TABLE F-1 Basis of the Low Spending Trajectory for Medicare and Medicaid

2008 (Percentage of GDP)

2025 Percentages of GDP

Actual

CBO Extended-Baseline Scenario

CBO: 0% Excess Cost Growth

CBO Alternative Fiscal Scenario/Study Baseline

0% Excess Cost Growth: For Use in Committee’s Scenarios

4.1

7.3

5.9

7.4

(5.9/7.3)*7.4 = 6.0

the assumption that Medicare’s payment rates for physicians will grow with inflation) that is the basis of the committee’s study baseline for Medicare and Medicaid.

The committee adopted a simple approach to reconcile CBO’s zero percent ECG trajectory with the study’s baseline assumptions. In 2025, for example, CBO’s path puts Medicare and Medicaid spending at 7.3 percent of GDP and program spending at 5.9 percent of GDP—that is, 19.2 percent below the extended baseline. Although the study baseline puts Medicare and Medicaid at 7.4 percent of GDP in 2025, which is slightly higher than CBO’s extended baseline, the committee still assumed that the zero percent ECG trajectory would put Medicare and Medicaid at 19.2 percent below the study baseline—that is, at 6 percent of GDP; see Table F-1.

High Spending Trajectory

The high spending path uses CBO data to broadly mimic the long-term cost-growth path of the Medicare Trustees. The formula used in the extrapolation does two things:

  1. It causes spending in 2083 to be at the same level as that achieved by the 1 percent ECG path laid out by CBO in its most recent update of the long-term budget outlook. The same adjustments the committee made to the zero percent ECG path (as described above) were made to the 1 percent ECG path.

  2. It causes the spending curve to flatten out to zero percent ECG by 2083.

The formula that accomplishes that is as follows:



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement