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Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. The Nation's Growing Fiscal Imbalance: David M. Walker: Comptroller General of the United States: Republican Main Street Partnership Forum: May 26, 2005: 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] GAO's High-Risk List: 2005: Addressing Challenges in Broad-based Transformations: High-Risk Areas: Protecting the Federal Government's Information Systems and the Nation's Critical Infrastructures; Year Designated High Risk: 1997. High-Risk Areas: Strategic Human Capital Management[A]; Year Designated High Risk: 2001. High-Risk Areas: U.S. Postal Service Transformation Efforts and Long- Term Outlook[A]; Year Designated High Risk: 2001. High-Risk Areas: Managing Federal Real Property[A]; Year Designated High Risk: 2003. High-Risk Areas: Implementing and Transforming the Department of Homeland Security; Year Designated High Risk: 2003. High-Risk Areas: Establishing Appropriate and Effective Information- Sharing Mechanisms to Improve Homeland Security; Year Designated High Risk: 2005. High-Risk Areas: DOD Approach to Business Transformation[A]; Year Designated High Risk: 2005. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Supply Chain Management (formerly Inventory Management); Year Designated High Risk: 1990. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Weapon Systems Acquisition; Year Designated High Risk: 1990. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Business Systems Modernization; Year Designated High Risk: 1995. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Financial Management; Year Designated High Risk: 1995. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Support Infrastructure Management; Year Designated High Risk: 1997. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Personnel Security Clearance Program; Year Designated High Risk: 2005. Managing Federal Contracting More Effectively: High-Risk Areas: DOE Contract Management; Year Designated High Risk: 1990. High-Risk Areas: NASA Contract Management; Year Designated High Risk: 1990. High-Risk Areas: DOD Contract Management; Year Designated High Risk: 1992. Management of Interagency Contracting; Year Designated High Risk: 2005. Assessing the Efficiency and Effectiveness of Tax Law Administration: High-Risk Areas: Enforcement of Tax Laws[A, B]; Year Designated High Risk: 1990. High-Risk Areas: IRS Business Systems Modernization[C]; Year Designated High Risk: 1995. Modernizing and Safeguarding Insurance and Benefit Programs: High-Risk Areas: Medicare Program[A]; Year Designated High Risk: 1990. High-Risk Areas: HUD Single-Family Mortgage Insurance and Rental Housing Assistance Programs; Year Designated High Risk: 1994. High-Risk Areas: Medicaid Program[A]; Year Designated High Risk: 2003. High-Risk Areas: Modernizing Federal Disability Programs[A]; Year Designated High Risk: 2003. High-Risk Areas: Pension Benefit Guaranty Corporation Single-Employer Insurance Program[A]; Year Designated High Risk: 2003. Other: High-Risk Areas: FAA Air Traffic Control Modernization; Year Designated High Risk: 1995. [A] Legislation is likely to be necessary, as a supplement to actions by the executive branch, in order to effectively address this high-risk area. [B] Two high-risk areas-Collection of Unpaid Taxes and Earned Income Credit Noncompliance-have been consolidated to make this area. [C] The IRS Financial Management high-risk area has been incorporated into this high-risk area. [End of table] 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] 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] 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] Selected Fiscal Exposures: Sources and Examples 2005[A]: Type: Explicit liabilities; Example (dollars in billions): Publicly held debt ($4,297). Type: Explicit liabilities; Example (dollars in billions): Military and civilian pension and post- retirement