Are Social Security and Medicare Solvent for the Future ? Group 4 Day 2 2015.8.4

CONTENTS Introduction of Social Security History of Social Security and Medicare Economy vs. Social Security and Medicare Social Security Trust Funds solvency Restoring solvency

Began in the 1930s. Social Security provide benefit to retired, disable workers and their family, family members of deceased workers.

Social Security Act in 1935 Economic security for workers Old Age Insurance: 65 Disability Insurance in 1956 Expansion of types of benificiaries Increase in payroll taxes Benefit levels increased periodically Medicare Attention on solvency since 1970s 1982: OASI borrow from DI and MHI (repaid in 1986)

Economy vs. Social Security Is improve economy threaten social security? What is the reason of develop economy? If it can not increase human welfare, why to develop economy?

Social Security contain Medicare In American pay out for medicare about 3,200 billion in 2015, which variant of GNP(gross nation product) 18%. Reason : over depend on market For management , such as insurance company Use high technology equipment

Cash Flow Deficits (non-interest income less costs) Table. Projected Operations of the Social Security Trust Fund, 2014-2020 ($ in billions) Year Non-Interest Income Costs Cash Flow Deficits (non-interest income less costs) 2014 783.4 863.1 (79.8) 2015 841.1 909.7 (68.3) 2016 888.8 963.3 (74.4) 2017 944.5 1,022.3 (77.8) 2018 1,003.4 1,087.6 (84.2) 2019 1,060.3 1,158.7 (98.4) 2020 1,117.1 1,235.2 (118.1) Source: http://www.socialsecurity.gov/OACT/TR/2014/lr6f8.html.

Government save less money, cause bad financial Government pay out for Social Security Government save less money, cause bad financial Economy and Social Security negative relation Economy develop slow down

Social Security and Medicare Trust Fund Solvency Trust Fund solvency: if the trust funds are not able to pay all current expenses out of current tax income and accumulated trust fund assets, they are insolvent. Insolvency means funds are unable to pay full benefits on time Near Insolvency: in early 1983, a solvency crisis almost happened in OASI. 1982 Trusteed reports showed that the trust fund could be insolvent by July 1983. In a temporary manner, Congress allowed OASI borrowed from DI and MHI and shall repay fully in 1986. Projection of the year of insolvency: in the 2014 report, DI will be exhausted in 2016 and OASI in 2034. In 2033, fund will be able to pay about 77% of scheduled benefits.

Restoring insolvency Decrease benefits Raising payroll taxes Transfering funds