Summary of the 1983 Annual Reports of the Medicare Board of Trustees

Hospital insurance (HI), which pays for inpatient hospital care and other related care of those 65 years of age and over and of the long-term disabled. Supplementary medical insurance (SMI), which pays for physicians' services, outpatient hospital services, and other medical expenses of those 65 years of age and over and of the long-term disabled. The HI program is financed primarily by payroll taxes, with the taxes paid by current workers used to pay benefits to current beneficiaries. However, the HI program maintains a trust fund that provides a small reserve against fluctuations. This type of financing is generally known as pay-as-you-go financing. By contrast, the SMI program is financed on an accrual basis with a contingency margin. This means that the SMI trust fund should always be somewhat greater than the claims that have been incurred by enrollees but not yet paid by the program. The trust funds hold all of the income not currently needed to pay benefits and related expenses. The assets of the funds may not be used for any other purpose; however, they may be invested in certain interest-bearing obligations of the U.S. Government. The Secretaries of Treasury, Labor, and Health and Human Services serve as trustees of the HI and SMI trust funds. The Secretary of Treasury is the managing trustee. The Administrator of the Health Care Financing Administration, the agency charged with administering the Medicare program, is the secretary of the Board of Trustees.