherwise known as Medicare Part A, helps pay for hospital, home health services following hospital stays, skilled nursing facility, 

and hospice care for the aged and disabled. SMI consists of separate 

accounts for Medicare Part B and Part D. Part B helps pay for physician, outpatient hospital, home health, and other services for the aged 

and disabled who have voluntarily enrolled. Part D provides subsidized 

access to drug insurance coverage on a voluntary basis for all beneficia-
ries, as well as premium and cost-sharing subsidies for low-income 

enrollees.

The Trustees project that the HI Trust Fund will be depleted in 2026, three 

years earlier than projected in last year’s report. At that time dedicated 

revenues will be sufficient to pay 91 percent of HI costs. The Trustees project that the share of HI cost that can be financed with HI dedicated revenues will decline slowly to 78 percent in 2039, and will then rise 

gradually to 85 percent in 2092. The HI fund again fails the test of shortrange financial adequacy, as its trust fund ratio is already below 

100 percent of annual costs, and is expected to decline continuously until 

reserve depletion in 2026.

The HI Trust Fund’s projected 75-year actuarial deficit is 0.82 percent of 

taxable payroll, which represents 0.4 percent of GDP through 2092, or 

21 percent of non-interest income, or 17 percent of program cost. This 

estimate is up from 0.64 percent of taxable payroll projected in last year’s 

report. Shifting the valuation period forward one year to 2018 through 

2092 increased the actuarial deficit expressed as a share of taxable payroll by 0.01 percentage point. The remaining 0.17 percentage point 

increase in the actuarial deficit was primarily due to lower projected payroll tax income, higher expenditures in 2017, higher payments to Medicare Advantage plans, and legislation that increased expenditures.

For SMI, the Trustees project that both Part B and Part D will remain 

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. However, the aging population and rising health care costs cause SMI projected costs to grow 

steadily from 2.1 percent of GDP in 2017 to approximately 3.6 percent of 

GDP in 2037, and to then increase more slowly to 3.9 percent of GDP by 

2092. General revenues will finance roughly three-quarters of SMI costs, 

and premiums paid by beneficiaries almost all of the remaining quarter. 

SMI also receives a small amount of financing from special payments by 

States, and from fees on manufacturers and importers of brand-name prescription drugs. 

The Trustees project that total Medicare costs (including both HI and SMI 

expenditures) will grow from approximately 3.7 percent of GDP in 2017 
to 5.8 percent of GDP by 2038, and then increase gradually thereafter to 

about 6.2 percent of GDP by 2092.

Since 2008, national health expenditure (NHE) growth has been below 

historical averages, although recently it is again outpacing growth of the 

economy. There is uncertainty regarding the degree to which this slowdown reflects the impacts of the recent economic downturn and other nonpersistent factors, as opposed to structural changes in the health care sector that may continue to produce cost savings in the years ahead. It is possible that U.S. health care practices are becoming more efficient as new 

payment models develop and providers anticipate less rapid growth of 

reimbursement rates in both the public and private sectors than has 

occurred during the past several decades.

For a number of years, the Trustees’ methodology for projecting Medicare 

finances over the long term has assumed a substantial reduction in per 

capita health expenditure growth rates relative to historical experience. 

In addition, the Trustees have in several recent Trustees Reports revised 

down the projections for near-term Medicare expenditure growth in light 

of the recent favorable experience, in part due to effects of payment 

changes and delivery system reform that are changing health care practices. The Trustees have not assumed additional long-term cost growth 

reductions arising from structural changes in the delivery system that may 

result from new payment mechanisms in the Medicare Access and CHIP 

Reauthorization Act of 2015 and the cost-reduction incentives in the 

Affordable Care Act, or from payment reforms initiated by the private

sector.

Notwithstanding the assumption of a substantial slowdown of per capita 

health expenditure growth, the projections indicate that Medicare still 

faces a substantial financial shortfall that will need to be addressed with 

further legislation. Such legislation should be enacted sooner rather than 

later to minimize the impact on beneficiaries, providers, and taxpayers.

Conclusion 

Lawmakers have many policy options that would reduce or eliminate the 

long-term financing shortfalls in Social Security and Medicare. Lawmakers should address these financial challenges as soon as possible. Taking 

action sooner rather than later will permit consideration of a broader 
range of solutions and provide more time to phase in changes so that the 

public has adequate time to prepare.

By the Trustees:

STEVEN T. MNUCHIN, Secretary of the Treasury,

and Managing Trustee 

of the Trust Funds.

R. ALEXANDER ACOSTA, Secretary of Labor,

and Trustee.

ALEX M. AZAR II

Secretary of Health 

and Human Services,

and Trustee.

