Also In This Issue Related stories are available to subscribers only: Never Mind: Previewing The Upcoming Aging Conference Related Resources On NationalJournal.com Off Message: Booming On (11/11/05) · Social Studies: "The No. 1 Moral Issue Is... Abortion? No, Social Security." (1/14/05) · Insider Interview: Andrew Kohut, Director of the Pew Research Center (4/13/05) · Ad Spotlight: American Medical Association's "Medicare Report" (6/8/05) · Wealth Of Nations: "The Slippery Economics Of Health Care" (10/21/05) · Poll Track: National Polling On Health Care · Poll Track: National Polling On Social Security [an error occurred while processing this directive] Additional Resources On The Web White House Conference on Aging · U.S. Census Bureau's Age Data · Federal Interagency Forum on Aging-Related Statistics · Troops to Teachers

By Julie Kosterlitz and Marilyn Werber Serafini, National Journal
© National Journal Group Inc.
Friday, Dec. 2, 2005

On January 1, the first of the Baby Boomers -- the generation born between the end of World War II and 1964 -- will turn 60. In just two years, they can begin collecting Social Security benefits. In five years, they can flash their Medicare cards at the doctor's office. And by 2030 -- the year the entire cohort will have passed 65 -- they can sink the body politic with their outsized claims on the federal budget.

"Demography is destiny," warns David Walker, head of the Government Accountability Office, in his frequent presentations to policy makers about the looming fiscal crunch. Already, he tells audiences, the government has implicitly promised health and retirement benefits to the elderly worth $33 trillion in today's dollars over the next 75 years -- an obligation that works out to about $266,000 for each full-time worker. "We're on an imprudent and unsustainable path," Walker told National Journal.

Scaling back these popular programs is not proving to be easy. President Bush's suggestions for Social Security hit a dead end, and the Medicare drug plan that begins in January is no contraction -- it's the biggest expansion of the program since its founding in 1965.

Still, the graying of America may not be as grim a prospect as Walker and the deficit hawks project, say some experts who have been studying the topic. "Demography Is Not Destiny" is a report co-authored by Bob Friedland, director of Georgetown University's Center on an Aging Society. Human beings, he says, are an adaptable lot. Friedland fears that conservatives are seizing on the direst projections to demand a much smaller role for government than is necessary or prudent.

Baby Boomers are likely to work past normal retirement age, a prospect that should help the national economy as well as their own finances. The astonishing gains in health and longevity made in the last half-century are not only increasing the numbers of elderly people, but also enabling them to work longer than previous generations. Already, a decades-long trend toward earlier retirement appears to have ended. And in surveys, most Baby Boomers say they plan on doing some sort of work even after "retirement."

"People will choose to work to avoid boredom, and people will choose to work to increase income. Both will happen," says former House Speaker Newt Gingrich, who is working on a project to promote health care technology.

Marc Freedman, whose Civic Ventures think tank is trying to inspire a movement for "second careers" in social action, says that the trend amounts to a new stage of life between midlife and old age. Its slogan could be "Not Your Father's Grandfather."

Jon Gunderson of McLean, Va., might be one of its poster-elders. He's 60, a few months too old to be a card-carrying Baby Boomer. Gunderson retired after 35 years of government work with a $90,000 annual pension. Still, he works part-time for the State Department, volunteers for international peace programs, and tutors kids at a public school at least six hours a week. "Sitting in Florida is good for some people, but you need to worry about other things than where you get your next meal," Gunderson says. "I assume I will gradually work less, but I have no intentions of stopping working."

Although government can't decide whether or how to renegotiate the social contract with the elderly, it is taking baby steps to help future retirees adapt to new economic realities. Raising the age of eligibility for Social Security -- the least-popular option in surveys -- seems politically impossible, but the government has tinkered with other, smaller changes to encourage quasi-retirees to keep working.

