A. Actuarial methodology and principal assumptions for hospital B. Summary of principal provisions. C. Notice of inpatient hospital deductible for 1974- D. Determination and announcement of the hospital insurance premium rate for the uninsured aged for fiscal year 1975___. 1974 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE TRUST FUND THE BOARD OF TRUSTEES The Federal hospital insurance trust fund, established on July 30, 1965, is held by the Board of Trustees under the authority of section 1817(b) of the Social Security Act, as amended. The Board is comprised of three members who serve in an ex officio capacity. The members of the Board are the Secretary of the Treasury, the Secretary of Labor, and the Secretary of Health, Education, and Welfare. The Secretary of the Treasury is designated by law as the Managing Trustee. The Commissioner of Social Security is Secretary of the Board. The Board of Trustees reports to the Congress once each year in compliance with section 1817 (b) (2) of the Social Security Act. This Report is the annual report for 1974, the ninth such report. HIGHLIGHTS The more important developments during fiscal year 1973, discussed in more detail in later sections, are indicated below: (a) The hospital insurance trust fund increased during fiscal year 1973, by an amount close to that projected in the 1973 Report. Income for fiscal 1973 amounted to nearly $8.4 billion, up by 38 percent over fiscal 1972. Benefit payments and administrative expenses totalled slightly over $6.8 billion, 9 percent more than in fiscal 1972. The fund increased by $1.5 billion in fiscal 1973 to $4.4 billion on June 30, 1973. (b) Approximately 21.1 million persons were protected by the hospital insurance program in June 1973. About 4.7 million persons actually received benefits during fiscal year 1973. An estimated 96 million workers had earnings in calendar year 1972 that were taxable and creditable toward eligibility under the program. (c) The trust fund earned $196 million in interest during the year, equivalent to an annual rate of 6.4 percent. (d) The Secretary of HEW promulgated an $84 inpatient deductible for calendar year 1974 and a $36 premium for noninsured enrollees for fiscal year 1975. SOCIAL SECURITY AMENDMENTS SINCE 1973 REPORT Since the passage of Public Law 92-603, the Social Security Act has been amended twice; both laws affected the financing of the hospital insurance system but no other substantial changes to the hospital insurance system were made. Public Law 93-66 provided for an increase in the maximum taxable amount of earnings in 1974 from $12,000 to $12,600. Public Law 93-233 further increased the 2 maximum taxable amount of earnings in 1974 to $13,200 but reduced the employer-employee contribution rate, effective January 1, 1974, from 1.0% to 0.9%. The expected result of these amendments is to slow the growth of the trust fund somewhat during the next few years and to strengthen the financing in subsequent years. Details of the 1973 Amendments and their financial effect can be found in documents prepared by and for the Congress. NATURE OF THE TRUST FUND The Federal hospital insurance trust fund was established on July 30, 1965, as a separate account in the United States Treasury to hold the amounts accumulated under the hospital insurance program. All the financial operations which relate to the system of hospital insurance are handled through this fund. The major sources of receipts of this fund are (1) amounts appropriated to it under permanent appropriation on the basis of contributions paid by workers and their employers, and by individuals with self-employment income, in work covered by the hospital insurance program and (2) amounts deposited in it representing contributions paid by workers employed by State and local governments and by such employers with respect to work covered by the program. The coverage of the hospital insurance program includes workers covered under the old-age, survivors, and disability insurance program and those covered under the railroad retirement insurance program. All employees in covered employment are required to pay contributions with respect to their wages, and their employers are also required to pay contributions with respect to wages (cash tips, covered as wages beginning in 1966 under the 1965 amendments, are an exception to this; employees pay contributions with respect to cash tips, but employers do not). All covered self-employed persons are required to pay contributions with respect to their self-employment income. In general, an individual's contributions are computed on annual wages or self-employment income, or both wages and self-employment income combined, up to a specified maximum annual amount with the contributions being determined first on the wages and then on any selfemployment income necessary to make up the annual maximum amount. The contribution rates applicable to taxable earnings in each of the calendar years 1966 and later are shown in table 1. The maximum amount of annual earnings taxable in each year, 1966-74, is also shown. For years after 1974, this amount is subject to automatic increases. Except for amounts received by the Secretary of the Treasury under State agreements (to effectuate coverage under the program for State and local government employees) and deposited directly in the trust fund, all contributions are collected by the Internal Revenue Service and deposited in the general fund of the Treasury as internal revenue collections; then, on an estimated basis, the contributions received are immediately and automatically appropriated to the trust fund. The exact amount of contributions received is not known initially 3 since (1) hospital insurance contributions, (2) old-age, survivors, and disability insurance contributions, and (3) individual income taxes are not separately identified in collection reports received by the Treasury Department. Periodic adjustments are subsequently made to the extent that the estimates are found to differ from the amounts of contributions