NANCY A. BERRYHILL, Acting Commissioner 

of Social Security,

and Trustee.
1

A SUMMARY OF THE 2018 ANNUAL SOCIAL SECURITY

AND MEDICARE TRUST FUND REPORTS

In 2017, Social Security’s reserves increased by $44 billion to reach 

$2.9 trillion by the year’s end. Under the intermediate assumptions, the 

Disability Insurance (DI) Trust Fund will be able to pay full benefits until 

2032, four years later than projected in last year’s Social Security report. 

The improved outlook is due to lower projected disability incidence rates 

in the near term and lower average benefit levels for disabled workers 

awarded in 2017 and thereafter. The Old-Age and Survivors Insurance 

(OASI) Trust Fund is able to pay full benefits until 2034, one year earlier 

than projected in last year’s report. The projected depletion date for the 

combined OASDI funds1 remains 2034, as reported last year. Over the 

75-year projection period, Social Security faces an actuarial deficit of 

2.84 percent of taxable payroll, up from the 2.83 percent figure projected 

last year. The actuarial deficit equals 1.0 percent of GDP through 2092.

Reserves in Medicare’s Hospital Insurance (HI) Trust Fund increased by 

$2.8 billion to a total of $202.0 billion at the end of 2017. The Trustees 

project that the HI Trust Fund will be able to pay full benefits until 2026, 

three years earlier than indicated in last year’s Medicare report. The 

changed outlook is attributable to adverse changes in both program 

income and costs. HI income is projected to be lower than last year’s estimates due to (i) lower payroll taxes attributable to lowered wages in 2017 

and lower levels of projected GDP and (ii) reduced income from the taxation of Social Security benefits as a result of legislation. HI expenditures 

are expected to be higher than last year’s estimates due to higher-thananticipated spending in 2017, legislation that increases hospital spending, 

and higher Medicare Advantage payments. The HI actuarial deficit is 

0.82 percent of taxable payroll over the 75-year projection period, 0.18 

percentage point larger than projected in last year’s report, and equivalent 

to 0.4 percent of GDP through 2092. The Supplementary Medical Insurance (SMI) Trust Fund held $88 billion in assets at the end of 2017 and is 

expected to be adequately financed over the next 10 years and beyond 

because premium income and general revenue income are reset each year 

to cover expected costs and ensure a reserve for Part B contingencies. 

What Are the Trust Funds? Congress established trust funds managed 

by the Secretary of the Treasury to account for Social Security and Medicare income and disbursements. The Treasury credits Social Security and 

Medicare taxes, premiums, and other income to the funds. There are four 

separate trust funds. For Social Security, the OASI Trust Fund pays retire1 OASDI is the designation for the two trust funds when they are considered on a hypothetical combined basis to illustrate the actuarial status of the program as whole. The OASI and DI Trust Funds 

are distinct legal entities which operate independently.
2

ment and survivors benefits and the DI Trust Fund pays disability benefits. For Medicare, the HI Trust Fund pays for inpatient hospital and 

related care. The SMI Trust Fund comprises two separate accounts: 

Part B, which pays for physician and outpatient services, and Part D, 

which covers prescription drug benefits.

The only disbursements permitted from the funds are benefit payments 

and administrative expenses. Federal law requires that all excess funds be 

invested in interest-bearing securities backed by the full faith and credit of 

the United States. The Department of the Treasury currently invests all 

program revenues in special non-marketable securities of the U.S. Government which earn interest equal to rates on marketable securities with 

durations defined in law. The balances in the trust funds, which represent 

the accumulated value, including interest, of all prior program annual surpluses and deficits, provide automatic authority to pay benefits.

What Were the Trust Fund Operations in 2017? In 2017, 51.5 million 

people received OASI benefits, 10.4 million received DI benefits, and 

58.4 million were covered under Medicare. A summary of Social Security 

and Medicare trust fund operations is shown below (Table 1). The OASI, 

DI, and HI Trust Funds asset reserves increased in 2017; SMI Trust Fund 

reserves declined by $8 billion.2

Table 2 shows payments, by category, from each trust fund in 2017.

2 In order to limit Part B premium increases for the 30 percent of beneficiaries ineligible for the holdharmless provision, 2017 financing was set to target a lower contingency reserve. For 2018, Part B 

rates have been set to restore assets to an adequate level. 

Table 1: TRUST FUND OPERATIONS, 2017

[In billions]

OASI DI HI SMI

Reserves (end of 2016) . . . . . . . . $2,801.3 $46.3 $199.1 $95.6

Income during 2017 . . . . . . . . . . 825.6 171.0 299.4 405.7

Cost during 2017. . . . . . . . . . . . . 806.7 145.8 296.5 413.6

Net change in reserves . . . . . . 19.0 25.1 2.8 -7.9

Reserves (end of 2017) . . . . . . . . 2,820.3 71.5 202.0 87.7

Notes: Totals do not necessarily equal the sum of rounded components.

