5 TABLE 1.- CONTRIBUTION RATES AND MAXIMUM TAXABLE AMOUNT OF ANNUAL EARNINGS SUMMARY OF THE OPERATIONS OF THE TRUST FUND, A statement of the income and disbursements of the Federal hospital insurance trust fund during fiscal year 1973 and of the assets of the fund at the beginning and the end of the fiscal year is presented in table 2. Comparable amounts for fiscal year 1972 are also shown in the table. The total assets of the trust fund amounted to $2,859 million on June 30, 1972. During fiscal year 1973, total receipts amounted to $8,352 million and total disbursements were $6,842 million. The assets of the trust fund thus increased $1,510 million during the year to a total of $4,369 million on June 30, 1973. Included in total receipts during fiscal year 1973 were $6,993 million representing contributions appropriated to the trust fund and $725 million representing amounts received by the Secretary of the Treasury in accordance with State agreements for coverage of State and local government employees and deposited in the trust fund. As an offset, $55 million was transferred from the trust fund into the Treasury as repayment for the estimated amount of contributions subject to refund to employees who worked for more than one employer during the course of a year and paid contributions on wages in excess of the statutory maximum earnings base. Net contributions amounted to $7,663 million, representing an increase of 47 percent over the amount for the preceding fiscal year. This growth in contribution income resulted primarily from (1) the increase in the combined employer-employee contribution rate from 1.2 percent to 2.0 percent that became effective January 1, 1973, (2) the higher level of employment and taxable earnings, and (3) the two increases in the maximum annual amount of earnings taxablefrom $7,800 to $9,000 and from $9,000 to $10,800-that became effective on January 1, 1972, and January 1, 1973, respectively. Although 6 the first increase in the maximum annual amount of earnings taxable, from $7,800 to $9,000, became effective in 1972, the first full fiscal year during which earnings between $7,800 and $9,000 were taxable was 1973. Reference has been made in an earlier section to provisions of the Railroad Retirement Act which coordinate the railroad retirement and the hospital insurance programs and which govern the financial interchange arising from the allocation of costs between the two systems. In accordance with these provisions, the Railroad Retirement Board and the Secretary of Health, Education, and Welfare determined that a transfer of $62,705,000 from the railroad retirement account to the hospital insurance trust fund would place this fund in the same position, as of June 30, 1972, as it would have been if railroad employment had always been covered under the Social Security Act. This amount was transferred to the trust fund in August 1972, together with interest to the date of transfer amounting to $533,000. Reference has also been made earlier to provisions under which the hospital insurance trust fund is to be reimbursed annually from the general fund of the Treasury for the costs of granting noncontributory credits for military service. In accordance with thest provisions, the Secretary of Health, Education, and Welfare made a determination in 1970 of the level annual appropriations to the trust fund necessary to amortize over a 44-year period, beginning in fiscal year 1972, the estimated total additional costs, for military service performed before 1957, arising from payments that have been made since July 1966 and that will be made in future years, taking into account the amounts of annual appropriations in fiscal years 1966-71 that have been deposited into the trust funds. The annual amount resulting from this determination was $48 million. Thus, a reimbursement amounting to $48 million was received by the trust fund in December 1972. Again, reference has been made earlier to provisions under which the hospital insurance trust fund is to be reimbursed from the general fund of the Treasury for costs of paying benefits under this program in behalf of certain uninsured persons. The reimbursement in fiscal year 1973 amounted to $381 million, consisting of $370 million for benefit payments, $19 million for administrative expenses, and, as an offset, $8 million due the general fund for net interest on adjustments to costs in prior fiscal years. The remaining $196 million of receipts consisted almost entirely of interest on the investments of the trust fund. Of the $6,842 million in total disbursements, $6,654 million represented benefits paid directly from the trust fund for health services covered under Title XVIII of the Social Security Act and about $842,000 represented amounts paid under incentive reimbursement arrangements. As offsets to benefit payments, transfers were made from the supplementary medical insurance trust fund consisting 34-500 O-74-38 7 of $6 million for certain costs of radiology and pathology services that were paid initially from the hospital