Social Security and Medicare are arguably the two most important social programs operated by the federal government. 63 million people receive Social Security benefits, including retirement, survivors, and disability insurance, and 60 million are insured through Medicare. In addition to providing financial security to tens of millions of Americans, the programs are by far the largest operated by the federal government, making up 38% of total federal spending (or $1.6 trillion out of $4.2 trillion) in 2018.
Despite how critical these programs are to the American public, the two key public trustee positions on the programs’ boards of trustees have been vacant for four years, the longest vacancy recorded since the roles were established in 1984.1 Over the years, the experts occupying these positions have provided essential public oversight of the programs. Unlike other board members, the public trustees are required to be of different political parties and are appointed by the president and confirmed by the Senate to represent the public.2
A recent Government Accountability Office report highlighted the unique role public trustees play in developing and presenting the annual trustees’ reports that assess the finances of Social Security and Medicare:
- Public Trustees Lend Credibility to the Trustees’ Reports
The public trustee positions were created to instill public trust in the financial oversight of Social Security and Medicare. According to GAO’s report, past public trustees stressed the nonpartisan nature of their roles and were careful not to let personal or political opinions influence the outcomes of the trustees’ reports. Therefore, GAO determined that the existence of public trustees lends credibility to the findings of the trustees’ reports, which present objective data about the status of the programs.
- Public Trustees Play a Unique Communications Role for Social Security and Medicare
The public trustees have also traditionally focused on making the trustees’ reports clearer and understandable to the general public. They introduced the summary of the trustees’ reports in 1991 to make the findings of the report more accessible, and they have regularly testified before Congress on the state of the Social Security and Medicare trust funds.
- Public Trustees Provide the Most Engaged Oversight
According to GAO, the public trustees have historically been the board members most engaged in the report writing process. They attended the trustees’ meetings more regularly than their counterparts, and they often weighed in on the specific analytic assumptions used in the trustees’ reports. While the Social Security and Medicare actuaries have appropriately left most of their assumptions unchanged for the past several years in the absence of public trustees, this stasis will soon become untenable. As demographic and economic changes force a more serious overhaul of the reports’ assumptions, public trustees should be in place to assure those changes receive appropriate oversight.
The public trustees’ credibility will be even more essential in the coming years, when policymakers are forced to grapple with the impending insolvency of the Social Security and Medicare trust funds. When this happens, the public trustees will play a crucial role in assuring the public that those decisions are based upon sound evidence.
Specifically, the trust funds face large financing gaps that are becoming more difficult to close as policymakers continue to delay meaningful action. For illustrative purposes, consider that fixing Social Security’s shortfall for its combined programs would require either an immediate 17% reduction in benefits to all current and future beneficiaries or a 2.7 percentage point increase in payroll taxes (to a total rate of 15.1%, split between employer and employee). If policymakers delay action until after the combined trust funds are projected to run out in 2034, however, the size of those necessary changes increases to an immediate 23% reduction in all benefits or a 3.7 percentage point increase in payroll taxes. For a worker claiming benefits at age 65 in 2035 with an average earnings history, a 23% reduction in benefits would amount to an annual loss (in 2019 dollars) of roughly $5,400 (from $23,700 to $18,300 per year).
The financing challenges for Medicare are similar, with an immediate 19% payment reduction or 0.9 percentage point increase in payroll taxes (to a total of 3.8% in Medicare taxes, split between employer and employee) required to fully close the financing shortfall in the Hospital Insurance trust fund. The needed changes grow by 12% if action is delayed to 2026, when the Hospital Insurance trust fund is projected to run dry.
Because of the importance of the public trustees, BPC has partnered for the past three years with the two most recent public trustees, Charles Blahous and Robert Reischauer, to provide independent and bipartisan analysis of Social Security and Medicare while the positions remain vacant. While this project has served an important role, it cannot replace the need for respected individuals serving in those official capacities. GAO’s analysis has reaffirmed the need for these consequential positions to be filled.
1 Social Security and Medicare have three separate boards of trustees, each with identical membership: one for Social Security, one for the Hospital Insurance program, and one for the Supplementary Medical Insurance program.
2 The remaining members of the boards of trustees are ex officio trustees (members by virtue of their office and position) including the secretary of the Treasury, secretary of Labor, secretary of Health and Human Services, and the commissioner of Social Security.