Examining the Forecasting Properties of the CMS Personal Health Care Price Projections

Given the lack of consensus forecasts for medical price inflation, forensic economists may rely on price projections for personal
health care items provided by the Center for Medicaid and Medicare Services (CMS). The objective of this research is to examine the forecasting properties of the CMS price projections in the context of life care plan valuation. The CMS price projections were examined on an absolute basis over 10-year and 20-year periods between 2002 to 2021. The real 20-year CMS projection-based forecasts were more accurate than the nominal forecasts. The use of real CMS projection-based forecasts premised on the 2012 CMS projections did not improve accuracy. As measured by the root mean squared error, the CMS forecasts produced error rates comparable to other forecasting methods discussed in the forensic economics literature. In 2024 the CMS began publishing its projections; hence, an example of how these data can be used to value a life care plan is presented. This research furthers the forensic economic literature by providing insight into the error rates for CMS price projection-based forecasts.