WASHINGTON (MNI) – The following is the text of the statement read
by Treasury Secretary Tim Geithner at the Social Security Trustees
briefing session under way:

The Social Security and Medicare Boards of Trustees met this
afternoon to complete their annual financial review of the programs and
to transmit their Reports to Congress. I welcome my fellow Trustees. I
also want to acknowledge the hard work and dedication of the chief
actuaries, Stephen Goss and Richard Foster, and their staffs, who worked
especially hard this year to incorporate the effects of health care
reform in the reports.

Seventy-five years ago this month, President Roosevelt signed the
Social Security Act into law, creating the program that tens of millions
of Americans now rely on to help them retire with economic security.
Thirty years later, President Johnson signed amendments to that law
creating Medicare, providing health insurance for our older Americans.
And this year, President Obama signed the Affordable Care Act, giving
Americans more control over their healthcare decisions, ending insurance
company abuses, and taking major steps to bring down health care costs
over the long term.

The impact of health care reform is made clear by the Trustees
Reports, which show some very positive developments for Social Security
and especially Medicare. But they also remind us that we must continue
to make progress addressing the financing challenges facing the
long-term solvency of these programs.

When we delivered our Reports last spring I argued that it was
imperative that we gain control of Medicare costs by delivering health
care services more efficiently, and that doing so requires a larger
effort to control health care costs and improve quality more generally.
With the recent enactment of the Affordable Care Act (ACA), we have
taken a huge step in that direction. This new law gives Americans more
control over their healthcare decisions, ends insurance company abuses
and will bring down health care costs over the long term.

The Affordable Care Act has dramatically improved projected
Medicare finances. Medicares Hospital Insurance (HI) Trust Fund is now
expected to remain solvent until 2029, 12 years longer than was
projected last year, which is a record increase from one report to the
next. In addition, the 75-year financial shortfall for HI has been
reduced to 0.66 percent of taxable payroll from 3.88 percent of taxable
payroll in last years report, and the projected costs for the Medicare
Supplementary Medical Insurance (SMI) program over the next 75 years,
expressed as a share of GDP, are down 23 percent relative to the
projections in the 2009 report Nearly all of these improvements in
projected Medicare finances are due to the Affordable Care Act President
Obama signed into law in March.

As impressive as these achievements are, there is still work to be
done. Although HI financing is projected to be sufficient until 2029,
the HI Trust Fund balance is expected to fall below one years projected
expenditure beginning in 2012, which means the test for short-range
financial adequacy is not met. And it is projected that SMI will
continue to put increasing pressure on the federal budget and
beneficiaries in the years ahead, though to a much lesser extent than
was projected last year, prior to the passage of the Affordable Care
Act. Over the next 75 years, SMI costs are expected to average 3.3
percent of GDP, which is 1.4 percentage points higher than the SMI cost
share of GDP was in 2009, so additional reform measures will be needed.
Those measures will be informed by experiments with alternative provider
payment mechanisms and patient care models that are authorized in the
ACA, as well as by the recommendations of the newly created Independent
Payment Advisory Board.

The Affordable Care Act also improves Social Securitys finances.
Starting in 2019, a new tax on high-cost health care plans is expected
to result in a shift in labor compensation from health insurance to
earnings, which are subject to Social Security and Medicare taxes. This
factor more than accounts for the reduction in Social Securitys
actuarial deficit to 1.92 percent of taxable payroll from 2.0 percent of
taxable payroll projected last year.

The recession has, however, somewhat worsened Social Securitys
very near term outlook. Benefit payments are expected to exceed tax
revenue for the first time this year, six years earlier than was
projected last year, but the improving economy is expected to result in
rough balance between Social Security taxes and expenditures for several
years before the retirement of the baby boom generation swells the
beneficiary population and causes deficits to grow rapidly. It is
projected that tax and interest income will be sufficient to pay
benefits through 2024, after which the Trust Fund will be drawn down
until depleted in 2037, the same date of Trust Fund exhaustion projected
last year. After 2037, it is expected that tax income will be
sufficient to finance more than three quarters of scheduled benefits.

Despite the projection that Social Security can continue to pay
full benefits for nearly 30 years, the sooner action is taken the more
options for reform will be available and the fairer reforms will be to
our children and grandchildren. Now that we have taken meaningful steps
to put Medicare on a sustainable path and moved quickly and aggressively
to rescue our economy and put us a path to continued future growth, we
must work to address the other intermediate- and long-term fiscal
imbalances that the federal government faces as well.

To that end, the President has proposed some important steps to put
us on a fiscally responsible path. First, the Administrations Budget
puts a three-year freeze on non-security discretionary funding. The
President reinstated pay-as-you budgeting that helped lead to the
economic prosperity of the 1990s. And the President has appointed a
bipartisan Fiscal Commission which will make further recommendations by
the end of the year. These measures, along with further healing of our
economy, will help make sure we have strong and sustainable growth that
will benefit all Americans.

** Market News International Washington Bureau: 202-371-2121 **

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