Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

Relative to the combined Social Security Trust Funds, the Medicare HI Trust Fund faces a more immediate funding shortfall, though its longer term financial outlook is better under the assumptions employed in this report.

Medicare costs (including both HI and SMI expenditures) are projected to grow substantially from approximately 3.6 percent of GDP in 2010 to 5.5 percent of GDP by 2035, and to increase gradually thereafter to about 6.2 percent of GDP by 2085.

The projected 75-year actuarial deficit in the HI Trust Fund is 0.79 percent of taxable payroll, up from 0.66 percent projected in last year’s report. The HI fund fails the test of short-range financial adequacy, as projected assets drop below one year’s projected expenditures early in 2011. The fund also continues to fail the long-range test of close actuarial balance. Medicare’s HI Trust Fund is expected to pay out more in hospital benefits and other expenditures than it receives in income in all future years. The projected date of HI Trust Fund exhaustion is 2024, five years earlier than estimated in last year’s report, at which time dedicated revenues would be sufficient to pay 90 percent of HI costs. The share of HI expenditures that can be financed with HI dedicated revenues is projected to decline slowly to 75 percent in 2045, and then to rise slowly, reaching 88 percent in 2085. Over 75 years, HI’s actuarial imbalance is estimated to be equivalent to 21 percent of tax receipts or 17 percent of program outlays.

The worsening of HI's projected finances is primarily due to lower HI real (inflation-adjusted) non-interest income caused by a slower assumed economic recovery, and by higher HI real costs caused by higher assumed near-term growth in real economy-wide average labor compensation. The resulting increases in HI real deficits are concentrated in the near term, which is why trust fund exhaustion occurs five years earlier than was projected last year despite a relatively modest increase in the 75-year actuarial deficit.

Part B of Supplementary Medical Insurance (SMI), which pays doctors’ bills and other outpatient expenses, and Part D, which provides access to prescription drug coverage, are both projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet the next year’s expected costs. However, the aging population and rising health care costs will cause SMI costs to grow rapidly from 1.9 percent of GDP in 2010 to approximately 3.4 percent of GDP in 2035 and approximately 4.1 percent of GDP by 2085. Roughly three-quarters of these costs will be financed from general revenues and about one-quarter from premiums paid by beneficiaries. Small amounts of SMI financing are received from special payments by States and from fees on manufacturers and importers of brand-name prescription drugs. 2011 Report

Meanwhile the rest of the government (not medicare and SS) gets 13.1% of GDP in revenues and spends 17% of GDP. But damn.. we have to worry about cutting SS and Medicare. Never mind that they both are OWED money that MUST be paid back.

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 assets to projected costs for the ensuing year (the "trust fund ratio"). A trust fund ratio of 100 percent or more -- that is, assets at least equal to projected costs for a year -- is a good indicator of a fund’s short-range adequacy. That level of projected assets for any year means 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.

By this measure, the OASI Trust Fund is financially adequate throughout the 2011-20 period, but the DI Trust Fund fails the short-range test because its projected trust fund ratio falls to 90 percent by the beginning of 2013, followed by exhaustion of assets in 2018.Furthermore, despite the increasing nominal value of the OASI and combined OASDI trust funds throughout the short-range period, both the OASI and DI trust fund ratios -- indicators of the duration of continuing benefit payments that the trust funds could finance out of current assets -- will continue to decline from 2011 forward.

The HI Trust Fund also does not meet the short-range test of financial adequacy; its projected trust fund ratio falls to 86 percent by the beginning of 2012. Projected HI Trust Fund assets are fully depleted in 2024. Chart D shows the trust fund ratios through 2040 under the intermediate assumptions.

A less stringent annual "contingency reserve" test is applied to SMI Part B assets since the overwhelming portion of the financing for that account consists of beneficiary premiums and general revenue contributions that are set each year to meet expected costs. Part D is similarly financed on an annual basis. Moreover, the operation of Part D through private insurance plans, together with a flexible appropriation for Federal costs, eliminates the need for a contingency reserve in that account. Note, however, that estimated Part B costs are improbably low for 2012 and beyond because the projections assume that current law, which substantially reduces physician payments per service under the sustainable growth rate system, will not be changed. The estimated physician fee reduction for 2012 is 29 percent. A reduction in fees of this magnitude is highly unlikely; Congress has acted to prevent smaller reductions in every year since 2003. Underestimated payments to physicians would affect projected costs for Part B, total SMI, and total Medicare.

Chart D—OASI, DI, and HI Trust Fund Ratios
(Assets as a percentage of annual cost)
I hoped to post the chart but it blew out the pagesize....

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Chart D—OASI, DI, and HI Trust Fund Ratios
(Assets as a percentage of annual cost)
I hoped to post the chart but it blew out the pagesize....

Team Obama's support for the latest one (4th in his presidency) will blow up in their faces on the day the Treasury has to come back cap in hand asking for a 5th. That, btw, was the reason for standing firm and calling Obama's bluff about the "deadline" being August 2; recall that Treasury had already been bumping under the debt ceiling for months, that the delay forced it to exhaust all other available funding avenues (such as borrowing from the Trust Funds, the Exchange Stabilization Fund, etc) and that this accounting maneuver can't easily be repeated unless those funds are reimbursed first. If you read comments made by PM Putin of Russia and the president of the (central) Bank of China after Obama signed this 4th debt raise you'll see they weren't fooled.

Their posted figures are wrong for the actual US GDP (as revised) 2010 and wildly optimistic for projected GDP 2011 - we'll be lucky to see 2% this year.

Right, so your point about the funds being owed monies is moot to my point that we need to have Medicare reform on the table.

[Military spending - 4.9% of GDP
Medicare - 3.3% of GDP
Social Security 4.8% of GDP
Veteran's benefits - .8% of GDP
Transportation - 6.9% of GDP
adm of Justice - 3.7% of GDP
General govt - 0.17% of GDP
Allowance for Emergencies - 0.13%

That alone adds up to 16.8% of GDP..

Medicaid and other health programs - 2.6%
Income Security - 3.8%

The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff.

Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.

“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.[/i]“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”.........“I have found that universally, [private-sector workers] care every bit as much about our country, are every bit as patriotic and wanting to make a difference … as those who wear the uniform and are in harm’s way,” he said[/i].