health ($3,059). Type: Explicit liabilities; Example (dollars in billions): Veterans benefits payable ($925). Type: Explicit liabilities; Example (dollars in billions): Environmental and disposal liabilities ($249). Type: Explicit liabilities; Loan guarantees ($43). Type: Explicit financial commitments; Example (dollars in billions): Undelivered orders ($596). Type: Explicit financial commitments; Example (dollars in billions): Long-term leases ($39). Type: Financial contingencies; Example (dollars in billions): Unadjudicated claims ($4). Type: Financial contingencies; Example (dollars in billions): Pension Benefit Guaranty Corporation ($96). Type: Financial contingencies; Example (dollars in billions): Other national insurance programs ($1). Type: Financial contingencies; Example (dollars in billions): Government corporations e.g., Ginnie Mae. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Debt held by government accounts ($3,071)[B]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Social Security benefit payments ($4,017)[C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Medicare Part A benefit payments ($8,561)[C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Medicare Part B benefit payments ($12,384)[C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Medicare Part D benefit payments ($8,686)[C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Life cycle cost including deferred and future maintenance and operating costs (amount unknown). Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Government Sponsored Enterprises e.g., Fannie Mae and Freddie Mac. [A] All figures are for end of fiscal year 2004, except Social Security and Medicare estimates, which are as of January 1, 2005. [B] This amount includes $845 billion held by military and civilian pension and post-retirement health funds that would offset the explicit liabilities reported by those funds. [C] Figures for Social Security and Medicare are net of debt held by the trust funds ($1,687 billion for Social Security, $268 billion for Medicare Part A, and $19 billion for Medicare Part B) and represent net present value estimates over a 75-year period. Over an infinite horizon, the estimate for Social Security would be $11.1 trillion, $24.1 trillion for Medicare Part A, $25.8 trillion for Medicare Part B, and $18.2 trillion for Medicare Part D. Source: GAO analysis of data from the Department of the Treasury, the Office of the Chief Actuary, Social Security Administration, and the Office of the Actuary, Centers for Medicare and Medicaid Services. Revised 3/29/05: [End of table] Another Way to Think About These Numbers: * Debt held by the public--$4.3T; * Trust fund debt--$3.1T; * Gross debt--$7.4T; * Gross debt per person--about $25,000; * If we add everything on the previous slide, the burden is more than $150,000 per person or more than $365,000 per full-time worker. Alternatively, it amounts to a total burden of more than $45 trillion in current dollars, which is about 18 times the current annual federal budget or about 3.7 times the current annual GDP. This compares with an estimated $48.5 trillion in total net worth, including home equity, for all Americans. Note: The calculations are based on 75-year projections for Social Security and Medicare. 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; All other spending; Percent of GDP: 10.4%; Medicare & Medicaid; Percent of GDP: 3.8%; Social Security; Percent of GDP: 4.3%; Net interest; Percent of GDP: 1.4%; Revenue; Percent of GDP: 16.3%. 2015; All other spending; Percent of GDP: 7.6%; Medicare & Medicaid; Percent of GDP: 5.2%; Social Security; Percent of GDP: 4.7%; Net interest; Percent of GDP: 1.5%; Revenue; Percent of GDP: 19.6%. 2030; All other spending; Percent of GDP: 7.6%; Medicare & Medicaid; Percent of GDP: 8.1%; Social Security; Percent of GDP: 6.6%; Net interest; Percent of GDP: 2.1%; Revenue; Percent of GDP: 19.6%. 