LTC Bullet:  Surplus Won't Save Us


Wednesday, March 14, 2001



In testimony before the U.S. Senate Budget Committee last month, David Walker, Comptroller General of the United States, delivered a sobering message about our national budget surplus and the future of federal retirement security and health programs, including Medicaid.  His message: Don't be fooled by the surplus, however large and however much we save of it.  We're still on course for a fiscal train wreck absent serious entitlement reform. To this end, the Center for LTC Financing offers its "LTC Choice" proposal to reform long-term care so at least the Medicaid program can survive to provide high quality care to the truly needy long into the future.  The Center's policy paper, "LTC Choice:  A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" is available in .pdf format at You can also order a hard copy of the paper [$24.95; free to media and lawmakers] by sending your request and complete contact information to

Below are excerpts from Comptroller General Walker's compelling testimony:

"Our [GAO's] long-term simulations . . . show that spending for federal health and retirement programs eventually overwhelms even today's projected surpluses.  This is true even assuming no additional spending for defense, education, or a Medicare prescription benefit—i.e., even if the entire unified surplus was saved." (p. 3)

* * *

"Although the ten-year horizon looks better in CBO's [Congressional Budget Office's] January 31st projections than it did in July 2000, the long-term fiscal outlook looks worse.  In the longer term--beyond the 10-year budget window of CBO's projections—the share of the population over 65 will begin to climb and the federal budget will increasingly be driven by demographic trends.

"As more and more of the baby boom generation enters retirement, spending for Social Security, Medicare, and Medicaid will demand correspondingly larger shares of federal revenues.  Federal health and retirement spending will also surge due to improvements in longevity.  People are likely to live longer than they did in the past, and spend more time in retirement.  Finally, advances in medical technology are likely to keep pushing up the cost of providing health care."
(pps. 5-6)

* * *

"The message from our long-term simulations, which incorporate CBO's 10-year estimates, remains the same as it was a year ago.  Indeed, it is the same as when we first published long-term simulations in 1992.  Even if all projected unified surpluses are saved and used for debt reduction, deficits reappear in 2042.  If only the Social Security surpluses are saved, unified deficits emerge in 2019. . . .  In both scenarios deficits would eventually grow to unsustainable levels absent policy changes.

"To move into a future with no changes in federal health and retirement programs is to envision a very different role for the federal government.  Assuming, for example, that Congress and the President adhere to the often-stated goal of saving the Social Security surpluses our long-term model shows a world by 2030 in which Social Security, Medicare, and Medicaid increasingly absorb available revenues within the federal budget.  Under this scenario, these programs would require more than three-quarters of total federal revenue.

"Little room would be left for other federal spending priorities such as national defense, education, and law enforcement.  Absent changes in the structure of Social Security and Medicare, some time during the 2040s government would do nothing but mail checks to the elderly and their healthcare providers.  Accordingly, substantive reform of Social Security and health programs remains critical to recapturing our future fiscal flexibility." (pps. 8-10)

* * *

"As we have stated elsewhere, early action to change these programs would yield the highest fiscal dividends for the federal budget and would provide a longer period for prospective beneficiaries to make adjustments in the own planning.  This message is not changed by the new surplus numbers.  It remains true that the longer we wait to take action on the programs driving long-term deficits, the more painful and difficult the choices will become." (p. 20)

Source: "Long-Term Budget Issues: Moving From Balancing the Budget to Balancing Fiscal Risk," Testimony before the Committee on the Budget, U.S. Senate, Statement of David M. Walker, Comptroller General of the United States, February 6, 2001, GAO-01-385T,


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