Social Security and Medicare: Improved Schedule Management Needed for More Timely Trust Fund Reports
Released: 2019-08-14T00:00:00

Letter

Background

The boards that oversee the Social Security and Medicare trust funds are technically separate entities under the Social Security Act, but the same set of trustees have served as board members for each trust fund and the boards meet concurrently. For each board, four of the trustees are ex officio, i.e. members by virtue of their office and position: the Secretary of the Treasury, Secretary of Labor, Secretary of Health and Human Services, and the Commissioner of Social Security. The remaining two trustees are members of the public, nominated by the President, confirmed by the Senate, and the public trustees must not be from the same political party as one another. The public trustee positions were established in 1983; they have been vacant since 2015.

The boards issue two separate Trustees reports each year, one on the Social Security trust funds and one on the Medicare trust funds. Under the Social Security Act, these reports are due by April 1 of each year. The Trustees reports provide information on the present and projected statuses of the trust funds, including their projected balances over the next 10 years (short-term), the next 75 years (long-term), and the assumptions and methods used to make these projections. The reports provide estimates of the projected costs and incomes of the trust funds, and any dates that the boards project the trust funds’ reserves to become depleted, among other information about the programs. Because projections are inherently uncertain, the reports include three projection scenarios: intermediate, low-cost, and high-cost alternatives, along with other information about uncertainty. The intermediate scenario is based on assumptions that reflect the boards’ best estimate of future experience. The low-cost scenario makes assumptions that are relatively more favorable with respect to the projected statuses of the trust funds, while the high-cost scenario does the opposite. For example, the low-cost scenario assumes more workers will pay into the trust funds and fewer beneficiaries will receive benefits, while the high-cost scenario assumes fewer workers and more beneficiaries.

Agency Officials and Trustees Follow a Collaborative Process Each Year to Develop the Trustees Reports

Agency Officials and Trustees Determine the Economic, Demographic, and Programmatic Assumptions Prior to Drafting the Trustees Reports

Officials in the Social Security Administration Office of the Chief Actuary (SSA OCACT) and the Centers for Medicare & Medicaid Services Office of the Actuary (CMS OACT) work with other agency officials and trustees to develop assumptions and draft and revise the Trustees reports in an annual cycle, according to agency officials and the board meeting minutes and report development schedules we reviewed (see fig. 1). At the end of each cycle, the boards have established a working group that is largely responsible for overseeing the day-to-day development of the next year’s report. This working group consists of officials in the four agencies that are led by the ex officio trustees (Treasury, DOL, HHS, and SSA), officials from SSA OCACT and CMS OACT, and the public trustees, when confirmed. All of the working group’s discussions and agreements are subject to the approval of the boards. The Secretary of the Treasury serves as the Managing Trustee and Chairperson of the boards. Treasury staff has historically coordinated the report development process, including organizing the development schedule and hosting the working group and boards’ meetings. The reports are drafted by SSA and CMS.

SSA OCACT and CMS OACT officials we interviewed said they work to update the assumptions—both long-term and short-term—they propose as the basis for the trust fund projections in the reports. Assumptions are the demographic, economic, and program-specific factors that the actuaries use to model the future financial status of the trust funds (see appendix I). For each assumption, SSA OCACT and CMS OACT go through a process of updating the values for the 75-year projection period as needed and use those updated values as inputs in their models to project future costs and income for the trust funds. As a part of this process, the working group discusses issues that inform the assumptions proposed by SSA OCACT and CMS OACT.

The work on assumptions is divided according to the specializations and expertise of the two actuarial offices, and is developed by staff from a range of disciplines, including actuaries, demographers, and economists. SSA OCACT develops the demographic and economic assumptions that are common to both reports, including rates for fertility, mortality, and growth in gross domestic product. SSA OCACT also prepares the programmatic assumptions for Social Security, such as the numbers of retirement and disability beneficiaries and the anticipated income into the trust funds from payroll taxes. CMS OACT prepares the programmatic assumptions that are specific to Medicare, such as the number of Medicare beneficiaries and expected growth in health care costs.

