CBO projects that spending per beneficiary will also grow at an average rate of 3 percent per year over the coming decade—much more slowly than it has grown historically
. In particular, CBO projects that after adjusting for inflation, Medicare spending per beneficiary will increase at an average annual rate of 1.5 percent between 2014 and 2024, compared with average annual growth of 4 percent between 1985 and 2007 (excluding the jump in spending that occurred in 2006 with the implementation of Part D, the prescription drug program). . .
Second, the slowdown in Medicare cost growth during the past several years has been sufficiently broad and persistent to lead CBO to project that growth will be slower than usual for some years to come
. Markedly lower growth rates for Medicare spending in recent years have extended across all types of services, beneficiaries, and major regions.8 As spending has fallen short of CBO’s projections, the agency has made a series of downward adjustments to those projections.
For example, since March 2010, CBO has reduced its projection of Medicare outlays in 2020 (the last year included in the March 2010 projection) by $109 billion, or about 12 percent, based on analysis by CBO and other analysts of data on Medicare spending. (CBO has also made other revisions to its projections for Medicare spending in response to legislative action and revisions to CBO’s economic outlook.)
The third factor leading to slow projected growth in Medicare spending per beneficiary for the coming decade is the constraints on payment rates for most services that are built into current law: