President’s Message TOM WILDSMITH
Sustaining Our Future
SOCIAL SECURITY AND MEDICARE have changed what it means to be old in America. Poverty is no
longer the almost inevitable companion of aging. Millions of Americans depend on these programs for their
financial security and health care. Both programs represent long-term promises to the retirees of today and
tomorrow—and both face long-term financing challenges.
Actuarial work often focuses on technical
measures of solvency. The specific measures used
depend on the type of program involved, how it’s
financed, and how far the promises made extend
into the future. But certain underlying questions
remain the same: Can the promises be kept? Is
the program on track to achieve its goals? Is the
Solvency asks whether the books balance.
Sustainability asks whether a program is likely
to be prematurely curtailed or discontinued.
Sustainability is harder to measure, but it’s also
perhaps the more important of the two concepts.
Both Social Security and Medicare are financed through trust funds. The trustees for the funds issue
annual reports on their financial status, including financial projections developed by the chief actuary of the Social Security
Administration (SSA) and the chief actuary of the Centers for
Medicare and Medicaid Services (CMS). Recent reports have
consistently projected that key trust funds for both programs
will run out of money in the relatively near future.
The most recent Social Security Trustees Report projects
that the Old Age and Survivors Insurance (OASI) trust fund will
be depleted in 2035. When that happens, revenues under the
program are estimated to cover only 77 percent of the promised
benefits. The most recent Medicare Trustees Report projects
that the Hospital Insurance (HI) trust fund will be depleted
in 2028, at which time revenues will cover only 87 percent of
benefits. It’s not clear what would happen at that point. Would
Medicare pay benefits at only 87 cents on the dollar, or would
benefits be paid on a “first-come, first-served” basis? In either
case, the result would be a significant curtailment of benefits.
And these programs are growing as the U.S. population ages,
taking up a greater percentage of GDP and crowding out other
spending priorities in the process.
In my judgment, neither Social Security nor Medicare is fully
sustainable under current law. Does that mean the programs are
doomed? Of course not. We have time to fix them, and given the
number of voters who depend on these programs, Congress will
eventually come under tremendous pressure to do so. But the
sooner we do it, the easier it will be.
On one level, the issues are simple. Eliminating the financial shortfall will require raising
revenues, reducing benefit costs, or more likely
some combination of the two. But given the significance of these programs for people’s lives,
the decisions will not be easy. My Social Security benefits will help determine the lifestyle
I can afford to lead in retirement—or perhaps
even whether I can afford to retire. The way my
Medicare benefits are structured will affect the
care I receive on my deathbed.
Determining how the costs and benefits
of these programs are spread across income
groups, age groups, and generations is an
inherently political question. Recognizing this in no way
minimizes the vital role that actuaries play in helping the nation understand the financial challenges, quantifying them,
and evaluating the adequacy and effectiveness of potential
solutions. The annual trustee report projections, prepared by
dedicated actuaries at SSA and CMS, are widely recognized
as reliable and authoritative measures of the health of these
programs. The Academy has a long history of providing the
nation with objective, unbiased actuarial analyses of both the
financial status of the programs and options for strengthening them. But the tough decisions—such as choosing between
higher taxes and lower benefits, or between higher Medicare
premiums and fewer choices of health care providers—
must be made by the American public through their elected
You and I are not just professionals—we are citizens as well.
We are in the middle of an election year, and the decisions made
by the next president and Congress will shape the long-term financial health of Medicare and Social Security. Each of us has a
right—and a responsibility—to understand the candidates’ positions on these vital programs before entering the voting booth.
As you evaluate those positions, the Academy’s 2016 election
guides on Social Security and Medicare can provide a useful
roadmap to the critical issues facing each program—you’ll find
them at election2016.actuary.org. Once you’ve studied the candidates’ positions on these and other issues, I encourage you to
vote—it’s a civic duty that we all share.