Among those are lower future Cost-of-Living Adjustments (COLAs). Citing future changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which will directly affect COLAs, the annual increases were revised downward by 0.3 percentage point. The COLA that will become effective January 1, 2003, is estimated to be only 1.3%. To read more about the COLA changes, click here to read "COLAs Cut by CPI Changes." http://www.tscl.org/NewContent/101406.asp

Also cited as contributing to the short-term Trust Fund "improvement" are growing revenues from the taxation of Social Security benefits. Under current law, beneficiaries who have incomes below $25,000 (for individuals) or $32,000 (for couples) pay no taxes on benefits. But for those with incomes over $25,000 to $34,000 for individuals or over $32,000 to $44,000 for couples, up to 50% of their Social Security benefits are taxable. That revenue is allocated to the Social Security Trust Fund. For individuals with incomes over $34,000 or couples with incomes over $44,000, up to 85% of Social Security benefits may be taxable and that revenue is allocated to Medicare. Because those amounts are not adjusted annually, growing numbers of beneficiaries are affected.

The Trustees now estimate that the point at which tax revenues will fall below program costs for Social Security, often referred to as the "crisis date," comes in 2017. Although this is one year later than last year's forecast, this represents no change. Social Security has maintained a 15-year "cushion" for the past six years. The Trustees also declared that the program continues to be substantially under-financed for the long term.

Significant Statistics from the 2002 Social Security Trustees Report:

• 46 million beneficiaries on Social Security at the end of 2001.
• $163 billion surplus Social Security payroll taxes collected by end of 2001.
• $16.7 billion in taxes paid on Social Security benefits by end of 2001.
• $1.21 trillion the government owes to the Social Security Trust Fund by the end of 2001.

The point at which tax revenues are estimated to fall below program costs for the Medicare Hospital Insurance (Part A) Trust Fund is now 2016, also a year later than last year's forecast. Medicare Part B which pays for physician services remains adequately financed into the future because it receives about 75% of financing from general federal revenues. Trustees warn, however, that Part B spending is experiencing rapid growth-12% last year alone-and predict that costs will nearly double over the next 10 years. Rising Part B costs have a direct impact on Medicare beneficiaries since monthly premiums pay 25% of the program costs. Trustees now estimate that Medicare monthly premiums will rise from $54 to more than $90 by 2011.

In 2002, actual Medicare Premiums from the 2002 Medicare Trustees Report were $54.00.
The estimated Medicare Premiums from the 2002 Medicare Trustees Report for upcoming years are as follows:

• $57.00 in 2003
• $59.80 in 2004
• $63.90 in 2005
• $67.70 in 2006
• $71.60 in 2007
• $76.00 in 2008
• $80.60 in 2009
• $86.10 in 2010
• $90.80 in 2011

Sources: The 2002 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, and The 2002 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, March 26, 2002.

For more information on the Trustees Report, click here to read, "2002 Social Security Trustees Report Due Soon," at http://www.tscl.org/NewContent/101348.asp.

May 2002