2040; All other spending; Percent of GDP: 7.6%; Medicare & Medicaid; Percent of GDP: 9.9%; Social Security; Percent of GDP: 7.2%; Net interest; Percent of GDP: 4.8%; Revenue; Percent of GDP: 19.6%. 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 March 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: 4.3%; Medicare & Medicaid: 3.8%; All other spending: 10.4%; Revenue: 16.3%. 2015; Net interest: 2.8%; Social Security: 4.7%; Medicare & Medicaid: 5.2%; All other spending: 9.7%; Revenue: 17.4. 2030; Net interest: 7.7%; Social Security: 6.7%; Medicare & Medicaid: 8%; All other spending: 9.7%; Revenue: 17.4%. 2040; Net interest: 15.7%; Social Security: 7.9%; Medicare & Medicaid: 9.7%; All other spending: 9.7%; 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 March 2005 analysis. [End of figure] Social Security, Medicare, and Medicaid Spending as a Percent of GDP: [See PDF for image] - graphic text: Area graph with 81 Groups and 3 items per Group. 2000: Total value: 7.75% of GDP; Medicare value: 2.29% of GDP, which is 29.5% of 2000 spending; Medicaid value: 1.23% of GDP, which is 15.9% of 2000 spending; Social Security value: 4.23% of GDP, which is 54.6% of 2000 spending. 2001: Total value: 8.14% of GDP; Medicare value: 2.46% of GDP, which is 30.2% of 2001 spending; Medicaid value: 1.33% of GDP, which is 16.3% of 2001 spending; Social Security value: 4.35% of GDP, which is 53.4% of 2001 spending. 2002: Total value: 8.4% of GDP; Medicare value: 2.55% of GDP, which is 30.4% of 2002 spending; Medicaid value: 1.44% of GDP, which is 17.1% of 2002 spending; Social Security value: 4.41% of GDP, which is 52.5% of 2002 spending. 2003: Total value: 8.44% of GDP; Medicare value: 2.59% of GDP, which is 30.7% of 2003 spending; Medicaid value: 1.49% of GDP, which is 17.7% of 2003 spending; Social Security value: 4.36% of GDP, which is 51.7% of 2003 spending. 2004: Total value: 8.52% of GDP; Medicare value: 2.68% of GDP, which is 31.5% of 2004 spending; Medicaid value: 1.51% of GDP, which is 17.7% of 2004 spending; Social Security value: 4.33% of GDP, which is 50.8% of 2004 spending. 2005: Total value: 8.52% of GDP; Medicare value: 2.76% of GDP, which is 32.4% of 2005 spending; Medicaid value: 1.48% of GDP, which is 17.4% of 2005 spending; Social Security value: 4.28% of GDP, which is 50.2% of 2005 spending. 2006: Total value: 9.16% of GDP; Medicare value: 3.44% of GDP, which is 37.6% of 2006 spending; Medicaid value: 1.47% of GDP, which is 16.0% of 2006 spending; Social Security value: 4.25% of GDP, which is 46.4% of 2006 spending. 2007: Total value: 9.23% of GDP; Medicare value: 3.51% of GDP, which is 38.0% of 2007 spending; Medicaid value: 1.49% of GDP, which is 16.1% of 2007 spending; Social Security value: 4.23% of GDP, which is 45.8% of 2007 spending. 2008: Total value: 9.34% of GDP; Medicare value: 3.56% of GDP, which is 38.1% of 2008 spending; Medicaid value: 1.54% of GDP, which is 16.5% of 2008 spending; Social Security value: 4.24% of GDP, which is 45.4% of 2008 spending. 2009: Total value: 9.49% of GDP; Medicare value: 3.61% of GDP, which is 38.0% of 2009 spending; Medicaid value: 1.6% of GDP, which is 16.9% of 2009 spending; Social Security value: 4.28% of GDP, which is 45.1% of 2009 spending. 2010: Total value: 9.64% of GDP; Medicare value: 3.66% of GDP, which is 38.0% of 2010 spending; Medicaid value: 1.66% of GDP, which is 17.2% of 2010 spending; Social Security value: 4.32% of GDP, which is 44.8% of 2010 spending. 2011: Total value: 9.82% of GDP; Medicare value: 3.72% of GDP, which is 37.9% of 2011 spending; Medicaid value: 1.73% of GDP, which is 17.6% of 2011 spending; Social Security value: 4.37% of GDP, which is 44.5% of 2011 spending. 2012: Total value: 10.06% of GDP; Medicare value: 3.81% of GDP, which is 37.9% of 2012 spending; Medicaid value: 1.8% of GDP, which is 17.9% of 2012 spending; Social Security value: 4.45% of GDP, which is 44.2% of 2012 spending. 