SSA OCACT and CMS OACT officials update assumptions and revise their methodologies based on recent data, if a change is warranted. For example, the 2017 Social Security Trustees report projected an increase in the total fertility rate. Information collected in the subsequent year showed that fertility rates had not risen as expected, so officials reduced the fertility rate assumptions for the 2018 report. SSA OCACT officials told us that they look at both the reasonableness of the assumptions individually and in the aggregate, as some assumptions interrelate. According to agency officials we interviewed, the assumptions generally undergo gradual or no changes from year to year, unless there are significant policy changes. SSA OCACT and CMS OACT also update their models by incorporating more recent data into them. For example, in the 2017 Social Security Trustees report, the model for projecting average age benefit levels of retired worker and disabled worker beneficiaries who are newly entitled to benefits used a sample of these beneficiaries from 2013. In the 2018 report, this model was updated to use a sample from 2015.

The Working Group Discusses and Works Toward Consensus on Assumptions

The working group considers and works towards consensus on the assumptions proposed by SSA OCACT and CMS OACT. Members of the working group meet periodically to discuss the assumptions and come to an agreement on the values for them. In these meetings, the working group often hears presentations from internal or external experts on specific topics. For example, in one meeting, SSA staff led a presentation and discussion on Disability Insurance, and DOL staff led a presentation and discussion on how globalization might affect long-term economic trends. To inform their discussions, the working group may also review reports from technical panels or invite panel members to discuss their findings and recommendations at a working group meeting. For example, in September 2012, the working group discussed a Medicare technical panel recommendation that the board continue to present alternative projections in which average Medicare spending per beneficiary rises faster than the current law baseline; the working group and board agreed to implement this recommendation. Throughout the working group’s activities, the members representing the ex officio trustees generally serve as a liaison between the trustee for their agency and the working group. When confirmed, public trustees participate directly on the working group.

After consideration, the working group finalizes long-term assumptions at a fall board meeting. The long-term assumptions serve as the basis for the short-term assumptions and the 75-year trust fund projections. For each long-term assumption, the boards set the “ultimate value”, i.e. the constant rate or number that is projected to be met in a particular year (within 10 years in most cases) and then continued through the remainder of the 75-year projection period. For example, for the 2019 Trustees reports, the boards set the ultimate value for the annual change in covered earnings as a percent of total labor compensation for each year beginning in 2028 and continuing through 2093. In most cases, according to agency officials we interviewed, the working group achieves consensus on the assumptions before the fall board meeting. However, when the working group is unable to reach consensus, the boards settle any outstanding issues and tend to either make no changes or incremental changes over time to avoid major swings in year-to-year projections, according to some agency officials we interviewed.

Once the long-term ultimate values are set by the boards, the working group then discusses the short-term assumptions that bridge the gap between current data and the ultimate values. The working group first considers and works toward agreement on the short-term economic assumptions and then the health assumptions. Short-term economic assumptions can vary during the early years of the projection period. The projection of Medicare’s HI Trust Fund depletion date is based on detailed short-term growth rate assumptions for individual types of Medicare services, such as inpatient hospital care.

SSA OCACT and CMS OACT Draft the Trustees Reports

Once the assumptions are set, officials at SSA OCACT develop the projections that determine the actuarial status and then draft the Social Security Trustees report, and officials at CMS OACT do the same for the Medicare Trustees report. The reports include information on and values of the assumptions, projected financial statuses of the trust funds and programs, actuarial analyses and estimates, and technical information on the methodologies and projections. In addition, the reports note changes to the assumptions, methodology, and projections from prior reports, and explain the implications for the trust funds. The reports also include statements of opinion by the relevant agency’s Chief Actuary regarding whether the techniques and methodologies used are generally accepted within the actuarial profession and whether the assumptions used and the resulting actuarial estimates are reasonable.

The Working Group Comments and Develops Consensus on Reports

When the drafts are completed, SSA OCACT and CMS OACT circulate them to the working group for comments and agreement. According to one former public trustee, these comments are mostly related to the presentation of the information, such as word choices, as members have previously agreed to the assumptions. SSA OCACT or CMS OACT officials respond to these comments, and make revisions to the reports in several rounds, engaging with the working group for comment on each new version of the reports. As with the earlier round when the working group worked toward consensus on the assumptions, the working group members that represent the ex officio trustees can brief the trustee from their agency and bring any input back to the working group to help ensure that the trustees agree with the reports.

