THE WHITE HOUSE
Office of the Press Secretary
PRESIDENT CLINTON AND VICE PRESIDENT GORE:
Saving Social Security and Strengthening Medicare
January 27, 1999
In His State of the Union Address, President Clinton Put Forward His Framework To Save Social Security And Strengthen Medicare. A week ago, President Clinton proposed his framework to allocate the projected budget surpluses over the next 15 years to meet America's challenges.
Save Social Security Now. The President's framework includes transferring 62 percent of the projected budget surpluses over the next 15 years -- more than $2.7 trillion -- to the Social Security system and investing a portion of the transferred surpluses in the private sector to achieve higher returns for Social Security -- just as any state or local government, or private pension does. This will keep Social Security solvent until 2055. The President believes we must work on a bipartisan basis to make the hard-headed but sensible and achievable choices to save Social Security until at least 2075, while reducing poverty among single elderly women and eliminating the limit on what older Americans on Social Security can earn. Letter from Social Security Actuary Shows President's Proposal Saves Social Security Until 2055. Today, a memo from Stephen Goss, Deputy Chief Actuary of the Social Security Administration, was released, and it stated that the President's "proposal would extend the estimated year in which the combined OASDI trust funds would become exhausted by 23 years, from 2032 to 2055. It would reduce the size of the estimated long-range OASDI actuarial deficit by over one half, from 2.19 to 0.76 percent of taxable payroll." [Memorandum from Stephen Goss, Deputy Chief Actuary of the Social Security Administration, January 26, 1999] Strengthening Medicare for the 21st Century. Today, President
Clinton emphasized the importance of his proposal to dedicate 15 percent of the projected budget surpluses to the Medicare program, as part of his broad framework to save Social Security and Medicare for the 21st century. These resources alone would extend the life of the Medicare Trust Fund to 2020, as confirmed by the Medicare actuary in a letter released today. However, the President stressed that the dedicated surplus dollars should be used in the context of broader Medicare reforms that modernize and improve the program.
President Clinton Emphasized That Dedicating Revenues is Essential to Preserving and Strengthening Medicare.
Letter from Medicare Actuary Shows President's Proposal Keeps Medicare Solvent Until 2020. Today, a memo from Richard Foster, Chief Actuary of the Health Care Financing Administration (HCFA), was released, and it stated that "the assets of the HI trust fund would be depleted in calendar year 2020 under [the President's] proposal, as compared to 2008 under present law." [Memorandum from Richard Foster, Chief Actuary of the Health Care Financing Administration, January 27, 1999] Medicare, like Social Security, Faces Challenge of the "Senior Boom." Medicare's enrollment is expected to double by 2030. Moreover, by 2030, the ratio of workers (who help finance Medicare through payroll taxes) to beneficiaries is expected to decline by over 40 percent. Without New Surplus Revenue, Medicare Spending Would Have to Be Reduced Significantly. For the Hospital Insurance (HI) Trust Fund to be solvent only through 2017, it would take a 10 percent reduction in baseline spending in each year (all else held constant). For example, in 2000, this would amount to about $15 billion -- more than Medicare pays for all of home health care. Growth Would Have to Be Slowed to below General Inflation. Even if Medicare per capita cost growth were constrained to general inflation in every year -- virtually unprecedented in health care and less than half projected private spending growth rate -- the Trust Fund would only be extended to 2016. Experts Validate That Additional Revenues Are Critical to Preserving and Strengthening Medicare. Health economists and experts agree: not only are new revenues needed but the surplus is a good source. Experts supporting this proposal include: Robert Reischauer, Henry Aaron, Judy Feder, Marilyn Moon, and Uwe Reinhardt and other respected economists. The President Underscored His Strong Belief That Surplus Dollars
Should Be Utilized In the Context of Broader Reforms to the Program. The President emphasized that it would be ill-advised to expand Medicare in the absence of broader reforms. He stressed that the additional dedicated dollars should be used in conjunction with important reforms which would modernize the program by providing market-oriented purchasing tools, additional savings, and a long-overdue prescription drug benefit.
The President's Framework Would Also Allocate Projected Surpluses To Provide Tax Relief for Retirement Security and To Prepare America for the Challenges of the Future:
Create New Universal Savings Accounts -- USA Accounts. After we save Social Security, the President would allocate 12 percent of the projected surpluses to create new Universal Savings Accounts (USAs). USA Accounts would be a $536 billion tax cut over the next 15 years to help Americans save for their futures, providing Americans a flat tax credit to make contributions into their USA Account and additional tax credits to match a portion of an individual's savings -- with more help for lower-income workers. Prepare America for the Challenges of the Future. And after Social Security reform is secured, the President's framework would allocate 11 percent of the projected surpluses for military readiness and other pressing domestic priorities. ###