CBO: Medicare spending to climb 7% each year after 2018 — with nearly 5 percentage points reflecting cost growth

The Congressional Budget Office projects Medicare spending will grow to $1.2 trillion by 2028, according to its Budget and Economic Outlook: 2018 to 2028.

This year, CBO estimates Medicare spending will grow by 3 percent, which is much slower than previous years. CBO attributes the slow growth to higher premium revenue, and anticipates Medicare enrollment to increase by 2.7 percent this year, compared to 2.6 percent last year.

However, that won't be the case from 2019 to 2028, CBO said. The office anticipates Medicare spending to climb an average of 7 percent each year during the time period. The change is "driven by the rising per-beneficiary costs of medical care," CBO said. Specifically, cost growth reflects nearly 5 percentage points of the increase. Growing enrollment only accounts for the remainder. 

Medicaid is also expected to cost the government more due mostly to increasing per capita costs. After this year, CBO projects Medicaid spending will grow at an average rate of 5.5 percent per year. Just 1 percent of the spending reflects an uptick in enrollment, while nearly 5 percent is due to cost.

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