The Boards Approve and Issue Trustees Reports

The final drafts of the Trustees reports are presented and approved at the annual spring meeting of the boards. Under the boards’ bylaws, members of the boards must be present at these meetings to approve the reports. During the meeting, agency officials provide an overview of the reports to the trustees and other attendees, and explain changes in the overall projections from the previous year’s reports. For those trust funds with an estimated depletion date, agency officials explain the estimated dates of depletion and the potential implications for beneficiaries. After any discussion, the trustees sign the reports and the boards formally issue them to Congress.

Public Trustees Can Play Unique Roles in Developing and Presenting the Trustees Reports

Public trustees, when confirmed, play unique roles as members of the boards and also the working group that develops the Trustees reports. Former public trustees we interviewed said their role was to represent the public in the report development process, independent of the ex officio trustees and other agency officials in the administration. To become members of the board, public trustees must be nominated by the President and confirmed by the Senate, and the public trustee cannot both be from the same political party. Those we interviewed stressed the importance of not allowing personal and political opinions to influence their work on the Trustees reports. As a result, according to both agency officials and former public trustees, having public trustees in place lends credibility to the reports. Former public trustees stated that they worked closely with their counterpart public trustee to coordinate their comments and input to the working group.

Historically, public trustees sometimes questioned or encouraged changes to some assumptions used in the reports, according to former public trustees and some agency officials. When in place, public trustees regularly attend working group meetings, whereas ex officio trustees do not. According to the former public trustees we interviewed, they saw part of their role as facilitating conversations as leaders and moving the group towards consensus on assumptions. Additionally, former public trustees and some agency officials said trustees are more hesitant to change the assumptions in the reports when there are no public trustees in place, out of concern that any change could be viewed as politically motivated. For example, in 2017 the boards discussed whether or not to change the long-range real interest rate assumption from the rate used in the previous year’s Trustees reports. The boards decided to keep the assumptions unchanged, in part because there were no public trustees in place.

When they are in place, public trustees can also help communicate the message of the Trustees reports to policy makers and the public. As an example, the Trustees reports can be technical and difficult to understand; to address this, the public trustees introduced a summary of the reports in 1991, which presented the reports’ findings in a way that is more accessible to the general public. Former public trustees said they were able to inform policy makers on the contents of the reports through congressional testimony and direct conversations with congressional staff. One former public trustee reported that he was a resource for the media, spending hours on the phone providing his perspective and explaining the reports’ implications for policy decisions. In addition, public trustees published a separate message that allowed them to present what they believe to be the main idea of the reports.

The Boards Have Frequently Missed the Statutory Deadline and Have Not Effectively Managed the Report- Development Schedule

Trustees Reports Have Been Issued Late in Part to Allow More Time for Updating Reports and Due to Scheduling Issues

The boards issued the Trustees reports to Congress after the April 1 statutory deadline in 17 of the 25 years from 1995 to 2019, including every year from 2009 through 2019 (see fig. 2). Since 2009, the boards have issued the reports at least 2 months late six times; they only issued the reports this late one time in the 14 years from 1995 to 2008.

Agency officials and former public trustees provided a number of reasons why the Trustees reports have been late in recent years. Agency officials and former public trustees said they may delay reports in order to include the impact of late-breaking legislation or policy changes on the assumptions or data. SSA OCACT told us that this decision is based on (1) if the policy change results in substantial changes to assumptions and (2) if the policy change affects a policy that is directly governing a trust fund. For example, agency officials and former public trustees stated that the Patient Protection and Affordable Care Act (PPACA), enacted on March 23, 2010, significantly contributed to the 2010 reports being issued August 5, 2010, over 4 months past the deadline. PPACA significantly affected many of the factors that were the basis for the Medicare Trustees report projections, such as reducing projected Medicare expenditures through various policy changes, including a change to the payment formula for the Medicare Advantage program—the private health plan alternative to traditional Medicare. According to one former public trustee, if the boards had issued a report that did not reflect the changes made by PPACA, it would not have been applicable to the current outlook of the Medicare trust funds and therefore not as useful to Congress and the public.

