Policy Documents

The 2004 Medicare and Social Security Trustees Reports

Andrew J. Rettenmaier and Thomas R. Saving –
June 1, 2004

The 2004 Medicare and Social Security Trustees Reports were released on March 23.  The cost estimates for Medicare's new prescription drug benefit and the worsening financial position of Medicare generated much public interest.  Other estimates of the new benefit's 10-year cost proved to be $150 billion higher than the Congressional Budget Office's initial calculations.  However, the real problem is not the near term; rather, it is the benefit's long-run expense.  The 2004 reports measure this cost, along with Medicare's other long-range unfunded liabilities, for the first time.  When combined with the long-run measures for Social Security, which were first reported last year, they reveal sizable burden for future taxpayers.

In this paper we focus on the highlights of the two Trustees reports.  The summary that accompanies their release provides an excellent outline of the main points in the two reports.  Specifically, we will concentrate on the program's implicit debts, the growth of the cash flow deficits, and their implied effect on the rest of the federal budget.