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United States Government Accountability Office: 

A Look at Our Future: Examining Women's Retirement Security: 

WISER Symposium: 
October 27, 2005: 

The Honorable David M. Walker: 
Comptroller General of the United States: 

GAO's Strategic Plan: 

[See PDF for image] - graphic text: 

Serving the Congress and the Nation: 

GAO's Strategic Plan Framework: 

Mission: 

GAO exists to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. 

Themes: 

* Long-term Fiscal Imbalance; 

* National Security; 

* Global interdependence; 

* Changing Economy; 

* Demographics; 

* Science and Technology; 

* Quality of Life; 

* Governance; 

Goals and Objectives: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-Being 
and Financial Security of the American People related to: 

* Health care needs and financing; 

* Education and protection of children; 

* Work opportunities and worker protection; 

* Retirement income security; 

* Effective system of justice; 

* Viable communities; 

* Natural resources use and environmental protection; 

* Physical infrastructure; 

Respond to Changing Security Threats and the Challenges of Global 
Interdependence involving: 

* Emerging threats; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market forces; 

Help Transform the Federal Government's Role and How It Does Business 
to Meet 21st Century Challenges by assessing: 

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government; 

Maximize the Value of GAO by Being a Model Federal Agency and a World- 
Class Professional Services Organization in the areas of: 

* Client and customer service; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice; 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability; 

Source: GAO. 

GAO Strategic Plan 2004-2009. 

[End of strategic plan framework] 

Composition of Federal Spending: 

[See PDF for image] - graphic text 

3 pie charts with 5 items each. 

1964: 
Defense: 46.0%; 
Social Security: 14.0%; 
Medicare & Medicaid: 0%; 
Net interest: 7.0%; 
All other spending: 33.0%. 

1984: 
Defense: 27.0%; 
Social Security: 21.0%; 
Medicare & Medicaid: 9.0%; 
Net interest: 13.0%; 
All other spending: 30.0%. 

2004: 
Defense: 20.0%; 
Social Security: 22.0%; 
Medicare & Medicaid: 19.0%; 
Net interest: 7.0%; 
All other spending: 32.0%. 

Source: Office of Management and Budget. 

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] - graphic text 

3 pie charts with 3 items each. 

1964: 
Discretionary: 67%; 
Mandatory: 26%; 
Net Interest: 7%. 

1984: 
Discretionary: 45%; 
Mandatory: 42%; 
Net Interest: 13%. 

2004: 
Discretionary: 39%; 
Mandatory: 54%; 
Net Interest: 7%. 

Source: Office of Management and Budget. 

[End of figure] 

Fiscal Year 2004 Deficit Numbers: 

On-Budget Deficit; 
-$567 Billion; 
-4.9% of GDP. 

Off-Budget Surplus; 
$155 Billion; 
1.3% of GDP. 

Unified Deficit; 
-$412 Billion; 
-3.6% of GDP. 

* Includes the $151 billion Social Security surplus and a $4 billion 
surplus for the Postal Service. 

March 2005. 

[End of table] 

Surplus or Deficit as a Share of GDP: Fiscal Years 1962-2004: 

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 1 line (Unified) and 43 bars. 

Fiscal year: 1962; 
On-budget: -1%; 
Off-budget: -0.2%; 
Unified: -1.3%. 

Fiscal year: 1963; 
On-budget: -0.7%; 
Off-budget: -0.1%; 
Unified: -0.8%. 

Fiscal year: 1964; 
On-budget: -1%; 
Off-budget: 0.1%; 
Unified: -0.9%. 

Fiscal year: 1965; 
On-budget: -0.2%; 
Off-budget: No data; 
Unified: -0.2%. 

Fiscal year: 1966; 
On-budget: -0.4%; 
Off-budget: -0.1%; 
Unified: -0.5%. 

Fiscal year: 1967; 
On-budget: -1.6%; 
Off-budget: 0.5%; 
Unified: -1.1%. 

Fiscal year: 1968; 
On-budget: -3.2%; 
Off-budget: 0.3%; 
Unified: -2.9%. 

Fiscal year: 1969; 
On-budget: -0.1%; 
Off-budget: 0.4%; 
Unified: 0.3%. 

Fiscal year: 1970; 
On-budget: -0.9%; 
Off-budget: 0.6%; 
Unified: -0.3%. 

Fiscal year: 1971; 
On-budget: -2.4%; 
Off-budget: 0.3%; 
Unified: -2.1%. 

Fiscal year: 1972; 
On-budget: -2.2%; 
Off-budget: 0.3%; 
Unified: -2%. 

Fiscal year: 1973; 
On-budget: -1.2%; 
Off-budget: No data; 
Unified: -1.1%. 

Fiscal year: 1974; 
On-budget: -0.6%; 
Off-budget: 0.1%; 
Unified: -0.4%. 

Fiscal year: 1975; 
On-budget: -3.5%; 
Off-budget: 0.1%; 
Unified: -3.4%. 

Fiscal year: 1976; 
On-budget: -4.1%; 
Off-budget: -0.2%; 
Unified: -4.2%. 

Fiscal year: 1977; 
On-budget: -2.5%; 
Off-budget: -0.2%; 
Unified: -2.7%. 