Agency officials have also reported that there have been instances of waiting for more complete or recent data sets to become available before calculating the actuaries’ projections. According to CMS officials, a tradeoff exists between updating data and meeting the deadline. For example, Treasury officials told us that because the working group decided that CMS OACT should not wait for January 2019 Medicare Advantage enrollment data, the 2019 Trustees reports were issued earlier (April 22) than they would have been if they had waited for the complete end of year data, as they had in previous years.

Agency officials and public trustees also cited difficulties in scheduling the spring board meetings as a factor that contributed to delays in issuing the Trustees reports. The boards’ bylaws require the annual reports to be adopted by a majority of the trustees who are present and voting. However, sometimes Treasury staff experienced difficulty scheduling the meeting. According to Treasury officials responsible for scheduling the meeting, they generally wait until the first drafts of the Trustees reports are completed before they schedule the spring board meeting to avoid having to reschedule the meeting if the draft reports are provided after the working group’s internal deadline. For the last 15 years (2005-2019), report development schedules from SSA OCACT indicated that the draft reports were provided to the working group after the internal deadline 12 times. In the other 3 years, the report development schedules did not show the actual date that the draft reports were provided. As a result of scheduling the meeting later in the process, Treasury staff has sometimes not been able schedule a meeting that all of the Trustees can attend prior to the statutory deadline of April 1.

Other challenges that contribute to delays include government shutdowns and staff having conflicting concurrent responsibilities, according to some agency officials or former public trustees. When the government shut down for 11 business days in October 2013, the board meeting minutes show that it affected the timelines for the 2014 Trustees reports. However, according to HHS, government shutdowns have never materially delayed the release dates for the Trustees reports. Some former public trustees and one agency official we spoke to stated that agency officials involved in the report process sometimes had other duties competing for their time, which could result in delaying their work on the Trustees reports, while other agency officials stated this was not a factor.

The Process for Managing the Schedule for Developing the Trustees Reports Does Not Reflect Best Practices

Agency officials’ scheduling process is inconsistent with GAO’s guide on best practices for schedule management. Agency officials and former public trustees said they attempted to meet the statutory deadline each year, but did not believe issuing the report after the deadline created serious negative consequences. As a result, agency officials and former public trustees involved with developing the reports in recent years said they developed a schedule designed to meet the deadline knowing it would most likely not be met. Several agency officials and former public trustees described the schedule as “ambitious” and difficult to achieve. If the schedule is unrealistic from the start of the process, and if involved parties view it as an unlikely goal, rather than the expected outcome, then the schedule does not serve as a useful tool for managing the timely development of the Trustees reports.

In addition to designing an unrealistic Trustees reports schedule, agency officials did not always document actual progress in meeting scheduled dates or modify the schedule in a way that would allow them to overcome early setbacks. Treasury officials, who organize the schedule for developing the Trustees reports, stated that the initial proposed schedule is updated only once during the report process, after the first drafts of the reports are completed. According to best practices, the schedule should be updated regularly with actual progress and remaining work. Without doing so, it could be difficult to respond to actual events while still meeting set deadlines.

Treasury has not regularly archived the final version of the schedule with the dates that milestones were actually met. According to best practices, the final iteration of the schedule that was actually followed should be archived and used to inform and improve future schedules. Treasury officials were able to provide us with the archived, updated schedules for only 6 of the last 25 years, and these schedules were incomplete. While these updated schedules showed the actual dates that the draft reports were provided and the planned dates for later milestones, they did not include the dates for milestones before the draft reports were provided or the actual dates for the later milestones, including the reports’ issuance dates.

Further, although the boards have regularly missed the statutory deadline, the initial report-development schedules have not significantly changed in recent years. Based on the proposed schedules for the Trustees reports that are presented in the spring board meeting minutes we reviewed, the initial schedules for each milestone in the report development process, such as obtaining agreement on assumptions or circulating drafts, has not significantly changed in the last 6 years, although the schedules have consistently proven difficult to meet (see table 1). Without recording the actual report production schedule that was followed, participating officials do not have the historical data that would assist them in making meaningful and effective changes to future schedules.

