House Oversight Document Highlights Unfunded Liability Estimates for U.S. Entitlement Programs

Entitlement Spending: Observations from Previous Slide e Entitlement revenue was $0.87 trillion, yet entitlement spending was $1.98 trillion in F2010. e Entitlement spending exceeded entitlement revenue by 129% in F2010. e Social Security (ex. Trust Fund interest income) accounted for 73% of dedicated entitlement revenue yet only 36% of entitlement spending in F2010 while Medicare accounted for 21% of revenue and 23% of spending and Medicaid accounted for 0% of revenue and 14% of spending. KP i USA Inc. | Income Statement Drilldown 81 Entitlement Spending: Clarification On ‘Unfunded’ / ‘Net Responsibilities’... There is debate about the semantics of using words like unfunded / net responsibilities to describe the financial status of entitlement programs like Social Security, Medicare and Medicaid. ‘Unfunded’ — We define ‘unfunded’ liabilities for Social Security and Medicare as the present value of future expenditures in excess of dedicated future revenue. We call Social Security and Medicare ‘partially unfunded’ entitlement programs as their future expenditures are projected to exceed dedicated future revenue. e ‘Net Responsibilities’ — USA Inc. does not record these ‘unfunded’ financial commitments as explicit liabilities on balance sheet, owing to Federal accounting standards." — USA Inc.’s Dept. of Treasury calls these commitments ‘net responsibilities’ or ‘net expenditures’ in its annual Financial Report of the U.S. Government. e Medicaid — We view Medicaid as an ‘unfunded’ liability as there is no dedicated revenue source to match expected expenses in our financial analysis. Medicaid is jointly funded on a pay-as-you go basis by Federal and State general tax revenue. P Note: 1) per Dept. of Treasury, “2004 Financial Report of the United States Government.” (@E) www.kpcb.com USA Inc. | Income Statement Drilldown 82 HOUSE_OVERSIGHT_020882