Fiscal year: 1978; 
On-budget: -2.5%; 
Off-budget: -0.2%; 
Unified: -2.7%. 

Fiscal year: 1979; 
On-budget: -1.5%; 
Off-budget: -0.1%; 
Unified: -1.6%. 

Fiscal year: 1980; 
On-budget: -2.7%; 
Off-budget: No data; 
Unified: -2.7%. 

Fiscal year: 1981; 
On-budget: -2.4%; 
Off-budget: -0.2%; 
Unified: -2.6%. 

Fiscal year: 1982; 
On-budget: -3.7%; 
Off-budget: -0.2%; 
Unified: -4%. 

Fiscal year: 1983; 
On-budget: -6%; 
Off-budget: No data; 
Unified: -6%. 

Fiscal year: 1984; 
On-budget: -4.8%; 
Off-budget: No data; 
Unified: -4.8%. 

Fiscal year: 1985; 
On-budget: -5.3%; 
Off-budget: 0.2%; 
Unified: -5.1%. 

Fiscal year: 1986; 
On-budget: -5.4%; 
Off-budget: 0.4%; 
Unified: -5%. 

Fiscal year: 1987; 
On-budget: -3.6%; 
Off-budget: 0.4%; 
Unified: -3.2%. 

Fiscal year: 1988; 
On-budget: -3.9%; 
Off-budget: 0.8%; 
Unified: -3.1%. 

Fiscal year: 1989; 
On-budget: -3.8%; 
Off-budget: 1%; 
Unified: -2.8%. 

Fiscal year: 1990; 
On-budget: -4.8%; 
Off-budget: 1%; 
Unified: -3.9%. 

Fiscal year: 1991; 
On-budget: -5.4%; 
Off-budget: 0.9%; 
Unified: -4.5%. 

Fiscal year: 1992; 
On-budget: -5.5%; 
Off-budget: 0.8%; 
Unified: -4.7%. 

Fiscal year: 1993; 
On-budget: -4.6%; 
Off-budget: 0.7%; 
Unified: -3.9%. 

Fiscal year: 1994; 
On-budget: -3.7%; 
Off-budget: 0.8%; 
Unified: -2.9%. 

Fiscal year: 1995; 
On-budget: -3.1%; 
Off-budget: 0.9%; 
Unified: -2.2%. 

Fiscal year: 1996; 
On-budget: -2.3%; 
Off-budget: 0.9%; 
Unified: -1.4%. 

Fiscal year: 1997; 
On-budget: -1.3%; 
Off-budget: 1%; 
Unified: -0.3%. 

Fiscal year: 1998; 
On-budget: -0.3%; 
Off-budget: 1.1%; 
Unified: 0.8%. 

Fiscal year: 1999; 
On-budget: No data; 
Off-budget: 1.4%; 
Unified: 1.4%. 

Fiscal year: 2000; 
On-budget: 0.9%; 
Off-budget: 1.5%; 
Unified: 2.4%. 

Fiscal year: 2001; 
On-budget: -0.3%; 
Off-budget: 1.6%; 
Unified: 1.3%. 

Fiscal year: 2002; 
On-budget: -3.1%; 
Off-budget: 1.5%; 
Unified: -1.5%. 

Fiscal year: 2003; 
On-budget: -4.9%; 
Off-budget: 1.5%; 
Unified: -3.5%. 

Fiscal year: 2004; 
On-budget: -4.9%; 
Off-budget: 1.3%; 
Unified: -3.6%. 

Source: Office of Management and Budget and Congressional Budget 
Office. 

[End of figure] 

Estimated Fiscal Exposures (in $ trillions): 

Explicit liabilities (Publicly held debt, military & civilian pensions 
& retiree health, other); 
2000: $6.9; 
2002: $7.8; 
2004: $9.1. 

Commitments & Contingencies: e.g., PBGC, undelivered orders; 
2000: $0.5; 
2002: $0.8; 
2004: $0.9. 

Implicit exposures; 
2000: $13.0; 
2002: $17.8; 
2004: $33.3. 

Implicit exposures: Future Social Security benefits; 
2000: $3.8; 
2002: $4.6; 
2004: $5.2. 

Implicit exposures: Future Medicare Part A benefits; 
2000: $2.7; 
2002: $5.1; 
2004: $8.5. 

Implicit exposures: Medicare Part B benefits; 
2000: $6.5; 
2002: $8.1; 
2004: $11.4. 

Implicit exposures: Medicare Part D benefits; 
2004: $8.1. 

Total; 
2000: $20.4; 
2002: $26.4; 
2004: $43.3. 

Sources: Consolidated Financial Statements. 

Note: Estimates for Social Security and Medicare are PV as of January 1 
of each year as reported in the Consolidated Financial Statements and 
all other data are as of September 30. The 2005 Trustees Reports issued 
in March of this year show that the Social Security and Medicare 
exposures have increased as follows: Social Security increased to $5.7 
trillion, Medicare Part A increased to $8.8 trillion, Medicare Part B 
increased to $12.4 trillion and Part D increased to $8.7 trillion. 
Totals may not add due to rounding. 

[End of table] 

How Big is Our Growing Fiscal Burden? 

Our total fiscal burden can be translated and compared as follows: 

Total fiscal exposures: $43.3 trillion; 
Total household net worth: $48.5 trillion: 
* Burden/Net worth ratio: 89 percent. 

