Demography and Retirement: The Twenty-First Century

cannot make the marginal adjustments needed to maintain the program pretty much along the lines now configured. We should make those marginal adjustments to prevent long-term imbalance in the program as far in advance as possible.

The long-term prospect for Medicare is decidedly pessimistic. It would appear that current projections suggest a future level of benefits that may not be politically sustainable. Putting this conclusion in the larger context of the U.S. health system's inflation and access problems suggests that fundamental issues about the organization and provision of health care services will have to be addressed long before the baby boom reaches retirement age.

This paper attempts to answer the question of whether Social Security can survive the expected demographic changes in our society after the turn of the century as the baby boom generation passes from their working careers into retirement. That this is an issue may be startling to the casual observer of our social insurance system. Just eight years ago, we completed the big overhaul of Social Security that resolved its short-term financial crisis and set it on a course that was hailed as being actuarially sound for the next 75 years. With just one-tenth of that period elapsed and with the system's experience being almost exactly what was predicted, and with the unprecedented accumulations now occurring in the trust funds, it may seem an odd time to be overly concerned about the system's survival.

The prospects for Medicare have not been as bright, at least in recent years, as those for the cash benefits program we call Social Security. But, each time we seem to approach the cusp of crisis in Medicare, the program is amended to push the day of reckoning further into the future. Maybe the continued careful course adjustments can keep Medicare afloat, for who can think of the alternative? And if the financing of Medicare becomes dangerously precarious, we do have the cash benefits trust funds just sitting there.

Yet as we begin to move through the 1990s, the prospects for future problems are beginning to unveil themselves in a fashion that legitimizes questions about the long-term viability of these social insurance programs. After the release of the 1989 Trustees Report, at least one authority declared that the picture on Social Security's financial health was a rosy one for the elderly, but a dim one for the young. ¹ Increasingly, there is a feeling in the business community that the federal government's Medicare policies are nothing more than the government promising benefits to the elderly on the one hand, and making employersponsored plans pay the bill on the other. There is a growing concern that the shifting of costs from governmentally sponsored health plans to private ones is making the sponsorship of employer plans an untenable proposition. Thus we face the prospect that Medicare is choking its one existing safety valve. Given the general problems of cost inflation, concerns about the quality of care provided, and the limited access that some citizens have to the U.S. health care system, it is important to understand the interrelationship of Medicare to the larger system.

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