Likewise, as the traditional lifetime pension fades from the scene, Congress has expanded its search for ways to help people provide for their own needs once they can no longer work. Although the idea of turning Social Security into a private savings and investment program remains a nonstarter in Congress, smaller-scale legislation to modify existing private savings and insurance tools has been moving ahead with little fanfare.

The White House Conference on Aging -- the fifth since 1961 -- is scheduled to meet on December 12 in Washington to recommend new policies to Congress and the president. The conference could prove illuminating, as much for the tone it sets as for the substantive recommendations it makes. Conference Chairwoman Dorcas Hardy, a former Reagan administration official and an advocate of private accounts for Social Security, told National Journal that she hopes to limit discussions of Social Security reforms. She would also like to break with the tradition of earlier conferences that dreamed up new federal programs to address issues facing the elderly. Her goal is to engage individuals, employers, and other private forces "to figure out how we're going to plan, execute, and finance our longevity."

In the end, the nation will likely avoid the scariest budget scenarios and adjust to its new, grayer self in fits and starts, driven at least as much by changes in human behavior as by government policy. "We'll have a different set of values, and society will adapt," said Robert Reischauer, president of the Urban Institute and a former head of the Congressional Budget Office. "That doesn't mean these changes are all good, just because we will accept them. But the 'Chicken Little' view of history isn't correct. Changes take place gradually, and people and institutions adapt."

The Boomers Are Coming! The Boomers Are Coming!
David Walker may not be Chicken Little, but he is Washington's new Paul Revere. As the head of the GAO, Congress's nonpartisan watchdog agency, he rides a circuit of hearings, press briefings, and speeches, calling attention to the imminent arrival of -- old people.

With the Boomers poised to step over that threshold, and with longevity getting, um, longer, Walker is determined to make sure that America understands the fiscal consequences. He is armed with a passel of alarming charts and graphs that project current policy into the future based on a set of educated assumptions. In one, Social Security, Medicare, and Medicaid rise to consume almost twice as much of our national wealth in 2030 as they do today. Others show these three programs and the ballooning interest on the national debt squeezing out all other federal programs by that year.

His message is simple: Without dramatic changes in the nation's policies and in people's lifestyles, America is on a fast track to fiscal oblivion.

"Demographics are pushing most of the numbers," Walker says, also noting that skyrocketing health care costs are equally powerful.

Although he has served in past Republican administrations and was appointed by the GOP-controlled Congress, Walker is scrupulously nonpartisan in his presentation. A bipartisan chorus of deficit hawks is reinforcing his message, and the center-left Brookings Institution and the conservative Heritage Foundation are singing a similar tune on a joint road tour. Walker will be a headliner at the upcoming White House Conference on Aging.

Walker doesn't offer a detailed blueprint for coping with this looming crisis. He mainly wants to set up a process that forces Congress to think about how to reconcile the growing gap between revenue and spending, so that the government can make changes before they get too costly -- politically and financially. Such a reckoning, Walker says, will almost surely mean somewhat higher tax rates, as well as a fundamental overhaul of Medicare, Medicaid, and Social Security.

A more concrete look at the proverbial "tough choices" ahead comes from Brookings Institution senior fellows Alice Rivlin and Isabel Sawhill, who assembled a team of experts to flesh out alternative scenarios. Brookings published them in a tome called Restoring Fiscal Sanity 2005.

If the federal government can't hold its spending to the traditional 18 percent of gross domestic product, the median household will eventually have to cough up about one-third more in federal taxes, the study says. If the public couldn't stomach higher taxes, people would have to consider the Spartan regime offered in the group's "smaller-government scenario." Subsidies for farmers and business? Gone. Federal programs for education, housing, job training, the environment, and police? Up to the states to finance. Military spending limits would dictate smaller armed forces. Social Security benefit levels would have to be cut, so that by 2050, new retirees benefits would replace just 25 percent of their pre-retirement income, compared with 43 percent today. At the same time, the elderly would have to pay for more of their health care costs.