insurance trust fund but that were liabilities of the supplementary medical insurance trust fund. Net benefit payments from the trust fund in fiscal year 1973, therefore, amounted to $6,649 million, an increase of 8.8 percent over the corresponding amount paid in fiscal year 1972. The remaining $193 million of disbursements was for net administrative expenses. Administrative expenses are allocated and charged directly to each of the four trust funds-old-age insurance, disability insurance, hospital insurance, and supplementary medical insuranceon the basis of provisional estimates. Periodically, as actual experience develops and is analyzed, adjustments to the allocations of administrative expenses, and costs of construction, for prior periods are effected by transfers among the four trust funds, with appropriate interest allowances. Table 3 compares the actual experience in fiscal year 1973 with the estimates presented in the 1973 Annual Report of the Board of Trustees. Reference was made in an earlier section to the appropriation of contributions to the trust funds on an estimated basis, with subsequent periodic adjustments to account for differences from the amounts of contributions actually payable on the basis of reported earnings. In interpreting the figures in table 3, it should be noted that the "actual" amount of contributions in fiscal year 1973 reflects the aforementioned type of adjustments to contributions for prior fiscal years. On the other hand, the "actual" amount of contributions in fiscal year 1973 does not reflect adjustments to contributions for fiscal year 1973 that were to be made after June 30, 1973. The estimated contributions and benefit payments in the 1973 report were both quite close to actual experience. The assets of the trust fund at the end of fiscal year 1973 totaled $4,369 million, consisting of $4,222 million in the form of obligations of the U.S. Government or of federally-sponsored agency obligations, and an undisbursed balance of $146 million. Table 4 shows a comparison of the total assets of the fund and their distribution at the end of fiscal years 1972 and 1973. The net increase in the par value of the investments held by the fund during fiscal year 1973 amounted to $1,338 million. New securities at a total par value of $10,614 million were acquired during the fiscal year, through the investment of receipts and the reinvestment of funds made available from the redemption of securities. The par value of securities redeemed during the fiscal year was $9,275 million. Included in these amounts is $8,454 million in certificates of indebtedness that were acquired and redeemed within the fiscal year. The effective annual rate of interest earned by the assets of the hospital insurance trust fund during fiscal year 1973 was 6.4 percent. The interest rate on public-debt obligations issued for purchase by the trust fund in June 1973 was 6% percent, payable semiannually. 8 TABLE 2.-STATEMENT OF OPERATIONS OF THE HOSPITAL INSURANCE TRUST FUND 1 Beginning March 1972 incentive reimbursement payments are being made on a current basis from each of the 2 trust. funds, hospital insurance and supplementary medical insurance, so that no transfer was necessary in fiscal year 1973. For explanation, see text. Includes administrative expenses of the intermediaries. A positive figure represents a transfer from the hospital insurance trust fund to the other social security trust funds. A negative figure represents a transfer to the hospital insurance trust fund from the other social security trust funds. 9 TABLE 3.-COMPARISON OF ACTUAL AND ESTIMATED OPERATIONS OF THE HOSPITAL INSURANCE TRUST FUND Note. In interpreting the figures in the above table, reference should be made to the accompanying text. TABLE 4.-ASSETS OF THE HOSPITAL INSURANCE TRUST FUND, BY TYPE, AT THE END OF FISCAL YEARS 1972 Par value, plus unamortized premium, less discount outstanding. 4,222, 365,000.00 146, 301, 420.67 4,368,666, 420.67 2 A minus figure represents an overdraft which is covered by the redemption of securities on the 1st working day of the following month. ADVISORY COUNCIL ON SOCIAL SECURITY The Secretary of Health, Education, and Welfare on April 23, 1974, announced the appointment of an Advisory Council on Social Security under the provisions of section 706 of the Social Security Act. The Council, which consists of a Chairman and 12 members representing organizations of employers and of employees, self-employed persons, and the public, is making a comprehensive study of the old-age and survivors insurance, disability insurance, hospital insurance, and supplementary medical insurance programs. The Council is required to review the status of the old-age and survivors insurance trust fund, the disability insurance trust fund, the hospital insurance trust fund, and the supplementary medical insurance trust fund in relation to the long-term commitments of the programs. The Council will review the scope of coverage, the adequacy of benefits, and other aspects of these four programs, including their |