Table 2: PROGRAM COST, 2017

[In billions]

Category OASI DI HI SMI

Benefit payments . . . . . . . . . . . . $798.7 $142.8 $293.3 $408.7

Railroad Retirement financial 

interchange . . . . . . . . . . . . . . . 4.3 0.2 — —

Administrative expenses . . . . . . 3.7 2.8 3.2 4.9

Total . . . . . . . . . . . . . . . . . . . . . . 806.7 145.8 296.5 413.6

Notes: Totals do not necessarily equal the sum of rounded components.
3

Trust fund income, by source, in 2017 is shown in Table 3.

In 2017, Social Security’s total income exceeded total cost by $44 billion, 

but when interest received on trust fund assets is excluded from program 

income, there was a deficit of $41 billion. The Trustees now project that 

total cost will exceed total income (including interest) beginning in 2018 

and continuing throughout the long-range period (2018-92).

In 2017, the HI Trust Fund’s total income, consisting of $292 billion in 

non-interest income and $7 billion in interest income (Table 3), exceeded 

program expenditures ($297 billion). The Trustees project that HI tax 

income and other dedicated revenues will fall short of expenditures in all 

future years. For SMI, general revenues, which are set prospectively 

based on projected costs, are the largest source of income.

What Is the Outlook for Future Social Security and Medicare Costs 

in Relation to GDP? One instructive way to view the projected costs of 

Social Security and Medicare is to compare the costs of scheduled benefits and administrative expenses for the programs with the gross domestic 

product (GDP), the most frequently used measure of the total output of 

the U.S. economy (Chart A).

Under the intermediate assumptions employed in the reports, the costs of 

these programs as a percentage of GDP increase substantially through 

about 2035 because: (1) the number of beneficiaries rises rapidly as the 

baby-boom generation retires; and (2) the lower birth rates that have persisted since the baby boom cause slower growth of the labor force and 

GDP.

Social Security’s annual cost as a percentage of GDP is projected to 

increase from 4.9 percent in 2018 to about 6.1 percent by 2038, then 

decline to 5.9 percent by 2052 before generally rising to 6.1 percent of 

GDP by 2092. Under the intermediate assumptions, Medicare cost rises 

from 3.7 percent of GDP in 2018 to 5.6 percent of GDP by 2035 due

mainly to the growth in the number of beneficiaries, and then increases 

Table 3: PROGRAM INCOME, 2017

[In billions]

Source OASI DI HI SMI

Payroll taxes . . . . . . . . . . . . . . . $706.5 $167.1 $261.5 —

Taxes on OASDI benefits . . . . . 35.9 2.0 24.2 —

Interest earnings . . . . . . . . . . . . 83.2 1.9 7.4 $2.4

General Fund reimbursements . a a 1.3 -2.0

General revenues. . . . . . . . . . . . — — — 292.5

Beneficiary premiums . . . . . . . . — — 3.5 97.0

Transfers from States. . . . . . . . . — — — 11.4

Other . . . . . . . . . . . . . . . . . . . . . a — 1.5 4.5

Total. . . . . . . . . . . . . . . . . . . . . . 825.6 171.0 299.4 405.7

Notes: Totals do not necessarily equal the sum of rounded components. a Less than $50 million.
4

further to 6.2 percent by 2092. The growth in health care cost per beneficiary becomes the larger factor later in the valuation period, particularly 

in Part D.

In 2018, the combined cost of the Social Security and Medicare programs 

is estimated to equal 8.6 percent of GDP. The Trustees project an increase 

to 11.7 percent of GDP by 2035 and to 12.3 percent by 2092, with most of 

these increases attributable to Medicare. Medicare’s annual relative cost is 

expected to rise gradually from 75 percent of the cost of Social Security 

in 2018 to be approximately equal from 2050 through 2092. 

The projected costs for OASDI and HI depicted in Chart A and elsewhere 

in this document reflect the full cost of scheduled current-law benefits 

without regard to whether the trust funds will have sufficient resources to 

meet these obligations. Current law precludes payment of any benefits 

beyond the amount that can be financed by the trust funds, that is, from 

annual income and trust fund reserves. In years after trust fund depletion, 

the amount of benefits that would be payable is lower than shown because 

OASDI and HI, by law, cannot borrow money or pay benefits that exceed 

the asset reserves in their trust funds. The projected costs assume realization of the full estimated savings of the Affordable Care Act and the physician payment rate updates specified in the Medicare Access and CHIP 

Reauthorization Act (MACRA) of 2015. As described in the Medicare 

Trustees Report, the projections for HI and SMI Part B depend significantly on the sustained effectiveness of various current-law cost-saving 

 Chart A–Social Security and Medicare Cost as a Percentage of GDP

0%

2%

4%

6%

8%

10%

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

OASI + DI

HI + SMI (including Part D)

Historical Estimated
5

measures, in particular, the lower increases in Medicare payment rates to 

most categories of health care providers.