The Fiscal Sanity team considered this prospect politically dubious. "It is difficult to imagine such a scenario being acceptable in a society in which large numbers of senior citizens vote," they wrote. And indeed, public reaction against a similar proposal by Bush's 2001 Commission to Strengthen Social Security showed that elected politicians want to stay far away from such radical surgery.

The notion that the elderly are prospering at the expense of the young is an undercurrent in today's debate. "Today's elderly consume more, relative to the young, than ever before, and young taxpayers are financing much of that consumption," says a 2003 report of the libertarian Cato Institute. The Cato paper suggests taking the approach advocated by the Bush administration: Turn Social Security and Medicare into savings-based systems, lower the taxes on savings, and cut health care costs through competition between private providers.

Maybe Grim, Maybe Not
Some demographers and economists say that the doom-and-gloom message may be overstated.

Walker "is getting almost shrill about this," says labor economist Martha Farnsworth Riche, a former Census Bureau director, who shared the dais with him at a recent event. She understands that Walker needed to turn up the rhetoric because "he's trying to get Congress's attention," but the future is likely to be more shaded, she says.

"The analyses you want to avoid are those that hold everything constant," says Riche, now a private consultant based in Ithaca, N.Y. With static analysis, "you're assuming there's a fixed age at which people do things -- but we know from the Baby Boom that this is very changeable."

Not so long ago, Riche says, analysts were wringing their hands over how the Baby Boom Generation was going to be the first to do less well than their parents, and those projections were based on early measures of Boomers' economic status. The mistake, she says, was comparing Baby Boomers with their parents at the same ages. It turned out that Boomers weren't doing worse; they were just taking longer to move into the economic mainstream. Baby Boomers, Riche says, "did everything later" -- marriage, home-buying, childbearing. One reason was that many of them were busy getting more education -- which ultimately helped them do better than their parents.

Friedland of the Center on an Aging Society complains that projections -- which are essentially thought experiments -- are being used as cover for the ideological agenda of conservatives who favor small government and individual solutions. "I don't want people to get away with the notion that it is simply the number of people" that dictates our future, he says. "I want to say, 'On the other hand ... ' "

Friedland tells a nuanced story that offers more hope for the future. The population's share of elderly has already shown far faster growth in the past than the current projections call for in the future -- and the earlier growth didn't bust the bank. Since 1900, Friedland notes, the number of Americans age 65 and older has doubled three times. It has doubled since 1960, while the overall population grew only 57 percent. Yet the nation's income since 1960 has nearly quadrupled.

The key, he says, has been startling productivity gains. Even as the share of the population in the workforce has fallen, the output of each worker has more than offset the change. The result: Someone born in 1940 has experienced an 875 percent increase in his or her standard of living.

Government bean-counters typically assume that economic growth will be 1.9 percent a year -- although growth has averaged around 2.9 percent since 1987. Forecasters assume that the aging population will force growth down, but Friedland believes that higher productivity could more than offset the slower growth in the labor force. After all, there is nothing like a dearth of workers to spur investments in new labor-saving technologies.

If economic growth does continue at historical rates, Friedland says, government spending might not consume a much larger share of national income than it does now. And even if the government's share did grow, the sky would not fall, he argues. In parts of Western Europe -- where entitlements are far more expansive than the United States would ever contemplate -- and in Japan, the populations are nearly as gray now as America's will be in 2030. These nations may not epitomize growth and upward mobility, but neither are they on the brink of collapse, Friedland says.

Adaptive Behavior: Back to Work
Another problem with all the hand-wringing scenarios is that they tend to ignore how people and the political process usually respond to changed circumstances. In particular, the concept of "retirement" has implied an end to work in the marketplace. That doesn't have to hold true in the future.

A February survey by Merrill Lynch showed that three-quarters of Baby Boomers intend to keep working into retirement. About one-quarter are expecting to work because they need the money, and about half will work to avoid boredom, to give back to the community, and to finance the cruises they'd like to keep taking.

Those who work longer tend to be at the extreme ends of the income parabola: Those at the leading edge, such as Jon Gunderson, work because they like to, and those at the trailing edge work because they need to.

Gingrich, who is now head of the Center for Health Transformation, a collaboration of free-market-minded business leaders promoting technology to improve health care and save money, says that the era of indolent retirement is coming to an end. The number of people "working 20 hours a week or more in their 60s, 70s, and 80s will be far higher in the next generation than in the last generation," he says, "both because they're capable of doing it and because work will be organized to enable them to do it."

After trending downward for decades, the share of people 55 and older who are working has increased since 1985. "Many more older men and women are working today than the prior trends would have predicted," says Boston College professor Joseph Quinn.

Respondents to the Merrill Lynch survey said they expect to "retire" at around 64 and then jump into a new job or career. Ideally, 42 percent said, they would like to cycle between periods of work and periods of leisure. Another 16 percent said they wanted to work part-time, and 13 percent wanted to start their own business. Only 17 percent said they hoped to never work for pay again, while 6 percent said they planned to work full-time.

Boomers will be able to work longer than previous generations partly because technology has made jobs less demanding. "My uncles were steelworkers, and if you were a steelworker, you were physically exhausted at 50," Gingrich says. "So there's an enormous transition that started occurring in the 1950s, as air conditioning and computers began to replace the world we once lived in."

Gunderson is one of those reasonably comfortable retirees who are still in the workforce. Last year, at age 59, he retired from the State Department after 35 years of work with the Army, Justice Department, and Foreign Service. With a $90,000-a-year pension, Gunderson doesn't really need to keep in the traces, although like many Boomers, he had kids late (the oldest of his three is 14), and the extra $60,000 he earns helps his family maintain a comfortable lifestyle.

Gunderson has a flexible, part-time contracting arrangement with the State Department that takes up about half of a workweek. More important, he says, the new flexibility allows him to pursue his interests. When he's not coaching his kids' sports teams, he's working for United Nations reform as part of the U.S. Institute of Peace, a nonpartisan institution funded by Congress.

Gunderson, though, talks most enthusiastically about his volunteer work mentoring and tutoring kids at Birney Elementary School in Washington. Last year, he signed on with the Experience Corps, a nonprofit organization that connects older people with volunteer opportunities in inner-city schools. Birney has a handful of mentors, including a retired D.C. police officer. "They are good role models in the community," Gunderson says. "They don't want to just go in there and feel good. They give the kids a sense that they can do something with their lives."

Like Gunderson, many Baby Boomers say they plan to work as long as possible, and in jobs they find meaningful. "The old dream was freedom from work. The new dream is freedom to work," says Marc Freedman, president of Civic Ventures, which oversees the Experience Corps.

But mental stimulation isn't everything, and the people who need to earn money the most tend to be the least qualified. The pivot point is education, says AARP Director of Policy and Strategy John Rother. "It used to be that if you were a high school grad, you could get a manufacturing job with some benefits associated with it. It's not true now," he says. Rother points to "a gap between haves and have-nots. Most Baby Boomers would not have [economic security] but for Medicare and Social Security." It's the bottom quarter of Boomers "where you start to get scared," he says. That group has lost ground relative to their parents. "They did not have a pension plan.... A lot don't have home equity or financial assets and will have to work longer."

Robert Blendon, professor of health policy and management at the Harvard School of Public Health, believes that some Boomers who think they can make it financially in retirement are in for a surprise. "There is an optimism among current working people that they will figure it out. My view is that they will not."

There will be fewer early retirees, he says, because people won't be able to afford to buy individual health insurance while waiting for Medicare to kick in at 65. Many will adjust by working part-time, and by living in "very tiny studio apartments with some services available. It's not the vision that they had. Everyone should be sweating."

Gray and Pitching In
Boomers' ability to work later in life is likely to ease some workforce shortages that have already begun. The nation currently is short of teachers and of nurses and other health professionals. Boomers are headed straight for those fields, according to a survey conducted last spring for the MetLife Foundation and Civic Ventures.

Hardy, chairwoman of the White House Conference on Aging, says that employers will have to create programs to train older workers, and colleges will need to start new types of educational programs. Some companies and groups have begun their own efforts.

* In September, IBM began to encourage experienced workers to become math and science teachers in U.S. schools. The company offers experienced employees up to $15,000 in tuition and stipends while they student-teach and provide online mentoring to students. "It's an incentive to retire and an example of making a virtue out of a necessity," Freedman says.

* The seniors group AARP collaborates with about two dozen companies to connect Americans over 50 with jobs. Its "Featured Employers" -- including Cingular Wireless, Comcast Cable Communications, and CVS/pharmacy -- actively recruit "mature" workers. AARP has a Web page that lists participating employers, provides extensive employment information, and gives links to training opportunities for mature job seekers. In its publications, the group advertises the program to its 35 million members.

* Civic Ventures in June will present five $100,000 awards to people over 60 who devise new ways to tackle social problems -- with a mind toward providing role models, and perhaps job opportunities, for others in their age group. "We want to let the innovators create the rules for their peers," Freedman says.

* The federal Defense and Education departments run Troops to Teachers, to steer military retirees toward public school teaching. Some financial assistance is available.

A recent report, "60 Is the New 55," highlights the broader benefits of older people's presence in the workforce. Goldman Sachs looked at the impact over the next two decades of having 55-to-59-year-olds working at the same rates as those 50 to 54 had previously worked, 50-to-60-year-olds working at the same level as 45-to-49-year-olds, and so on. The study found that this change could raise national economic growth rates by half a percentage point, translating into an 11 percent increase in per capita incomes.

If the recent trend of the elderly and near-elderly working more continues, it could also improve the financial outlook for entitlement programs. In a 2003 study, Craig Copeland, a senior research associate at the Employee Benefits Research Institute, a nonprofit think tank, estimated that a continuation of recent changes in labor-force participation among those 60 to 64 could trim Social Security's long-term deficit by about 15 percent. That improvement, he says, doesn't even include the likely increases in payroll contributions from the even-greater increase in workforce participation among those 65 and older.

Changing Rules and Incentives
If older people are to keep working, some laws and workplace rules that discourage employment after the traditional retirement age of 65 will have to be changed. These rules were not a problem when society was trying to move people out of the labor force early, to make room for returning World War II veterans and for young Baby Boomers seeking to move up the career ladder. But now, "the imminent, drastic change in demographic conditions creates a much more urgent need for reform," according to a recent Urban Institute report, "Legal and Institutional Impediments to Partial Retirement and Part-Time Work by Older Workers" [PDF].

John Euill, for example, retired at 57 from the Capitol Police because retirement was mandatory at that age. Now 61, a Cheverly, Md., resident, Euill says he would have stayed on longer if allowed, but "they want to make room for younger officers. They don't want too many old men hanging around."

A "huge" reduction of the pressure to quit working began in 1986, Quinn says, when the federal government changed Social Security benefit formulas to do away with a built-in benefit reduction for those who decided to keep working and postpone getting Social Security until a later age. The program, he explained, "used to be set up like private pensions were. If you hung around too long, your expected lifetime benefits went down."

Likewise, more "age-neutral" 401(k) plans are replacing traditional "defined-benefit" pension plans, which were structured to move older workers out. And some evidence suggests that the shift to 401(k)s -- which don't guarantee a specific income level in retirement -- may be prompting some people to work longer.

Still, many retirement plans make part-time work unattractive by basing pension payments on earnings in the last few years before retirement. That was the case for Andrew Johnson, a 66-year-old resident of Washington, D.C., who retired early because he had no incentive to stay on. After 34 years as a Drug Enforcement Agency officer, Johnson left at 55. He could have worked until 57, but the federal government bases retirement pay on the three highest-salary years, and Johnson says his pension wouldn't have changed much. "It wasn't worth staying," he says.

