Projecting long term medical spending growth

We present a dynamic general equilibrium model of the U.S. economy and the medical sector in which the adoption of new medical treatments is endogenous and the demand for medical services is conditional on the state of technology. We use this model to prepare 75-year medical spending forecasts and a projection of the Medicare actuarial balance, and we compare our results to those obtained from a method that has been used by government actuaries. Our baseline forecast predicts slower health spending growth in the long run and a lower Medicare actuarial deficit relative to the previous projection methodology.