What Is the Outlook for Future Social Security and Medicare HI 

Costs and Income in Relation to Taxable Earnings? Because the primary source of income for OASDI and HI is the payroll tax, it is informative to express the programs’ incomes and costs as percentages of taxable 

payroll—that is, of the base of worker earnings taxed to support each program (Chart B).

It is important to understand that the two programs have different taxable 

payrolls. HI taxable payroll is about 25 percent larger than that of OASDI 

because the HI payroll tax is imposed on all earnings while OASDI taxes 

apply only to earnings up to a maximum ($128,400 in 2018), which ordinarily is adjusted each year. Thus, the percentages in Chart B are comparable within each program, but not across programs.

Both the OASDI and HI annual cost rates rise over the long run from their 

2017 levels (13.69 and 3.45 percent). Projected Social Security cost 

grows to 16.83 percent of taxable payroll in 2039 and to 17.68 percent of 

taxable payroll in 2092. The projected Medicare HI cost rate rises to 

5.00 percent of taxable payroll in 2050, and thereafter increases to 

5.16 percent in 2092.

 Chart B–OASDI and HI Income and Cost as Percentages 

of Their Respective Taxable Payrolls

0%

5%

10%

15%

20%

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Income rates

Cost rates

Historical Estimated

OASDI

HI
6

The OASDI and HI income rates in Chart B include payroll taxes and 

taxes on OASDI benefits, but not interest payments. The projected 

OASDI income rate is stable at about 13 percent throughout the longrange period. The HI income rate rises gradually from 3.36 percent in 

2017 to 4.41 percent in 2092 due to the Affordable Care Act’s increase in 

payroll tax rates for high earners that began in 2013. Individual tax return 

filers with earnings above $200,000, and joint return filers with earnings 

above $250,000, pay an additional 0.9 percent tax on earnings above 

these earnings thresholds. An increasing fraction of all earnings will be 

subject to the higher tax rate over time because the thresholds are not 

indexed. By 2092, an estimated 79 percent of workers would pay the 

higher rate.

How Will Cost Growth in the Different Parts of Medicare Change the 

Sources of Program Financing? As Medicare cost grows over time, 

general revenues and beneficiary premiums will play an increasing role in 

financing the program. Chart C shows scheduled cost and non-interest 

revenue sources under current law for HI and SMI combined as a percentage of GDP. The total cost line is the same as displayed in Chart A and 

shows Medicare cost rising to 6.2 percent of GDP by 2092.

Projected revenue from payroll taxes and taxes on OASDI benefits credited to the HI Trust Fund increases from 1.4 percent of GDP in 2018 to 

1.9 percent in 2092 under current law, while projected general revenue 

 Chart C–Medicare Cost and Non-Interest Income by Source

as a Percentage of GDP

0%

1%

2%

3%

4%

5%

6%

7%

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Historical Estimated

Payroll Taxes

Premiums

General Revenue

Transfers

Tax on OASDI Benefits

Total Non-Interest Income

Total Cost

State Transfers & Drug Fees

Deficit
7

transfers to the SMI Trust Fund increase from 1.6 percent of GDP in 2018 

to 2.8 percent in 2092, and beneficiary premiums increase from 0.6 to 

1.0 percent of GDP during the same period. Thus, the share of total noninterest Medicare income from taxes declines (from 39 percent to

32 percent) while the general revenue share rises (from 43 percent to 

48 percent), as does the share of premiums (from 15 percent to 

17 percent). The distribution of financing changes in large part because 

costs for Part B and especially Part D—the Medicare components that are 

financed mainly from general revenues—increase at a faster rate than 

Part A cost under the Trustees’ projections. The projected annual HI 

financial deficit beyond 2035 through 2092 averages about 0.4 percent of 

GDP and there is no provision under current law to finance that shortfall 

through general revenue transfers or any other revenue source.