Barbara Kennelly, president of the senior group National Committee to Preserve Social Security and Medicare and a former Democratic member of Congress from Connecticut, wants to see Congress break down more of the barriers. "I get so annoyed that we're not looking at this," she says. "We had to work very hard to make sure we didn't have age discrimination. At the same time, there are barriers for people. If you're still working and it's time for you to retire and you want to work part-time, your employer, by the law, can't let you."

Hardy says that the aging conference this month should explore changes to current law. "Maybe we need to say people can draw down on half of their pension because they're working half-time," she says.

Gary Kowalczyk, senior adviser with the Experience Corps, says that employers face a real problem in that they must comply with tax, discrimination, and ERISA laws, which together strongly discourage offering phased-retirement programs. The Urban Institute report noted that these laws are hard to change, because they were developed to protect employee rights that remain important.

Health insurance costs give companies another disincentive for keeping older workers. Health insurance for people ages 55 to 59 costs about twice as much as coverage for those ages 20 to 44. And Medicare, the federally sponsored health plan that begins at 65, won't become the primary health insurer for anyone who is working full-time for a company that provides health coverage. That makes it particularly expensive for an employer to retain workers after 65.

Maintaining Independence
Even though today's seniors will likely spend more of their lives in good health than previous generations did, at some point in life they will eventually fall prey to age-related ailments.

Moreover, because of an array of societal changes -- smaller families and more women entering the workforce -- the elderly are less likely than in the past to be cared for by family members. One-fourth of older people lived with relatives in 1960, but only about 13 percent did in 2000, according to a March report by the Georgetown Center. During that same period, the percentage of older people living alone increased from 19 percent to 30 percent.

Even so, some experts argue, new technologies, medical advances, innovative living arrangements, and more-appropriate care could allow aging Boomers to live independently longer -- potentially avoiding the projected exploding costs of nursing home care.

House Ways and Means Committee Chairman Bill Thomas, R-Calif., says that assisted-living housing-and-care arrangements -- rare a decade ago -- will expand. "We're beginning to look at a combination of college dorms, condo living, basic support hospitals, and home health care. As you get older, if you need more help, you stay in the same community and move to more help, and then back again."

Thomas concedes that these living arrangements aren't cheap. But Gingrich argues that business competition could eventually drive costs down.

And Gingrich is enthused about the potential for technology to protect the vulnerable. He cites motion detectors that can tell whether someone has fallen, locator bracelets that can track Alzheimer's patients, and a diabetes phone that can remind patients to draw blood, test the sample, record it, and report to a doctor.

The field is exploding: Inventors have produced an array of devices to help frail seniors retain their independence. Hardy says the White House Conference on Aging this year has had to shift to a larger facility to accommodate presentations by manufacturers.

Medical advances are important, particularly for memory-stripping Alzheimer's disease, which renders otherwise healthy people helpless and often requires expensive care. Almost half of people over 85 have Alzheimer's. Without a new, effective treatment, 7.8 million will have the disease by 2030, according to projections. Direct and indirect costs of care, plus lost productivity of Alzheimer's patients, amount to $100 billion a year, says William Thies, vice president of medical and scientific affairs at the Alzheimer's Association.

The association is pushing for $1 billion a year in research funding, even though the budget for Alzheimer's research at the National Institutes of Health has doubled in the last decade to about $650 million in fiscal 2006. "If we find a way to delay the onset by five years," Thies says, "we cut the number of cases in half." Such a delay would reduce Medicare spending in 2030 from a projected $394 billion to $217 billion, says association Vice President Stephen McConnell.

Some experts are even more optimistic. "By 2030, I have to believe that Alzheimer's is no longer a threat, and neither are urinary incontinence and osteoarthritis. Take these three away, and the nursing homes will be empty," says AARP's Rother.

