In recent years, health care costs have been increasing at twice the rate of real wages. Were this trend to continue, health care spending would consume the entire gross domestic product by the middle of the next century. The Trustees understand that this is impossible, so they have arbitrarily assumed that health care costs will rise at the same rate as hourly wages in their intermediate forecast. The optimistic forecast assumes an annual increase 2 percentage points less and the pessimistic forecast assumes an annual increase 2 percentage points more. But even the optimistic and pessimistic forecasts assume convergence with the intermediate assumptions in the year 2045.
General revenue pays the remainder.
To give a clearer picture of the impact on workers, we have converted the projection to a percentage of Part A's taxable payroll. Under intermediate assumptions, the government's share of Medicare Part B will climb to 5.99 percent of taxable payroll in 2040, assuming that the elderly continue to pay one-fourth of the cost. According to the pessimistic forecast, Part B cost will reach 11.32 percent in 2040. In this case, health care costs are assumed for the intermediate forecast to grow at the same rate as GDP per capita. The optimistic and pessimistic forecasts assume growth rates 2 percentage points lower and 2 percentage points higher, respectively.