The Medicare Modernization Act of 2003 (MMA) requires that the Board 

of Trustees determine each year whether the annual difference between 

program cost and dedicated revenues (the bottom four layers of Chart C) 

under current law exceeds 45 percent of total Medicare cost in any of the 

first seven fiscal years of the 75-year projection period. The Trustees 

Reports for 2006 through 2013, and again in 2017, contained a determination of “excess general revenue Medicare funding.” Because the current 

projected difference is expected to exceed the 45 percent threshold in fiscal year 2022, the Trustees are issuing a determination of projected excess 

general revenue Medicare funding in this year’s report. Since this is the 

second consecutive report in which the Trustees have made that determination, a “Medicare funding warning” is triggered and the MMA requires 

that the President submit to Congress proposed legislation to respond to 

the warning within 15 days after the submission of the Fiscal Year 2020 

Budget. Congress is then required to consider the legislation on an 

expedited basis.

What Are the Budgetary Implications of Rising Social Security and 

Medicare Costs? Discussion of the long-range financial outlook for 

Medicare and Social Security often focuses on the depletion dates for the 

HI and OASDI trust funds—the times when the projected trust fund balances under current law will be insufficient to pay the full amounts of 

scheduled benefits. Normal operations of the trust funds also have an 

impact on the unified Federal budget.

Under the OASDI and HI programs, when taxes and other sources of revenue are collected in excess of immediate program costs, funds are converted to Treasury bonds and held in reserve for future periods. 

Accumulation of assets in the trust funds improves the unified Federal 

budget position. When trust fund assets are drawn down to pay scheduled 

benefits, bonds are redeemed and interest payments are made, creating a 

current-year cost to the unified Federal budget. 
8

Unlike HI and OASDI, SMI does not have a trust fund structure with surpluses accumulated from prior years. General revenues finance roughly 

75 percent of all SMI costs and pose an immediate cost for the unified 

Federal budget.

Chart D shows the required SMI general revenue funding, plus the excess 

of scheduled costs over dedicated tax and premium income for the 

OASDI and HI trust funds expressed as percentages of GDP through 

2042. For OASDI and HI, the difference between scheduled cost and dedicated revenues is equal to interest earnings and asset redemptions prior to 

trust fund depletion, and unfunded obligations after depletion. The chart 

assumes full benefits will be paid after trust fund depletion, even though 

under current law expenditures can only be made to the extent covered by 

current income. Such budgetary assumptions are typical of unified budget 

baselines, but do not reflect current law in the Social Security Act, nor do 

they reflect policy approaches that Congress has used in the past.

In 2018, the projected difference between Social Security’s expenditures 

and non-interest income is $85 billion. The Trustees anticipate a deficit of 

$12 billion in non-interest income for the HI program.3 The projected 

general revenue demands of SMI are $319 billion. Thus, the total general 

 Chart D–Projected SMI General Revenue Funding

plus OASDI and HI Tax Shortfalls

[Percentage of GDP]

3 This difference is projected on a cash rather than the incurred expenditures basis applied elsewhere 

in the long-range projections, except where explicitly noted otherwise.

0%

1%

2%

3%

4%

5%

2018 2021 2024 2027 2030 2033 2036 2039 2042

Calendar year

SMI (B&D)

HI

OASDI
9

revenue requirements for Social Security and Medicare in 2018 are 

$416 billion, or 2.0 percent of GDP. Redemption of trust fund bonds, 

interest paid on those bonds, and general revenue transfers provide no 

new net income to the Treasury. When the unified budget is not in surplus, 

these payments are made through some combination of increased taxation, reductions in other government spending, or additional borrowing 

from the public.

Each of these trust funds’ operations will contribute increasing amounts 

to Federal unified budget deficits in future years as trust fund bonds are 

redeemed. Until 2026, interest earnings and asset redemptions, financed 

from general revenues, will cover the shortfall of HI tax and premium 

revenues relative to expenditures. In addition, general revenues must 

cover similar payments as a result of growing OASDI bond redemption 

and interest payments through 2034 as the trust funds are drawn down.

If full benefits are to be maintained for both Social Security and Medicare, by 2042 the combined OASDI and HI financing gap plus SMI’s projected general revenue demands will equal 4.4 percent of GDP—more 

than double the 2018 share.

What Is the Outlook for Short-Term Trust Fund Adequacy? The 

reports measure the short-range adequacy of the OASI, DI, and HI Trust 

Funds by comparing fund asset reserves at the start of a year to projected 

costs for the ensuing year (the “trust fund ratio”). A trust fund ratio of 

100 percent or more—that is, asset reserves at least equal to projected 

cost for the year—is a good indicator of a fund’s short-range adequacy. 

That level of projected reserves for any year suggests that even if cost 

exceeds income, the trust fund reserves, combined with annual tax revenues, would be sufficient to pay full benefits for several years. Chart E 

shows the trust fund ratios through 2040 under the intermediate assumptions.

By this measure, the OASI Trust Fund is financially adequate throughout 

and beyond the short-range period (2018-27). The DI Trust Fund fails the 

short-range test because its trust fund ratio was 48 percent at the beginning of 2018 and is not projected to reach 100 percent within 5 years. The 

Trustees project that the DI Trust Fund ratio will increase to 62 percent at 

the start of 2019, due largely to the temporary payroll tax reallocation 

during 2016-18 enacted in the Bipartisan Budget Act of 2015, and subsequently decline until depletion of all reserves in 2032.

The HI Trust Fund does not meet the short-range test of financial adequacy; its trust fund ratio was 65 percent at the beginning of 2018 based 

on the year’s anticipated expenditures, and the projected ratio does not 

rise to 100 percent within 5 years. Projected HI Trust Fund asset reserves 

become fully depleted in 2026.
10

The Trustees apply a less stringent annual “contingency reserve” test to 

SMI Part B asset reserves because (i) the financing for that account is set 

each year to meet expected costs, and (ii) the overwhelming portion of the 

financing for that account consists of general revenue transfers and beneficiary premiums, which were 71 percent and 27 percent of total Part B 

income in calendar year 2017. Part D premiums paid by enrollees and the 

required amount of general revenue financing are determined each year. 

Moreover, flexible appropriation authority established by lawmakers for 

Part D allows additional general revenue transfers if costs are higher than 

anticipated, limiting the need for a contingency reserve in that account.

What Are Key Dates in OASI, DI, and HI Financing? The 2018 

reports project that the OASI, DI, and HI Trust Funds will all be depleted 

within 20 years. The following table shows key dates for the respective 

trust funds as well as for the combined OASDI trust funds.4

 Chart E–OASI, DI, and HI Trust Fund Ratios

[Asset reserves as a percentage of annual cost]

Table 4: KEY DATES FOR THE TRUST FUNDS 

OASI DI OASDI HI

First year cost exceeds income 

excluding interesta. . . . . . . . . . . . . . . . . . . 

a Dates indicate the first year a condition is projected to occur and to persist annually thereafter through 

2092.

2010 2019 2010 2008

First year cost exceeds total incomea . . . . 2020 2019 2018 2018

Year trust fund reserves are depleted . . . . 2034 2032 2034 2026

4 HI results in this section of the Summary are on a cash rather than the incurred expenditures basis.

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1970 1980 1990 2000 2010 2020 2030 2040

Calendar year

OASI

DI

HI

Historical Estimated
11

DI Trust Fund reserves increase in 2018 and then fall steadily until they 

are fully depleted in 2032. Payment of full DI benefits beyond 2032, 

when tax income would cover only 96 percent of scheduled benefits, will 

require legislation to address the financial imbalance. 

The OASI Trust Fund, when considered separately, has a projected 

reserve depletion date of 2034, a year earlier than in last year’s report. At 

that time, income would be sufficient to pay 77 percent of scheduled 

OASI benefits.

The combined OASDI trust funds have a projected depletion date of 

2034, the same as in last year’s report. After the depletion of reserves, 

continuing tax income would be sufficient to pay 79 percent of scheduled 

benefits in 2034 and 74 percent in 2092.

The OASDI reserves are projected to decline in 2018 because total cost 

($1,003 billion) will exceed total income ($1,001 billion). This year’s 

report indicates that annual OASDI income, including payments of interest to the trust funds from the General Fund, will fall short of projected 

annual cost every year during the 75-year projection period. Thus, beginning in 2018, net redemptions of trust fund asset reserves with General 

Fund payments will be required to pay scheduled benefits until projected 

depletion of these reserves in 2034.

The projected HI Trust Fund depletion date is 2026, three years earlier 

than reported last year. Under current law, scheduled HI tax and premium 

income would be sufficient to pay 91 percent of estimated HI cost after 

trust fund depletion in 2026, declining to 78 percent by 2042, and then 

gradually increasing to 85 percent again by 2092.

This report projects a decrease in HI Trust Fund asset reserves in 2018 as 

total cost ($311 billion) is expected to exceed total income ($306 billion). 

Projected annual HI cost exceeds program income throughout the longrange projection period and assets will decline continuously until depletion of all reserves in 2026. 

What Is the Long-Range Actuarial Balance of the OASI, DI, and HI 

Trust Funds? Another way to view the outlook for payroll tax-financed 

trust funds (OASI, DI, and HI) is to consider their actuarial balances for 

the 75-year valuation period. The actuarial balance measure includes the 

trust fund asset reserves at the beginning of the period, an ending fund 

balance equal to the 76th year’s costs, and projected costs and income 

during the valuation period, all expressed as a percentage of taxable payroll for the 75-year projection period. Actuarial balance is not an informative concept for the SMI program because Federal law sets premium 

increases and general revenue transfers at the levels necessary to bring 

SMI into annual balance.
12

The actuarial deficit represents the average amount of change in income 

or cost that is needed throughout the valuation period in order to achieve 

actuarial balance. The actuarial balance equals zero if cost for the period 

can be met for the period as a whole and trust fund asset reserves at the 

end of the period are equal to the following year’s cost. The OASI, DI, 

and HI Trust Funds all have long-range actuarial deficits under the intermediate assumptions, as shown in the following table.

Note: Totals do not necessarily equal the sums of rounded components.

The annual deficit, expressed as the difference between the cost rate and 

income rate for a particular year, for the combined OASDI trust fund was 

0.59 percent of taxable payroll in 2017. The Trustees project that the 

annual deficits for Social Security will be larger through 2024 than 

reported last year, but smaller in most years thereafter. The projected 

annual deficits gradually increase from 1.17 percent of taxable payroll in 

2018 to 3.56 percent in 2039. The deficits then decline gradually to 

3.26 percent in 2052 before resuming an upward trajectory and reaching 

4.32 percent of taxable payroll in 2092 (Chart B). The relatively large 

variation in annual deficits indicates that a single tax rate increase for all 

years starting in 2018 sufficient to achieve actuarial balance would result 

in sizable annual surpluses early in the period followed by increasing 

deficits in later years. Sustainable solvency would require payroll tax rate 

increases or benefit reductions (or a combination thereof) by the end of 

the period that are substantially larger than those needed on average for 

this report’s long-range period (2018-92).

In 2017, the HI annual deficit was 0.09 percent of taxable payroll, continuing its downward trend since 2010, and it is projected to decline to 

0.08 percent in 2018. The cost rate has mostly been declining since 2010, 

and it is expected to fall further in 2018, largely due to (i) expenditure 

growth that was constrained in part by low utilization and low payment 

updates and (ii) a rebound of taxable payroll growth from 2007-2009 

recession levels. After 2018, 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 expected return to modest 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 0.8 percent 

through 2027 and 1.1 percent thereafter. After 25, 50, and 75 years, for 

example, the prices paid to HI providers under current law would be 

Table 5: LONG-RANGE ACTUARIAL DEFICIT OF THE 

OASI, DI, AND HI TRUST FUNDS

[Percent of taxable payroll]

OASI DI OASDI HI

Actuarial

Deficit . . . . . . . . . . . . . . . . . . 2.63 0.21 2.84 0.82
13

21 percent, 40 percent, and 55 percent lower, respectively, than prices 

absent the productivity reductions.

The financial outlooks for both OASDI and HI depend on a number of 

demographic and economic assumptions. Nevertheless, the actuarial deficit in each of these programs is large enough that averting trust fund 

depletion under current-law financing is extremely unlikely. An analysis 

that allows plausible random variations around the intermediate assumptions employed in the report indicates that OASDI trust fund depletion is 

highly probable by mid-century.

How Has the Financial Outlook for Social Security and Medicare 

Changed Since Last Year? Under the intermediate assumptions, the 

combined OASDI trust funds have a projected 75-year actuarial deficit 

equal to 2.84 percent of taxable payroll, up slightly from the 2.83 percent 

figure reported last year. The projected depletion date for the combined 

asset reserves remains 2034. Advancing the valuation date by one year to 

include 2092, a year with a large negative balance, alone would have 

increased the actuarial deficit by 0.06 percent of taxable payroll. That 

effect was mostly offset by changes in law, methods, starting values, and 

assumptions that collectively decreased the actuarial deficit by 0.04 percent of taxable payroll. 

Medicare’s HI Trust Fund has a long-range actuarial deficit equal to 

0.82 percent of taxable payroll under the intermediate assumptions, 

0.18 percentage point larger than reported last year. The anticipated date 

of depletion of the HI Trust Fund is now 2026, three years earlier than in 

last year’s report. HI income is projected to be lower throughout the longrange period than last year’s estimates due to (i) lower payroll taxes 

attributable to lowered wages for 2017 and lower levels of projected GDP 

and (ii) reduced income from the taxation of Social Security benefits as a 

result of legislation. In addition, HI expenditures are expected to be 

higher than last year’s estimates due to higher-than-anticipated spending 

in 2017, legislation that increases hospital spending, and higher Medicare 

Advantage payments.

Due to the nature of the financing for both parts of SMI, each account is 

separately in financial balance under current law, as they were last year. 