Burden: 
Per person: $147,000; 
Per full-time worker: $350,000; 
Per household: $383,000. 

Income: 
Median household income: $44,389; 
Disposable personal income per capita: $29,475. 

Note: Net worth and income data are calendar year 2004 levels. 

Sources: Federal Reserve Board for household net worth; Census Bureau 
for median household income; and the Bureau of Economic Analysis for 
disposable personal income per capita. 

[End of table] 

Composition of Spending as a Share of GDP Under Baseline Extended: 

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2004; 
Net interest: 1.4%; 
Social Security: 4.4%; 
Medicare & Medicaid: 3.8%; 
All other spending: 10.4%; 
Revenue: 16.3%. 

2015; 
Net interest: 1.8%; 
Social Security: 4.7%; 
Medicare & Medicaid: 5.3%; 
All other spending: 8.1%; 
Revenue: 19.5%. 

2030; 
Net interest: 2.8%; 
Social Security: 6.4%; 
Medicare & Medicaid: 8%; 
All other spending: 8.1%; 
Revenue: 19.5%. 

2040; 
Net interest: 5.7%; 
Social Security: 6.9%; 
Medicare & Medicaid: 9.7%; 
All other spending: 8.1%; 
Revenue: 19.5%. 

Notes: In addition to the expiration of tax cuts, revenue as a share of 
GDP increases through 2015 due to (1) real bracket creep, (2) more 
taxpayers becoming subject to the AMT, and (3) increased revenue from 
tax-deferred retirement accounts. After 2015, revenue as a share of GDP 
is held constant. 

Source: GAO’s August 2005 analysis. 

[End of figure] 

Composition of Spending as a Share of GDP Assuming Discretionary 
Spending Grows with GDP after 2005 and All Expiring Tax Provisions are 
Extended: 

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2004; 
Net interest: 1.4%; 
Social Security: 4.4%; 
Medicare & Medicaid: 3.8%; 
All other spending: 10.4%; 
Revenue: 16.3%. 

2015; 
Net interest: 2.8%; 
Social Security: 4.7%; 
Medicare & Medicaid: 5.3%; 
All other spending: 9.9%; 
Revenue: 17.4. 

2030; 
Net interest: 8%; 
Social Security: 6.7%; 
Medicare & Medicaid: 8%; 
All other spending: 9.9%; 
Revenue: 17.4%. 

2040; 
Net interest: 15.8%; 
Social Security: 7.7%; 
Medicare & Medicaid: 9.7%; 
All other spending: 9.9%; 
Revenue: 17.4%. 

Notes: Although expiring tax provisions are extended, revenue as a 
share of GDP increases through 2015 due to (1) real bracket creep, (2) 
more taxpayers becoming subject to the AMT, and (3) increased revenue 
from tax-deferred retirement accounts. After 2015, revenue as a share 
of GDP is held constant. 

Source: GAO's August 2005 analysis. 

[End of figure] 

Current Fiscal Policy Is Unsustainable: 

The “Status Quo” is Not an Option: 

* We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs. 

* GAO’s simulations show that balancing the budget in 2040 could 
require actions as large as: 

- Cutting total federal spending by about 60 percent or
- Raising taxes to about 2.5 times today's level. 

Faster Economic Growth Can Help, but It Cannot Solve the Problem: 

* Closing the current long-term fiscal gap based on responsible 
assumptions would require real average annual economic growth in the 
double digit range every year for the next 75 years. 

* During the 1990s, the economy grew at an average 3.2 percent per 
year. 

* As a result, we cannot simply grow our way out of this problem. Tough 
choices will be required. 

The Way Forward: 

Implement new accounting and reporting approaches and new budget 
control mechanisms for considering the impact of spending and tax 
policies and decisions over the long term. 

Develop new metrics for measuring the impact of policies and decisions 
over the long term (e.g., key national indicators to measure our 
Nation’s position and progress over time and in relation to other 
countries). 

Reexamine the base—question existing programs, policies and activities. 

21st Century Challenges Report: 

Provides background, framework, and questions to assist in reexamining 
the base. 

Covers entitlements & other mandatory spending, discretionary spending, 
and tax policies and programs. 

Based on GAO's work for the Congress. 

Issued February 16, 2005. 

Generic Reevaluation Criteria and Sample Questions: 

Relevance of purpose and the federal role: 

Why did the federal government initiate this program and what was the 
government trying to accomplish? 

Have there been significant changes in the country or the world that 
relate to the reason for initiating it? 

Measuring success: 

Are there outcome-based measures? If not, why? 

If there are outcome-based measures, how successful is it based on 
these measures? 

Targeting benefits: 

Is it well targeted to those with the greatest needs and the least 
capacity to meet those needs? 

Affordability and cost effectiveness: 

Is it using the most cost-effective or net beneficial approaches when 
compared to other tools and program designs? 

Best practices: 

Is the responsible entity employing prevailing best practices to 
discharge its responsibilities and achieve its mission? 

Illustrative 21st Century Questions: Retirement and Disability Policy: 

What changes should be made to enhance the retirement income security 
of workers while protecting the fiscal integrity of the PBGC insurance 
program (for example, increasing transparency in connection with 
underfunded plans, modifying PBGC's premium structure and insurance 
guarantees, reforming plan funding rules, or restricting benefit 
increases and the distribution of lump sum benefits in connection with 
certain underfunded plans)? 