actually payable on the basis of reported earnings. An employee who worked for more than one employer during the course of a year and paid contributions on wages in excess of the statutory maximum can receive a refund of the contributions he paid on such excess wages. The amount of contributions subject to refund for any period is a charge against the trust fund. Another source from which receipts of the trust fund are derived is interest received on investments held by the fund. The investment procedures of the fund are described later in this section. The income and expenditures of the trust fund are also affected by the provisions of the Railroad Retirement Act which provide for a system of coordination and financial interchange between the railroad retirement program and the hospital insurance program. Section 217(g) and 229(b) of the Social Security Act authorize annual reimbursements from the general fund of the Treasury to the hospital insurance trust fund for any costs arising from the granting of noncontributory wage credits for military service, according to periodic determinations made by the Secretary of Health, Education, and Welfare. Section 231 of the Social Security Act authorizes reimbursement from the general fund of the Treasury to the hospital insurance trust fund for any costs arising from the granting of noncontributory wage credits to individuals who were interned during World War II at a place within the United States operated by the Federal government for the internment of persons of Japanese ancestry. Hospital insurance benefits are provided to certain uninsured persons aged 65 and over. Such payments are made initially from the hospital insurance trust fund, with reimbursement from the general fund of the Treasury for the costs, including administrative expenses, of the payments. The reimbursements so made are on a provisional basis and are subject to adjustment, with appropriate interest allowances, as the actual experience develops and is analyzed. Certain persons not eligible for hospital insurance coverage either on an insured basis or on the uninsured basis described in the previous paragraph may obtain protection by enrolling in the program and paying a monthly premium. Expenditures for benefit payments and administrative expenses under the hospital insurance program are paid out of the trust fund. All expenses incurred by the Department of Health, Education, and Welfare and by the Treasury Department in carrying out the provisions of Title XVIII of the Social Security Act pertaining to the hospital insurance program and of the Internal Revenue Code relating to the collection of contributions, are charged to the trust fund. The Secretary of Health, Education, and Welfare certifies benefit payments to the Managing Trustee, who makes the payment from the trust fund in accordance therewith. 4 Hospitals, at their option, are permitted to combine their billing for both hospital and physician components of radiology and pathology services rendered hospital inpatients by hospital-based physicians. Where hospitals elect this billing procedure, payments are made initially from the hospital insurance trust fund, with reimbursement from the supplementary medical insurance trust fund. The reimbursements so made are on a provisional basis and are subject to adjustment with appropriate interest allowances, as the actual experience develops and is analyzed. The Social Security Amendments of 1967 and 1972 authorize the Secretary of Health, Education, and Welfare to develop and conduct a broad range of experiments and demonstration projects designed to determine various methods of increasing efficiency and economy in providing health care services, while maintaining the quality of such services, under the hospital insurance and supplementary medical insurance programs. The costs of such experiments and demonstration projects are paid out of the hospital insurance and supplementary medical insurance trust funds. The costs paid out of the hospital insurance trust fund are included as part of benefit payments in the financial statements of operations of the trust fund as set forth in subsequent sections of this report. Congress has authorized expenditures from the trust fund for construction of office buildings and related facilities for the Social Security Administration. The costs of such construction are included as part of the administrative expenses in the financial statements of operations of the trust fund as set forth in subsequent sections of this report. The net worth of the resulting facilities like the net worth of all other fixed capital assets-is not carried as an asset in such statements. That portion of the trust fund which, in the judgment of the Managing Trustee, is not required to meet current expenditures for benefits and administration is invested, on a daily basis, in interestbearing obligations of the U.S. Government (including special publicdebt obligations described below), in obligations guaranteed as to both principal and interest by the United States, or in certain federallysponsored agency obligations that are designated in the laws authorizing their issuance as lawful investments for fiduciary and trust funds under the control and authority of the United States or any officer of the United States. These obligations may be acquired on original issue at the issue price or by purchase of outstanding obligations at their market price. The Social Security Act authorizes the issuance of special public-debt obligations for purchase exclusively by the trust fund. The law requires that such special public-debt obligations shall bear interest at a rate based on the average market yield (computed by the Managing Trustee on the basis of market quotations as of the end of the calendar month next preceding the date of such issue) on all marketable interest-bearing obligations of the United States forming a part of the public debt which are not due or callable until after the expiration of four years from the end of such calendar month. |