2013: Total value: 10.34% of GDP; Medicare value: 3.93% of GDP, which is 38.0% of 2013 spending; Medicaid value: 1.87% of GDP, which is 18.1% of 2013 spending; Social Security value: 4.54% of GDP, which is 43.9% of 2013 spending. 2014: Total value: 10.6% of GDP; Medicare value: 4.07% of GDP, which is 38.4% of 2014 spending; Medicaid value: 1.9% of GDP, which is 17.9% of 2014 spending; Social Security value: 4.63% of GDP, which is 43.7% of 2014 spending. 2015: Total value: 10.88% of GDP; Medicare value: 4.24% of GDP, which is 39.0% of 2015 spending; Medicaid value: 1.9% of GDP, which is 17.5% of 2015 spending; Social Security value: 4.74% of GDP, which is 43.6% of 2015 spending. 2016: Total value: 11.15% of GDP; Medicare value: 4.4% of GDP, which is 39.5% of 2016 spending; Medicaid value: 1.9% of GDP, which is 17.0% of 2016 spending; Social Security value: 4.85% of GDP, which is 43.5% of 2016 spending. 2017: Total value: 11.41% of GDP; Medicare value: 4.55% of GDP, which is 39.9% of 2017 spending; Medicaid value: 1.9% of GDP, which is 16.7% of 2017 spending; Social Security value: 4.96% of GDP, which is 43.5% of 2017 spending. 2018: Total value: 11.69% of GDP; Medicare value: 4.72% of GDP, which is 40.4% of 2018 spending; Medicaid value: 1.9% of GDP, which is 16.3% of 2018 spending; Social Security value: 5.07% of GDP, which is 43.4% of 2018 spending. 2019: Total value: 12% of GDP; Medicare value: 4.89% of GDP, which is 40.8% of 2019 spending; Medicaid value: 1.92% of GDP, which is 16.0% of 2019 spending; Social Security value: 5.19% of GDP, which is 43.3% of 2019 spending. 2020: Total value: 12.35% of GDP; Medicare value: 5.08% of GDP, which is 41.1% of 2020 spending; Medicaid value: 1.95% of GDP, which is 15.8% of 2020 spending; Social Security value: 5.32% of GDP, which is 43.1% of 2020 spending. 2021: Total value: 12.69% of GDP; Medicare value: 5.26% of GDP, which is 41.4% of 2021 spending; Medicaid value: 1.99% of GDP, which is 15.7% of 2021 spending; Social Security value: 5.44% of GDP, which is 42.9% of 2021 spending. 2022: Total value: 13.02% of GDP; Medicare value: 5.45% of GDP, which is 41.9% of 2022 spending; Medicaid value: 2.02% of GDP, which is 15.5% of 2022 spending; Social Security value: 5.55% of GDP, which is 42.6% of 2022 spending. 2023: Total value: 13.37% of GDP; Medicare value: 5.64% of GDP, which is 42.2% of 2023 spending; Medicaid value: 2.06% of GDP, which is 15.4% of 2023 spending; Social Security value: 5.67% of GDP, which is 42.4% of 2023 spending. 2024: Total value: 13.71% of GDP; Medicare value: 5.84% of GDP, which is 42.6% of 2024 spending; Medicaid value: 2.09% of GDP, which is 15.2% of 2024 spending; Social Security value: 5.78% of GDP, which is 42.2% of 2024 spending. 2025: Total value: 14.06% of GDP; Medicare value: 6.04% of GDP, which is 43.0% of 2025 spending; Medicaid value: 2.13% of GDP, which is 15.1% of 2025 spending; Social Security value: 5.89% of GDP, which is 41.9% of 2025 spending. 2026: Total value: 14.38% of GDP; Medicare value: 6.22% of GDP, which is 43.3% of 2026 spending; Medicaid value: 2.17% of GDP, which is 15.1% of 2026 spending; Social Security value: 5.99% of GDP, which is 41.7% of 2026 spending. 2027: Total value: 14.68% of GDP; Medicare value: 6.4% of GDP, which is 43.6% of 2027 spending; Medicaid value: 2.2% of GDP, which is 15.0% of 2027 spending; Social Security value: 6.08% of GDP, which is 41.4% of 2027 spending. 2028: Total value: 14.98% of GDP; Medicare value: 6.58% of GDP, which is 43.9% of 2028 spending; Medicaid value: 2.23% of GDP, which is 14.9% of 2028 spending; Social Security value: 6.17% of GDP, which is 41.2% of 2028 spending. 2029: Total value: 15.28% of GDP; Medicare value: 6.77% of GDP, which is 44.3% of 2029 spending; Medicaid value: 2.27% of GDP, which is 14.9% of 2029 spending; Social Security value: 6.24% of GDP, which is 40.8% of 2029 spending. 