More information and analysis has emerged following the
release of the Social Security Trustees report for 2011. Particularly interesting is a change in life-expectancy projections. Dean Baker
explores that here.
The 2011 Social Security trustees report is far more optimistic about life expectancy than last year's report. It projects that men who turned age 65 in 2010 can expect to live another 18.6 years compared with the 18.1 figure projected in last year's report. Life expectancy for women at age 65 was projected at 20.7 years in the 2011 report, compared with 20.4 years in the 2010 report.
This assumed increase in life expectancy is the largest factor in a projected deterioration in the program's finances. The shortfall expressed as a share of payroll over the program's planning horizon is 2.22 percent, compared with 1.92 percent in the 2010 report. Expressed in dollar terms, the projected shortfall over the 75-year planning horizon is $6.5 trillion or 0.7 percent of GDP.
It is interesting to note that while the Social Security Trustees assume a big jump in life expectancies for retirees today compared with their assessment last year, they actually assume less progress in future decades. The 2010 Trustees report assumed that between 2010 and 2080, life expectancy at age 65 for men would increase by 4.2 years and by 4.1 years for women. By comparison, the 2011 report assumes an increase in life expectancy over this period of just 4.0 years for men and 3.9 years for women.
By having more improvement in life expectancy now and less in later years, the near-term finances of both Social Security and Medicare look somewhat worse. The date at which Social Security is first projected to face a shortfall is 2036 in this report compared with 2037 in last year's report. Medicare is first projected to face a shortfall in 2024 in this year's report as compared to 2029 in last year's report, even though the shortfall expressed as a share of payroll increased by just 0.13 percentage point.
Specifically on Medicare:
By comparison, the projected shortfall in the Medicare program is equal to 0.25 percent of GDP over the program's planning period or $2.3 trillion. The Congressional Budget Office's assessment of the Ryan plan endorsed by the GOP implied that it would increase the cost to the country of buying Medicare-equivalent policies by more than $34 trillion over the program's 75-year planning period, in addition to transferring $5 trillion in costs from the government to seniors.
It's important to remember as well that the House Republican budget repeals the Affordable Care Act, which is projected to save the program as much as $120 billion over the next five years.