Part B costs are higher in this report than projected last year due to recent 

legislation and higher Medicare Advantage spending. Part D spending 

projections are lower in the short range than in last year’s report because 

of higher manufacturer rebates, a decline in spending for Hepatitis C 

drugs, and a slowdown in spending growth for diabetes drugs. The longrange cost projections are similar to last year’s due to slightly higher 

growth rate assumptions in this year’s report. SMI spending was 2.1 percent of GDP in 2017, and is now expected to increase to 3.9 percent of 

GDP in 2090. In last year’s report, SMI spending was estimated to be 

3.7 percent of GDP in 2090.
14

How Are Social Security and Medicare Financed? For OASDI and HI, 

the major source of financing is payroll taxes on earnings paid by employees and their employers. Self-employed workers pay the equivalent of the 

combined employer and employee tax rates. During 2017, an estimated 

173.6 million people had earnings covered by Social Security and paid 

payroll taxes; for Medicare the corresponding figure was 177.5 million. 

Current law establishes payroll tax rates for OASDI, which apply to earnings up to an annual maximum ($128,400 in 2018) that ordinarily

increases with the growth in the nationwide average wage. In contrast to 

OASDI, covered workers pay HI taxes on total earnings. The scheduled 

payroll tax rates (in percent) for 2018 are: 

The Bipartisan Budget Act of 2015 reallocated OASDI payroll tax rates 

on a temporary basis. For earnings in calendar years 2016-18, 

0.57 percentage point of the 12.40 percent OASDI payroll tax rate is 

shifted from OASI to DI. The Affordable Care Act applies an additional 

HI tax equal to 0.9 percent of earnings over $200,000 for individual tax 

return filers, and on earnings over $250,000 for joint return filers.

Taxation of Social Security benefits is another source of income for the 

Social Security and Medicare trust funds. Beneficiaries with incomes 

above $25,000 for individuals (or $32,000 for married couples filing 

jointly) pay income taxes on up to 50 percent of their benefits, with the 

revenues going to the OASDI trust funds. This income from taxation of 

benefits made up about 4 percent of Social Security’s income in 2017. 

Those with incomes above $34,000 (or $44,000 for married couples filing 

jointly) pay income taxes on up to 85 percent of benefits, with the 

additional revenues going to the Medicare trust fund. This income from 

taxation of benefits made up about 8 percent of HI Trust Fund income in 

2017.

The trust funds also receive income from interest on their accumulated 

reserves, which are invested in U.S. Government securities. In 2017, 

interest income made up 9 percent of total income to the OASDI trust 

funds, 2 percent for HI, and less than 1 percent for SMI.

Payments from the General Fund financed about 70 percent of SMI 

Part B and Part D costs in 2017, with most of the remaining costs covered 

by monthly premiums charged to enrollees or in the case of low-income 

beneficiaries, paid on their behalf by Medicaid for Part B and Medicare 

for Part D. Part B and Part D premium amounts are determined by methTable 6: 2018 PAYROLL TAX RATES

[In percent]

OASI DI OASDI HI Total

Employees . . . . . . 5.015 1.185 6.20 1.45 7.65

Employers . . . . . . 5.015 1.185 6.20 1.45 7.65

Combined total. . . 10.030 2.370 12.40 2.90 15.30
15

ods defined in law and increase as the estimated costs of those programs 

rise. 

In 2018, the Part B standard monthly premium is $134.00, the same as in 

2017. A hold-harmless provision limited the premium increase in 2016 

and 2017 for about 70 percent of enrollees. These Part B enrollees saw an 

increase in their Part B premium from about $109, on average, in 2017 to 

about $130, on average, in 2018. There are also income-related premium 

surcharges for Part B beneficiaries whose modified adjusted gross income 

exceeds a specified threshold. In 2018 and 2019, the threshold is $85,000 

for individual tax return filers and $170,000 for joint return filers. 

Income-related premiums range from $187.50 to $428.60 per month in 

2018.

In 2018, the Part D “base monthly premium” is $35.02. Actual premium 

amounts charged to Part D beneficiaries depend on the specific plan they 

have selected and average around $34 for standard coverage. Part D 

enrollees with incomes exceeding the thresholds established for Part B 

must pay income-related monthly adjustment amounts in addition to their 

normal plan premium. For 2018, the adjustments range from $13.00 to 

$74.80 per month. Part D also receives payments from States that partially compensate for the Federal assumption of Medicaid responsibilities 

for prescription drug costs for individuals eligible for both Medicare and 

Medicaid. In 2018, State payments cover about 12 percent of Part D costs.

Who Are the Trustees? There are six Trustees, four of whom serve by 

virtue of their positions in the Federal Government: the Secretary of the 

Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two Trustees 

are public representatives appointed by the President, subject to confirmation by the Senate. The two Public Trustee positions have been vacant 

since July 2015.
Because the two Public Trustee positions are currently vacant, there is no 

Message from the Public Trustees for inclusion in the Summary of the 

2018 Annual Reports.


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2018