2030: Total value: 15.57% of GDP; Medicare value: 6.95% of GDP, which is 44.6% of 2030 spending; Medicaid value: 2.31% of GDP, which is 14.8% of 2030 spending; Social Security value: 6.31% of GDP, which is 40.5% of 2030 spending. 2031: Total value: 15.83% of GDP; Medicare value: 7.11% of GDP, which is 44.9% of 2031 spending; Medicaid value: 2.35% of GDP, which is 14.8% of 2031 spending; Social Security value: 6.37% of GDP, which is 40.2% of 2031 spending. 2032: Total value: 16.08% of GDP; Medicare value: 7.26% of GDP, which is 45.1% of 2032 spending; Medicaid value: 2.4% of GDP, which is 14.9% of 2032 spending; Social Security value: 6.42% of GDP, which is 39.9% of 2032 spending. 2033: Total value: 16.33% of GDP; Medicare value: 7.42% of GDP, which is 45.4% of 2033 spending; Medicaid value: 2.45% of GDP, which is 15.0% of 2033 spending; Social Security value: 6.46% of GDP, which is 39.6% of 2033 spending. 2034: Total value: 16.58% of GDP; Medicare value: 7.58% of GDP, which is 45.7% of 2034 spending; Medicaid value: 2.5% of GDP, which is 15.1% of 2034 spending; Social Security value: 6.5% of GDP, which is 39.2% of 2034 spending. 2035: Total value: 16.82% of GDP; Medicare value: 7.75% of GDP, which is 46.1% of 2035 spending; Medicaid value: 2.55% of GDP, which is 15.2% of 2035 spending; Social Security value: 6.52% of GDP, which is 38.8% of 2035 spending. 2036: Total value: 17.04% of GDP; Medicare value: 7.9% of GDP, which is 46.4% of 2036 spending; Medicaid value: 2.6% of GDP, which is 15.3% of 2036 spending; Social Security value: 6.54% of GDP, which is 38.4% of 2036 spending. 2037: Total value: 17.24% of GDP; Medicare value: 8.04% of GDP, which is 46.6% of 2037 spending; Medicaid value: 2.65% of GDP, which is 15.4% of 2037 spending; Social Security value: 6.55% of GDP, which is 38.0% of 2037 spending. 2038: Total value: 17.42% of GDP; Medicare value: 8.17% of GDP, which is 46.9% of 2038 spending; Medicaid value: 2.7% of GDP, which is 15.5% of 2038 spending; Social Security value: 6.55% of GDP, which is 37.6% of 2038 spending. 2039: Total value: 17.59% of GDP; Medicare value: 8.29% of GDP, which is 47.1% of 2039 spending; Medicaid value: 2.75% of GDP, which is 15.6% of 2039 spending; Social Security value: 6.55% of GDP, which is 37.2% of 2039 spending. 2040: Total value: 17.75% of GDP; Medicare value: 8.41% of GDP, which is 47.4% of 2040 spending; Medicaid value: 2.8% of GDP, which is 15.8% of 2040 spending; Social Security value: 6.54% of GDP, which is 36.8% of 2040 spending. 2041: Total value: 17.91% of GDP; Medicare value: 8.53% of GDP, which is 47.6% of 2041 spending; Medicaid value: 2.85% of GDP, which is 15.9% of 2041 spending; Social Security value: 6.53% of GDP, which is 36.5% of 2041 spending. 2042: Total value: 18.07% of GDP; Medicare value: 8.64% of GDP, which is 47.8% of 2042 spending; Medicaid value: 2.9% of GDP, which is 16.0% of 2042 spending; Social Security value: 6.53% of GDP, which is 36.1% of 2042 spending. 2043: Total value: 18.23% of GDP; Medicare value: 8.76% of GDP, which is 48.1% of 2043 spending; Medicaid value: 2.95% of GDP, which is 16.2% of 2043 spending; Social Security value: 6.52% of GDP, which is 35.8% of 2043 spending. 2044: Total value: 18.39% of GDP; Medicare value: 8.88% of GDP, which is 48.3% of 2044 spending; Medicaid value: 3% of GDP, which is 16.3% of 2044 spending; Social Security value: 6.51% of GDP, which is 35.4% of 2044 spending. 2045: Total value: 18.55% of GDP; Medicare value: 9% of GDP, which is 48.5% of 2045 spending; Medicaid value: 3.05% of GDP, which is 16.4% of 2045 spending; Social Security value: 6.5% of GDP, which is 35.0% of 2045 spending. 2046: Total value: 18.71% of GDP; Medicare value: 9.12% of GDP, which is 48.7% of 2046 spending; Medicaid value: 3.1% of GDP, which is 16.6% of 2046 spending; Social Security value: 6.49% of GDP, which is 34.7% of 2046 spending. 2047: Total value: 18.86% of GDP; Medicare value: 9.23% of GDP, which is 48.9% of 2047 spending; Medicaid value: 3.14% of GDP, which is 16.6% of 2047 spending; Social Security value: 6.49% of GDP, which is 34.4% of 2047 spending. 2048: Total value: 19% of GDP; Medicare value: 9.33% of GDP, which is 49.1% of 2048 spending; Medicaid value: 3.19% of GDP, which is 16.8% of 2048 spending; Social Security value: 6.48% of GDP, which is 34.1% of 2048 spending. 2049: Total value: 19.15% of GDP; Medicare value: 9.44% of GDP, which is 49.3% of 2049 spending; Medicaid value: 3.23% of GDP, which is 16.9% of 2049 spending; Social Security value: 6.48% of GDP, which is 33.8% of 2049 spending. 2050: Total value: 19.3% of GDP; Medicare value: 9.56% of GDP, which is 49.5% of 2050 spending; Medicaid value: 3.27% of GDP, which is 16.9% of 2050 spending; Social Security value: 6.47% of GDP, which is 33.5% of 2050 spending. 2051: Total value: 19.45% of GDP; Medicare value: 9.67% of GDP, which is 49.7% of 2051 spending; Medicaid value: 3.31% of GDP, which is 17.0% of 2051 spending; Social Security value: 6.47% of GDP, which is 33.3% of 2051 spending. 2052: Total value: 19.61% of GDP; Medicare value: 9.78% of GDP, which is 49.9% of 2052 spending; Medicaid value: 3.35% of GDP, which is 17.1% of 2052 spending; Social Security value: 6.48% of GDP, which is 33.0% of 2052 spending. 2053: Total value: 19.77% of GDP; Medicare value: 9.9% of GDP, which is 50.1% of 2053 spending; Medicaid value: 3.39% of GDP, which is 17.1% of 2053 spending; Social Security value: 6.48% of GDP, which is 32.8% of 2053 spending. 2054: Total value: 19.96% of GDP; Medicare value: 10.03% of GDP, which is 50.3% of 2054 spending; Medicaid value: 3.44% of GDP, which is 17.2% of 2054 spending; Social Security value: 6.49% of GDP, which is 32.5% of 2054 spending. 2055: Total value: 20.13% of GDP; Medicare value: 10.16% of GDP, which is 50.5% of 2055 spending; Medicaid value: 3.48% of GDP, which is 17.3% of 2055 spending; Social Security value: 6.49% of GDP, which is 32.2% of 2055 spending. 2056: Total value: 20.32% of GDP; Medicare value: 10.3% of GDP, which is 50.7% of 2056 spending; Medicaid value: 3.52% of GDP, which is 17.3% of 2056 spending; Social Security value: 6.5% of GDP, which is 32.0% of 2056 spending. 2057: Total value: 20.52% of GDP; Medicare value: 10.44% of GDP, which is 50.9% of 2057 spending; Medicaid value: 3.57% of GDP, which is 17.4% of 2057 spending; Social Security value: 6.51% of GDP, which is 31.7% of 2057 spending. 2058: Total value: 20.72% of GDP; Medicare value: 10.59% of GDP, which is 51.1% of 2058 spending; Medicaid value: 3.61% of GDP, which is 17.4% of 2058 spending; Social Security value: 6.52% of GDP, which is 31.5% of 2058 spending. 2059: Total value: 20.92% of GDP; Medicare value: 10.74% of GDP, which is 51.3% of 2059 spending; Medicaid value: 3.66% of GDP, which is 17.5% of 2059 spending; Social Security value: 6.52% of GDP, which is 31.2% of 2059 spending. 2060: Total value: 21.12% of GDP; Medicare value: 10.89% of GDP, which is 51.6% of 2060 spending; Medicaid value: 3.7% of GDP, which is 17.5% of 2060 spending; Social Security value: 6.53% of GDP, which is 30.9% of 2060 spending. 2061: Total value: 21.33% of GDP; Medicare value: 11.04% of GDP, which is 51.8% of 2061 spending; Medicaid value: 3.75% of GDP, which is 17.6% of 2061 spending; Social Security value: 6.54% of GDP, which is 30.7% of 2061 spending. 2062: Total value: 21.54% of GDP; Medicare value: 11.19% of GDP, which is 51.9% of 2062 spending; Medicaid value: 3.8% of GDP, which is 17.6% of 2062 spending; Social Security value: 6.55% of GDP, which is 30.4% of 2062 spending. 2063: Total value: 21.74% of GDP; Medicare value: 11.34% of GDP, which is 52.2% of 2063 spending; Medicaid value: 3.84% of GDP, which is 17.7% of 2063 spending; Social Security value: 6.56% of GDP, which is 30.2% of 2063 spending. 2064: Total value: 21.96% of GDP; Medicare value: 11.51% of GDP, which is 52.4% of 2064 spending; Medicaid value: 3.89% of GDP, which is 17.7% of 2064 spending; Social Security value: 6.56% of GDP, which is 29.9% of 2064 spending. 2065: Total value: 22.19% of GDP; Medicare value: 11.68% of GDP, which is 52.6% of 2065 spending; Medicaid value: 3.94% of GDP, which is 17.8% of 2065 spending; Social Security value: 6.57% of GDP, which is 29.6% of 2065 spending. 2066: Total value: 22.43% of GDP; Medicare value: 11.86% of GDP, which is 52.9% of 2066 spending; Medicaid value: 3.99% of GDP, which is 17.8% of 2066 spending; Social Security value: 6.58% of GDP, which is 29.3% of 2066 spending. 2067: Total value: 22.66% of GDP; Medicare value: 12.03% of GDP, which is 53.1% of 2067 spending; Medicaid value: 4.04% of GDP, which is 17.8% of 2067 spending; Social Security value: 6.59% of GDP, which is 29.1% of 2067 spending. 2068: Total value: 22.87% of GDP; Medicare value: 12.19% of GDP, which is 53.3% of 2068 spending; Medicaid value: 4.09% of GDP, which is 17.9% of 2068 spending; Social Security value: 6.59% of GDP, which is 28.8% of 2068 spending. 2069: Total value: 23.08% of GDP; Medicare value: 12.35% of GDP, which is 53.5% of 2069 spending; Medicaid value: 4.14% of GDP, which is 17.9% of 2069 spending; Social Security value: 6.59% of GDP, which is 28.6% of 2069 spending. 2070: Total value: 23.3% of GDP; Medicare value: 12.51% of GDP, which is 53.7% of 2070 spending; Medicaid value: 4.19% of GDP, which is 18.0% of 2070 spending; Social Security value: 6.6% of GDP, which is 28.3% of 2070 spending. 2071: Total value: 23.53% of GDP; Medicare value: 12.68% of GDP, which is 53.9% of 2071 spending; Medicaid value: 4.25% of GDP, which is 18.1% of 2071 spending; Social Security value: 6.6% of GDP, which is 28.0% of 2071 spending. 2072: Total value: 23.74% of GDP; Medicare value: 12.84% of GDP, which is 54.1% of 2072 spending; Medicaid value: 4.3% of GDP, which is 18.1% of 2072 spending; Social Security value: 6.6% of GDP, which is 27.8% of 2072 spending. 2073: Total value: 23.97% of GDP; Medicare value: 13.01% of GDP, which is 54.3% of 2073 spending; Medicaid value: 4.35% of GDP, which is 18.1% of 2073 spending; Social Security value: 6.61% of GDP, which is 27.6% of 2073 spending. 2074: Total value: 24.19% of GDP; Medicare value: 13.17% of GDP, which is 54.4% of 2074 spending; Medicaid value: 4.41% of GDP, which is 18.2% of 2074 spending; Social Security value: 6.61% of GDP, which is 27.3% of 2074 spending. 2075: Total value: 24.41% of GDP; Medicare value: 13.34% of GDP, which is 54.6% of 2075 spending; Medicaid value: 4.46% of GDP, which is 18.3% of 2075 spending; Social Security value: 6.61% of GDP, which is 27.1% of 2075 spending. 2076: Total value: 24.639% of GDP; Medicare value: 13.509% of GDP, which is 54.8% of 2076 spending; Medicaid value: 4.52% of GDP, which is 18.3% of 2076 spending; Social Security value: 6.61% of GDP, which is 26.8% of 2076 spending. 2077: Total value: 24.869% of GDP; Medicare value: 13.679% of GDP, which is 55.0% of 2077 spending; Medicaid value: 4.57% of GDP, which is 18.4% of 2077 spending; Social Security value: 6.62% of GDP, which is 26.6% of 2077 spending. 2078: Total value: 25.1% of GDP; Medicare value: 13.85% of GDP, which is 55.2% of 2078 spending; Medicaid value: 4.63% of GDP, which is 18.4% of 2078 spending; Social Security value: 6.62% of GDP, which is 26.4% of 2078 spending. 2079: Total value: 25.16% of GDP; Medicare value: 13.85% of GDP, which is 55.0% of 2079 spending; Medicaid value: 4.69% of GDP, which is 18.6% of 2079 spending; Social Security value: 6.62% of GDP, which is 26.3% of 2079 spending. 