Finally, according to best practices, it is important that stakeholders, including decision makers, have access to information on the progress of the project. Agency officials and former public trustees stated that they do not have a policy or practice of informing Congress of delays or changes to the schedules for the Trustees reports, even in years when the board issues the reports months after the deadline. Given this, Congress, the recipient of the Trustees reports, remains uninformed of the reports’ release date or the factors contributing to a delay in any given year. This uncertainty may hinder Congress from planning legislative sessions in advance that would use the findings of the Trustees reports. For example, congressional committees of jurisdiction may be hindered in scheduling hearings on or around the time of the reports’ release date and having access to the latest data from the reports to inform their oversight.

Conclusions

Trustees and agency officials set out at the start of each report cycle with a schedule to meet the statutory deadline to issue the Social Security and Medicare reports each year by April 1. However, over the past 25 years, they have mostly issued the reports after the deadline. Some of the factors contributing to the boards delivering the reports late may seem reasonable to agency officials and trustees. For example, investing time to make the report consistent with new legislation impacting Social Security or Medicare programs, or waiting for end of year data to be available, may make the report more useful than if it contained older information. However, other factors related to the management of the schedule for developing the reports, such as not formally tracking the reports’ progress or adjusting the schedule based on lessons learned in prior years, may have contributed to delays.

Taking steps to improve the management of the report-development schedule would better position the trustees and agency officials to anticipate and plan for scheduling the spring boards meeting and to meet the statutory deadline in future years. Additionally, recognizing that there may continue to be instances in which the issuance of the reports will be delayed, establishing a policy to inform Congress of potential delays and factors contributing to those delays would enhance Congress’s ability to conduct oversight and make decisions about these important programs.

Recommendations for Executive Action

We are making the following two recommendations to the Secretary of the Treasury: The Secretary of the Treasury, as Chairperson of the Boards of Trustees, should work with the other trustees to take steps—in consultation with the chief actuaries of SSA and CMS—to improve the management of the report development schedule in order to provide the Trustees reports to Congress by the statutory deadline. These steps could include regularly updating the schedule using actual progress and archiving the final iteration of the schedules. (Recommendation 1)

The Secretary of the Treasury, as Chairperson of the Boards of Trustees, should work with the other trustees to establish a policy to inform Congressional committees of jurisdiction when the trustees determine that the reports are expected to miss the issuance deadline. This outreach should include 1) the factors that are contributing to delays, and 2) the reports’ expected issuance dates. (Recommendation 2)

Agency Comments and Our Evaluation

We provided a draft of this report to the Secretary of the Treasury, the Secretary of Health and Human Services, the Secretary of Labor, and the Commissioner of Social Security for review and comment. Treasury and SSA provided formal written comments, and both agencies agreed with our recommendations. (See appendixes II and III.) Treasury, SSA, and HHS provided technical comments, which we incorporated as appropriate. DOL had no comments.

As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Treasury, the Secretary of Health and Human Services, the Secretary of Labor, the Commissioner of Social Security, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact Elizabeth Curda at (202) 512-7215 or curdae@gao.gov or James Cosgrove at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.

Appendix I: Assumptions Discussed in the 2019 Social Security and Medicare Trust Fund Reports

Appendix II: Comments from the Department of the Treasury

Appendix III: Comments from the Social Security Administration

Appendix IV: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments:

In addition to the contact named above, Mark Glickman (Assistant Director), Gregory Giusto (Assistant Director), Paul Schearf (Analyst-in- Charge), Christie Enders, and Samuel Gaffigan made key contributions to this report. Additional assistance was provided by Bill Boutboul, Juana Collymore, Robert Dacey, Alex Galuten, Yvette Gutierrez, Janice Latimer, Emei Li, Sheila R. McCoy, Art Merriam, Mimi Nguyen, Stacy Ouellette, Oliver Richard, Joseph Silvestri, Dawn Simpson, Ardith Spence, Almeta Spencer, Frank Todisco, and Walter Vance.