How can existing policies be reformed to encourage income preservation 
strategies so that retirement income lasts an individual's entire life 
(for example, benefit annuitization)? 

How can federal disability programs, and their eligibility criteria, be 
brought into line with the current state of science, medicine, 
technology, and labor market conditions (for example, which jobs are 
based on knowledge and skills rather than on strength and endurance)? 
How can such programs better facilitate the participation of people 
with disabilities in the workforce and society? 

What options could be considered for reforming VA's current disability 
benefits structure for veterans (such as revisiting the definition of 
service-connected benefits) that would ensure appropriate and adequate 
benefits? 

Illustrative 21st Century Questions: Health Care: 

How can we perform a systematic reexamination of our current health 
care system? For example, could public and private entities work 
jointly to establish formal reexamination processes that would (1) 
define and update as needed a minimum core of essential health care 
services, (2) ensure that all Americans have access to the defined 
minimum core services, (3) allocate responsibility for financing these 
services among such entities as government, employers, and individuals, 
and (4) provide the opportunity for individuals to obtain additional 
services at their discretion and cost? 

Key Elements for Economic Security in Retirement: 

Adequate retirement income: 

* Social Security; 
* Pensions; 
* Savings; 
* Earnings from continued employment (e.g., part-time). 

Affordable health care: 

* Medicare; 
* Retiree health care. 

Long-term care (a hybrid). 

Major Players: 

* Employers; 
* Government; 
* Individuals; 
* Family; 
* Community. 

U.S. Elderly Dependency Ratio Expected to Continue to Increase: 

[See PDF for image] – graphic text: 

Line chart with one line and 5 items. 

Year: 1950; 
Elderly Dependency Ratio (in percent): 13%. 

Year: 1980; 
Elderly Dependency Ratio (in percent): 17%. 

Year: 2000; 
Elderly Dependency Ratio (in percent): 19%. 

Year: 2030; 
Elderly Dependency Ratio (in percent): 33%. 

Year: 2050; 
Elderly Dependency Ratio (in percent): 35%. 

Source: Population Division of the Department of Economic and Social 
Affairs of the United Nations Secretariat, World Population Prospects: 
2000 Revision and World Urbanization Prospects: 2001 Revision. 

[End of figure] 

U.S. Labor Force Growth Will Continue to Decline: 

[See PDF for image] –graphic text: 

Line chart with one line and 111 items. 

Year: 1970; 
Percentage change (5-year moving average): 2.38%. 

Year: 1971; 
Percentage change (5-year moving average): 2.56%. 

Year: 1972; 
Percentage change (5-year moving average): 2.64%. 

Year: 1973; 
Percentage change (5-year moving average): 2.52%. 

Year: 1974; 
Percentage change (5-year moving average): 2.64%. 

Year: 1975; 
Percentage change (5-year moving average): 2.6%. 

Year: 1976; 
Percentage change (5-year moving average): 2.72%. 

Year: 1977; 
Percentage change (5-year moving average): 2.68%. 

Year: 1978; 
Percentage change (5-year moving average): 2.66%. 

Year: 1979; 
Percentage change (5-year moving average): 2.48%. 

Year: 1980; 
Percentage change (5-year moving average): 2.18%. 

Year: 1981; 
Percentage change (5-year moving average): 1.76%. 

Year: 1982; 
Percentage change (5-year moving average): 1.58%. 

Year: 1983; 
Percentage change (5-year moving average): 1.54%. 

Year: 1984; 
Percentage change (5-year moving average): 1.64%. 

Year: 1985; 
Percentage change (5-year moving average): 1.7%. 

Year: 1986; 
Percentage change (5-year moving average): 1.76%. 

Year: 1987; 
Percentage change (5-year moving average): 1.76%. 

Year: 1988; 
Percentage change (5-year moving average): 1.74%. 

Year: 1989; 
Percentage change (5-year moving average): 1.4%. 

Year: 1990; 
Percentage change (5-year moving average): 1.34%. 

Year: 1991; 
Percentage change (5-year moving average): 1.2%. 

Year: 1992; 
Percentage change (5-year moving average): 1.12%. 

Year: 1993; 
Percentage change (5-year moving average): 1%. 

Year: 1994; 
Percentage change (5-year moving average): 1.16%. 

Year: 1995; 
Percentage change (5-year moving average): 1.24%. 

Year: 1996; 
Percentage change (5-year moving average): 1.28%. 

Year: 1997; 
Percentage change (5-year moving average): 1.24%. 

Year: 1998; 
Percentage change (5-year moving average): 1.5%. 

Year: 1999; 
Percentage change (5-year moving average): 1.42%. 

Year: 2000; 
Percentage change (5-year moving average): 1.22%. 

Year: 2001; 
Percentage change (5-year moving average): 1.26%. 

Year: 2002; 
Percentage change (5-year moving average): 1.28%. 

Year: 2003; 
Percentage change (5-year moving average): 1.14%. 

Year: 2004; 
Percentage change (5-year moving average): 1.24%. 

Year: 2005; 
Percentage change (5-year moving average): 1.3%. 

