Growth rates project future increases in medical costs, wages, or other components. Medical cost inflation has historically exceeded general inflation, which plaintiffs cite to support higher rates.
The net discount rate combines growth and discount assumptions.
Alternative Names:
Inflation Assumption, Cost Growth Rate
Why it Matters?
Applying historical medical inflation across a fifty-year projection compounds into figures that assume the trend continues indefinitely, which no economist would defend as a prediction. Challenging the assumption that recent decades of medical cost growth will persist is substantive rather than technical. Using a net discount rate that offsets growth against investment return, rather than separate aggressive assumptions on each, produces more defensible figures.
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Frequently asked questions
What is the challenge to medical inflation assumptions?
What is the net discount rate?