2080: Total value: 25.23% of GDP; Medicare value: 13.85% of GDP, which is 54.9% of 2080 spending; Medicaid value: 4.75% of GDP, which is 18.8% of 2080 spending; Social Security value: 6.63% of GDP, which is 26.3% of 2080 spending. Note: Social Security and Medicare projections based on the intermediate assumptions of the 2004 Trustees' Reports. Medicaid projections based on CBO's January 2004 short-term Medicaid estimates and CBO's December 2003 long-term Medicaid projections under mid-range assumptions. Source: GAO analysis based on data from the Office of the Chief Actuary, Social Security Administration, Office of the Actuary, Centers for Medicare and Medicaid Services, and the Congressional Budget Office. [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. Long-term Fiscal Challenges Demand New Metrics, Mechanisms, and Processes: * Accounting and reporting policies for trust funds, Social Security, Medicare, Veterans benefits, among other things, need to be reviewed and revised (e.g., possible fiscal burden statement with per capita and intergenerational figures); * The current budget time horizon [2-year, 5-year, 10-year] does not capture many long-term costs--e.g. Social Security, Medicare, pension insurance--and other major tax and spending provisions; * Cash and obligations-based budgeting is misleading for insurance and some benefit programs; * Budget controls have expired--and we need to go beyond "holding the line" to "changing the base" in spending and tax policies. New Metrics, Mechanisms and Processes: Some Ideas: * Provide information on long-term costs of major spending and tax proposals before they are voted on, including showing long-term costs even for proposals that sunset; * Establish an OMB annual report on fiscal exposures, including appropriate measures and how to address them; * Consider fiscal targets, triggers, sunset provisions and points of order with focus on limiting growth of long-term commitments (e.g., mandatory spending); * Move to accrual budgeting for employee pension, retiree health; disclose "risk assumed" (missing premium) for insurance; * Reinstitute budget controls (caps on discretionary spending & PAYGO rules on both sides of the ledger). We Need a Multifaceted Approach to Close the Long-Term Fiscal Gap: Policy: * Reexamine the base of discretionary and other spending; * Restructure existing entitlement programs; * Review and revise our tax policy and enforcement programs; Operations: * Reassess and revise how the government does business (e.g., management, planning and operational issues); * Consider who should provide government services (e.g., sourcing strategy). 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 Reexamination 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? Selected 21ST Century Questions: Social Security and Healthcare: How should Social Security be reformed to make it both solvent and sustainable while better aligning it with 21ST Century economic, demographic and fiscal realities? How should our overall health care system be reformed to make it more successful and sustainable over time including, * focusing on certain defined needs versus unlimited wants; * addressing the division of responsibilities between levels of government, employers, and individuals; and: * facilitating individual choice, cost control and quality improvement? 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. Date: 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). [End of table] 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. 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] Evaluating Health Care System Reforms: 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? Health Care System Elements: Incentives, Transparency, and Accountability: Ideally, health care system reforms 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 accountability from health plans and providers to meet standards for appropriate use and quality. Moving the Debate Forward: The Sooner We Get Started, the Better: * The miracle of compounding is currently working against us. * Less change would be needed, and there would be more time to make adjustments. * Our demographic changes will serve to make reform more difficult over time. Need public education, discussion, and debate: * the role of government in the 21st Century; * which programs and policies should be changed and how, * how government should be financed. [End of slide presentation]