Year: 2006; 
Percentage change (5-year moving average): 1.26%. 

Year: 2007; 
Percentage change (5-year moving average): 1.18%. 

Year: 2008; 
Percentage change (5-year moving average): 1.02%. 

Year: 2009; 
Percentage change (5-year moving average): 0.92%. 

Year: 2010; 
Percentage change (5-year moving average): 0.82%. 

Year: 2011; 
Percentage change (5-year moving average): 0.74%. 

Year: 2012; 
Percentage change (5-year moving average): 0.66%. 

Year: 2013; 
Percentage change (5-year moving average): 0.6%. 

Year: 2014; 
Percentage change (5-year moving average): 0.52%. 

Year: 2015; 
Percentage change (5-year moving average): 0.48%. 

Year: 2016; 
Percentage change (5-year moving average): 0.44%. 

Year: 2017; 
Percentage change (5-year moving average): 0.42%. 

Year: 2018; 
Percentage change (5-year moving average): 0.38%. 

Year: 2019; 
Percentage change (5-year moving average): 0.36%. 

Year: 2020; 
Percentage change (5-year moving average): 0.34%. 

Year: 2021; 
Percentage change (5-year moving average): 0.3%. 

Year: 2022; 
Percentage change (5-year moving average): 0.26%. 

Year: 2023; 
Percentage change (5-year moving average): 0.24%. 

Year: 2024; 
Percentage change (5-year moving average): 0.22%. 

Year: 2025; 
Percentage change (5-year moving average): 0.2%. 

Year: 2026; 
Percentage change (5-year moving average): 0.2%. 

Year: 2027; 
Percentage change (5-year moving average): 0.2%. 

Year: 2028; 
Percentage change (5-year moving average): 0.2%. 

Year: 2029; 
Percentage change (5-year moving average): 0.22%. 

Year: 2030; 
Percentage change (5-year moving average): 0.24%. 

Year: 2031; 
Percentage change (5-year moving average): 0.26%. 

Year: 2032; 
Percentage change (5-year moving average): 0.28%. 

Year: 2033; 
Percentage change (5-year moving average): 0.3%. 

Year: 2034; 
Percentage change (5-year moving average): 0.3%. 

Year: 2035; 
Percentage change (5-year moving average): 0.3%. 

Year: 2036; 
Percentage change (5-year moving average): 0.3%. 

Year: 2037; 
Percentage change (5-year moving average): 0.3%. 

Year: 2038; 
Percentage change (5-year moving average): 0.3%. 

Year: 2039; 
Percentage change (5-year moving average): 0.3%. 

Year: 2040; 
Percentage change (5-year moving average): 0.3%. 

Year: 2041; 
Percentage change (5-year moving average): 0.3%. 

Year: 2042; 
Percentage change (5-year moving average): 0.3%. 

Year: 2043; 
Percentage change (5-year moving average): 0.3%. 

Year: 2044; 
Percentage change (5-year moving average): 0.3%. 

Year: 2045; 
Percentage change (5-year moving average): 0.3%. 

Year: 2046; 
Percentage change (5-year moving average): 0.28%. 

Year: 2047; 
Percentage change (5-year moving average): 0.26%. 

Year: 2048; 
Percentage change (5-year moving average): 0.24%. 

Year: 2049; 
Percentage change (5-year moving average): 0.22%. 

Year: 2050; 
Percentage change (5-year moving average): 0.2%. 

Year: 2051; 
Percentage change (5-year moving average): 0.2%. 

Year: 2052; 
Percentage change (5-year moving average): 0.2%. 

Year: 2053; 
Percentage change (5-year moving average): 0.2%. 

Year: 2054; 
Percentage change (5-year moving average): 0.2%. 

Year: 2055; 
Percentage change (5-year moving average): 0.2%. 

Year: 2056; 
Percentage change (5-year moving average): 0.2%. 

Year: 2057; 
Percentage change (5-year moving average): 0.2%. 

Year: 2058; 
Percentage change (5-year moving average): 0.2%. 

Year: 2059; 
Percentage change (5-year moving average): 0.2%. 

Year: 2060; 
Percentage change (5-year moving average): 0.2%. 

Year: 2061; 
Percentage change (5-year moving average): 0.2%. 

Year: 2062; 
Percentage change (5-year moving average): 0.2%. 

Year: 2063; 
Percentage change (5-year moving average): 0.2%. 

Year: 2064; 
Percentage change (5-year moving average): 0.2%. 

Year: 2065; 
Percentage change (5-year moving average): 0.2%. 

Year: 2066; 
Percentage change (5-year moving average): 0.2%. 

Year: 2067; 
Percentage change (5-year moving average): 0.2%. 

Year: 2068; 
Percentage change (5-year moving average): 0.2%. 

Year: 2069; 
Percentage change (5-year moving average): 0.2%. 

Year: 2070; 
Percentage change (5-year moving average): 0.2%. 

Year: 2071; 
Percentage change (5-year moving average): 0.2%. 

Year: 2072; 
Percentage change (5-year moving average): 0.2%. 

Year: 2073; 
Percentage change (5-year moving average): 0.2%. 

Year: 2074; 
Percentage change (5-year moving average): 0.2%. 

Year: 2075; 
Percentage change (5-year moving average): 0.2%. 

Year: 2076; 
Percentage change (5-year moving average): 0.2%. 

Year: 2077; 
Percentage change (5-year moving average): 0.2%. 

Year: 2078; 
Percentage change (5-year moving average): 0.2%. 

Year: 2079; 
Percentage change (5-year moving average): 0.2%. 

Year: 2080; 
Percentage change (5-year moving average): 0.2%. 

Note: Percentage change is calculated as a centered 5-yr moving average 
of projections based on the intermediate assumptions of the 2005 
Trustees Reports. 

Source: GAO analysis of data from the Office of the Chief Actuary, 
Social Security Administration. 

[End of figure] 

Social Security and Medicare’s Hospital Insurance Trust Funds Face Cash 
Deficits: 

[See PDF for image] – graphic text: 

Stacked Bar chart with 41 items. 

Billions of 2005 dollars. 

Year: 2000; 
Medicare HI cash flow: $27.20; 
Social Security cash flow: $99.10. 

Year: 2001; 
Medicare HI cash flow: $18.70; 
Social Security cash flow: $98.02. 

Year: 2002; 
Medicare HI cash flow: $11.80; 
Social Security cash flow: $90.98. 

Year: 2003; 
Medicare HI cash flow: $5.70; 
Social Security cash flow: $71.20. 

Year: 2004; 
Medicare HI cash flow: -$2.80; 
Social Security cash flow: $68.58. 

Medicare HI cash deficit: 2004. 

Year: 2005; 
Medicare HI cash flow: -$1.00; 
Social Security cash flow: $69.50. 

Year: 2006; 
Medicare HI cash flow: -$1.00; 
Social Security cash flow: $84.80. 

Year: 2007; 
Medicare HI cash flow: -$1.90; 
Social Security cash flow: $88.70. 

Year: 2008; 
Medicare HI cash flow: -$2.80; 
Social Security cash flow: $90.20. 

Year: 2009; 
Medicare HI cash flow: -$6.30; 
Social Security cash flow: $84.00. 

Year: 2010; 
Medicare HI cash flow: -$7.90; 
Social Security cash flow: $80.20. 

Year: 2011; 
Medicare HI cash flow: -$10.20; 
Social Security cash flow: $75.60. 

Year: 2012; 
Medicare HI cash flow: -$14.10; 
Social Security cash flow: $65.30. 

Year: 2013; 
Medicare HI cash flow: -$18.60; 
Social Security cash flow: $52.90. 

Year: 2014; 
Medicare HI cash flow: -$23.60; 
Social Security cash flow: $38.50. 

Year: 2015; 
Medicare HI cash flow: -$29.80; 
Social Security cash flow: $24.30. 

Year: 2016; 
Medicare HI cash flow: -$36.40; 
Social Security cash flow: $8.20. 

Year: 2017; 
Medicare HI cash flow: -$43.40; 
Social Security cash flow: -$8.80. 

Social Security cash deficit: 2017. 

Year: 2018; 
Medicare HI cash flow: -$51.40; 
Social Security cash flow: -$26.40. 

Year: 2019; 
Medicare HI cash flow: -$60.30; 
Social Security cash flow: -$44.70. 

Year: 2020; 
Medicare HI cash flow: -$69.30; 
Social Security cash flow: -$64.20. 

Year: 2021; 
Medicare HI cash flow: -$79.70; 
Social Security cash flow: -$83.90. 

Year: 2022; 
Medicare HI cash flow: -$91.40; 
Social Security cash flow: -$103.80. 

Year: 2023; 
Medicare HI cash flow: -$103.00; 
Social Security cash flow: -$123.70. 

Year: 2024; 
Medicare HI cash flow: -$115.70; 
Social Security cash flow: -$143.90. 

Year: 2025; 
Medicare HI cash flow: -$129.40; 
Social Security cash flow: -$164.30. 

Year: 2026; 
Medicare HI cash flow: -$143.30; 
Social Security cash flow: -$184.90. 

Year: 2027; 
Medicare HI cash flow: -$157.00; 
Social Security cash flow: -$204.40. 

Year: 2028; 
Medicare HI cash flow: -$171.40; 
Social Security cash flow: -$222.70. 

Year: 2029; 
Medicare HI cash flow: -$186.50; 
Social Security cash flow: -$239.70. 

Year: 2030; 
Medicare HI cash flow: -$203.10; 
Social Security cash flow: -$255.90. 

Year: 2031; 
Medicare HI cash flow: -$219.70; 
Social Security cash flow: -$271.60. 

Year: 2032; 
Medicare HI cash flow: -$236.20; 
Social Security cash flow: -$286.00. 

Year: 2033; 
Medicare HI cash flow: -$253.00; 
Social Security cash flow: -$298.60. 

Year: 2034; 
Medicare HI cash flow: -$271.00; 
Social Security cash flow: -$309.30. 

Year: 2035; 
Medicare HI cash flow: -$289.60; 
Social Security cash flow: -$319.00. 

Year: 2036; 
Medicare HI cash flow: -$307.80; 
Social Security cash flow: -$327.80. 

Year: 2037; 
Medicare HI cash flow: -$325.30; 
Social Security cash flow: -$335.40. 

Year: 2038; 
Medicare HI cash flow: -$342.80; 
Social Security cash flow: -$341.80. 