Focusing money on better primary care might also avert higher costs. For delivering such care to the truly frail, a relatively new medical specialty, geriatrics, has developed. Geriatricians don't just monitor diseases and medicines; they can keep people out of nursing homes and hospitals. "We deal with home care agencies. We may be working with assisted-living facilities. We may be working with Meals on Wheels," says Sharon Brangman, a geriatrician who serves on the board of the American Geriatrics Society.

The financial incentives, for now, are stacked against such care. "It's almost impossible to make it financially in geriatrics," says Joanne Schwartzberg, director of aging and community health at the American Medical Association, who used to practice geriatrics. She faults the payment systems of Medicare and private insurance. Geriatricians don't get paid, she says, for most of what they do outside of traditional medical services. Not surprisingly, the country has only half the geriatricians it needs, and few budding doctors are choosing the specialty.

Not everyone is optimistic that either technology or better care will lower health care costs. Writing about "the steady march of medical progress" in the Brookings book, health care economists Henry Aaron and Jack Meyer argue that while recent advances have "brought enormous benefits ... [they] have not been cheap." Scientific breakthroughs, they note, "often lower prices, but seldom lower cost," because more and more people eventually demand the new technology -- increasing the quantity of care consumed.

Beyond Social Security
Americans may not be ready to accept the sort of overhaul of Social Security that President Bush has proposed, but his talk of an impending "crisis" may have helped convince them that they will have to be more self-reliant. Transamerica Corp says it picked up signals of a new attitude in its latest retirement survey: Average contribution rates to 401(k) plans leapt from 8.4 percent of eligible employees in 2004 to 9.9 percent in 2005; and significantly more employees report saving for retirement outside of the workplace (66 percent in 2005, up from 58 percent in 2004).

Congress, although stalemated over Social Security, has been moving ahead with pension-reform legislation that promises to significantly increase 401(k) saving among lower-income workers simply by harnessing the power of human inertia. The measure would encourage employers to include in their 401(k) plans all workers who don't specifically choose to opt out -- rather than requiring workers to sign up in order to participate.

Ways and Means Chairman Thomas also argues that the nation needs to think more creatively about ways to channel new private sources of money into care for the elderly. In his committee's pension bill, Thomas included several measures to make a start. One would allow insurance companies to offer hybrid plans that combine annuities and long-term-care insurance, so that retired people could start out with a fixed-income payment that in later years could convert into payments for long-term care. Another provision would let employees annually retrieve up to $500 in unused pretax flexible spending account contributions -- which they must now forfeit -- and shift them into tax-favored health savings accounts.

But some observers say that the looming rise in health care costs will drive changes that go well beyond all such minor adjustments -- and beyond Medicare -- and will overwhelm Americans' reluctance to tax themselves more. AARP's Rother predicts that the nation will eventually turn to a value-added tax that would be earmarked for health care. The revenue from that tax could support universal care that was financed by taxpayers, but delivered through private plans much like the model envisioned for the new Medicare prescription drug benefit.

Although the Republican-controlled Congress seemingly prefers small-government solutions, the politically potent Baby Boom Generation's demands for help could shift the balance. Combined federal, state, and local government spending has risen from 21 percent of gross national product in 1950 to 33 percent today. This upward trend, according to Georgetown's Friedland, suggests that as society gets wealthier, it wants and is willing to pay for more of what government provides.

Much is riding on decisions to be made by federal and state governments. Still, Boomers as a cohort are sure to make retirement uniquely theirs, and mostly through their own independent actions.

"We will look up and say, '2020 is different than 2000,' " but we will not be aware of the changes as we go on, Reischauer says.

Train wrecks make better headlines than the humdrum work of the gandy dancer. Ultimately, however, it may be the little, mundane alterations in human behavior that come from personal experience, and the myriad mundane alterations in federal, state, and business policies, that get us through the challenging period ahead.

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