Consistent with the assumptions used by the Medicare trustees, the CBO's intermediate projections for Medicare and Medicaid are based on the assumption that, over the long run, per beneficiary health expenditures will increase at a rate that is 1 percentage point per year greater than the growth rate of per capita GDP.
Over the past twenty-five years, however, per beneficiary Medicare spending has actually exceeded per capita GDP growth by about 2-1/2 percentage points per year. Thus, a significant slowing in the growth of medical costs per beneficiary will be needed to keep expenditures close to those projected in this scenario. 2  BIS Review 19/2007  exponentially after that.