Year: 2039; 
Medicare HI cash flow: -$360.60; 
Social Security cash flow: -$347.30. 

Year: 2040; 
Medicare HI cash flow: -$379.20; 
Social Security cash flow: -$352.50. 

Note: Projections based on the intermediate assumptions of the 2005 
Trustees’ Reports. 

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration and Office of the Actuary, 
Centers for Medicare and Medicaid Services. 

[End of figure] 

Key Dates Highlight Long Term Challenges of the Social Security System: 

Date: 2009; 
Event: Social Security cash surplus begins to decline. 

Date: 2017; 
Event: Annual benefit costs exceed cash revenue from taxes. 

Date: 2027; 
Event: Trust fund ceases to grow because even taxes plus interest fall 
short of benefits. 

Dates: 2041 (SSA), 2052 (CBO); 
Event: Trust fund exhausted, annual revenues sufficient to pay about 
74% - 78% of promised benefits. 

Sources: Social Security Administration, The 2005 Annual Report of the 
Board of Trustees of the Federal Old-Age and Survivors Insurance and 
Disability Insurance Trust Funds. Washington, DC, March 2005. 
Congressional Budget Office, The Outlook for Social Security. Potential 
Range of Social Security Outlays and Revenues Under Current Law. 
Washington, DC, June 2004 (updated April 2005). 

GAO Criteria for Evaluating Social Security Reform Proposals: 

Reform proposals should be evaluated as packages that strike a balance 
among individual reform elements and important interactive effects. 

Comprehensive proposals can be evaluated against three basic criteria: 

* Financing sustainable solvency; 
* Balancing adequacy and equity in the benefits structure; 
* Implementing and administering reforms. 

Several Reforms Might Improve Plan Funding and Reduce the Risks to 
PBGC's Long-term Viability: 

* Strengthen funding rules applicable to poorly funded plans; 
* Consider additional tax deductible funding flexibility; 
* Limit lump sums in underfunded plans; 
* Modify program guarantees (e.g., phase-in rules); 
* Raise and modify pension premiums (e.g., nature of risk related 
premiums); 
* Eliminate floor/offset arrangements with significant investment 
concentrations in employer securities; 
* Increase transparency of current plan funding information; 
* Modify bankruptcy laws; 
* Address issues surrounding certain hybrid plans (e.g., cash balance 
plans). 

Key Dates Highlight Long Term Challenges of the Medicare Program: 

Date: 2004; 
Event: HI outlays exceed cash income. 

Date: 2007; 
Event: Estimated trigger date for "Medicare funding warning.": 

Date: 2012; 
Event: Projected date that annual "general revenue funding" will exceed 
45 percent of total Medicare outlays. 

Date: 2020; 
Event: HI (Part A) trust fund exhausted, annual income sufficient to 
pay about 79% of HI promised benefits. 

Source: 2005 Annual Report of The Boards of Trustees of The Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds Washington, DC, March 2005. 

[End of table] 

SMI Premium as Share of Average Social Security (OASI) Benefit: 

[See PDF for image] - graphic text: 

Line graph with 17 items. 

Year: 1990; 
Percent of average OASI benefit: 5.43%. 

Year: 1991; 
Percent of average OASI benefit: 5.34%. 

Year: 1992; 
Percent of average OASI benefit: 5.44%. 

Year: 1993; 
Percent of average OASI benefit: 6.03%. 

Year: 1994; 
Percent of average OASI benefit: 6.55%. 

Year: 1995; 
Percent of average OASI benefit: 7.09%. 

Year: 1996; 
Percent of average OASI benefit: 6.32%. 

Year: 1997; 
Percent of average OASI benefit: 6.27%. 

Year: 1998; 
Percent of average OASI benefit: 6.08%. 

Year: 1999; 
Percent of average OASI benefit: 6.19%. 

Year: 2000; 
Percent of average OASI benefit: 5.97%. 

Year: 2001; 
Percent of average OASI benefit: 6.27%. 

Year: 2002; 
Percent of average OASI benefit: 6.53%. 

Year: 2003; 
Percent of average OASI benefit: 6.93%. 

Year: 2004; 
Percent of average OASI benefit: 7.61%. 

Year: 2005; 
Percent of average OASI benefit: 8.63%. 

Year: 2006; 
Percent of average OASI benefit: 9.51%. 

Note: Data for 2006 are based on the announced SMI monthly premium of 
$88.50 and do not include the Medicare Prescription Drug premium. In 
August, the Centers for Medicare & Medicaid Services estimated that the 
national average monthly premium for prescription drug coverage 
equivalent to the Medicare standard coverage would be $32.20. 

Source: CMS, Office of the Actuary. 

[End of figure] 

Health Expenditures Will Continue to Absorb an Increasing Share of GDP: 

[See PDF for image] - graphic text: 

Bar chart with five items. 

Year: 1973; 
Percentage of GDP: 7.3%. 

Year: 1983; 
Percentage of GDP: 10.0%. 

Year: 1993; 
Percentage of GDP: 13.3%. 

Year: 2003; 
Percentage of GDP: 15.3%. 

Year: 2013; 
Percentage of GDP: 18.3%. 

Note: The figure for 2013 is projected. 

Source: The Centers for Medicare & Medicaid Services, Office of the 
Actuary. 

[End of figure] 

The United States Exceeds Other Industrialized Nations in Total Health 
Spending as a Percentage of GDP: 

[See PDF for image] - graphic text: 

Bar chart with seven items. 

Country: United States; 
Percentage of GDP: 15.3%. 

Country: Germany; 
Percentage of GDP: 11.1%. 

Country: France; 
Percentage of GDP: 10.1%. 

Country: Canada; 
Percentage of GDP: 9.9%. 

Country: Sweden; 
Percentage of GDP: 9.2%. 

Country: Japan; 
Percentage of GDP: 7.9%. 

Country: U.K.; 
Percentage of GDP: 7.7%. 

Note: Data for Sweden, Japan, and the United Kingdom are from 2002. All 
other data are for 2003. 

Source: Organization for Economic Cooperation and Development (OECD) 
Health Data 2005. 

[End of figure] 

Health Insurance Coverage in 2004, Women and Men Ages 18 to 64: 

[See PDF for image] - graphic text: 

Stacked bar chart with two groups with six items each. 

Employer-sponsored, primary; 
Women: 35%; 
Men: 49%. 

Employer-sponsored, dependent; 
Women: 29%; 
Men: 13%.

Uninsured; 
Women: 17%; 
Men: 20%. 

Medicaid; 
Women: 7%; 
Men: 3%. 

Individually purchased; 
Women: 5%; 
Men: 8%. 

Other*; 
Women: 6%; 
Men: 6%. 

Source: Kaiser Family Foundation, Women and Health Care: A National 
Profile, July 2005. 

* Other includes Medicare, CHAMPUS, TRICARE, and unknown insurance. 

[End of figure] 

Health Care Is the Nation's Top Tax Expenditure in Fiscal Year 2004 
(estimated): 

[See PDF for image] - graphic text: 

Bar chart with five items: 

Exclusion of employer contributions for insurance premiums and medical 
care: $102.3. 
Deductibility of mortgage interest on owner-occupied dwellings: $61.5. 
Exclusion of pension contributions and earnings: employer-sponsored 
401(K) plans: $47.7. 
Exclusion of pension contributions and earnings: employer-sponsored 
defined benefit plans: $47. 
Deductibility of nonbusiness state and local taxes (other than on owner-
occupied dwellings): $45.3. 

Note: "Tax expenditures" refers to the special tax provisions that are 
contained in the federal income taxes on individuals and corporations. 
OMB does not include forgone revenue from other federal taxes such as 
Social Security and Medicare payroll taxes. 

* If the payroll tax exclusion were also counted here, the total tax 
expenditure for employer contributions for health insurance premiums 
would be about 50 percent higher or $153.5 billion. 

Source: Office of Management and Budget (OMB), Analytical Perspectives, 
Budget of the United States Government, Fiscal Year 2006. 

[End of figure] 

Quality and Availability of Affordable Health Care Has Broad 
Implications for Retirees: 

Cost, access, and quality challenges together with obstacles to 
achieving efficiency argue for fundamental system reform. 

A comprehensive review and reassessment of the overall health care 
system raises the following questions: 

* What are societal needs versus individual wants in our health care 
system? 

* Who among individuals, employers, and governments-should be 
responsible for paying for health care? 

* Where would we get the largest return for our efforts to control 
spending? 

* How much of health care costs can government, employers, and 
individuals afford and sustain over time? 

* When are we going to get started, as the challenge gets bigger 
everyday and any delay compounds the problems: 

Issues to Consider in Examining Cost, Access, and Quality Challenges: 

In reforming our health care system, the public needs to be educated 
about the differences between wants, needs, affordability, and 
sustainability at both the individual and aggregate level. 

Ideally, health care reform proposals will: 

* align incentives for providers and consumers to make prudent choices 
about health insurance coverage and prudent decisions about the use of 
medical services, 

* foster transparency with respect to the value and costs of care, and: 

* ensure from health plans and providers to meet standards for 
appropriate use and quality. 

Selected Potential Health Care Reform Approaches: 

Provide more transparency in connection with health care costs and 
outcomes. 

Employ case management approaches for people with expensive acute and 
chronic conditions to improve the quality and efficiency of care 
delivered and avoid inappropriate care. 

Leverage the government's purchasing authority to foster value-based 
purchasing for health care products and services. 

Foster the use of information technology to increase consistency, 
transparency, and accountability in health care. Use the Federal 
Employees Health Benefits Program (FEHBP) as a possible means to 
experiment and see the way forward. 

Develop a set of national practice standards to help avoid unnecessary 
care, improve outcomes, and reduce litigation. 

Revise certain federal tax preferences for health care to encourage the 
efficient use of appropriate care. 

Selected Potential Health Care Reform Approaches: 

Limit spending growth for government-sponsored health care programs 
(e.g., percentage of the budget and/or the economy). 

Pursue multinational approaches to investing in health care R&D. 

Develop a core set of basic and essential services with supplemental 
coverage being available as an option but at a cost. 

Create insurance pools for alternative levels of coverage, as 
necessary. 

Three Key Ingredients Needed for These Challenging and Changing Times: 

* Courage; 
* Integrity; 
* Innovation. 

[End of slide presentation]