Retiring Baby Boomers: Meeting the Challenges


Presented to

Special Committee on Aging
U.S. Senate


Gail R. Wilensky, Ph.D.
John M. Olin Senior Fellow
Project HOPE
March 6, 1997

Mr. Chairman and members of the committee, thank you for inviting me to appear before you. My name is Gail Wilensky. I am a John M. Olin Senior Fellow at Project HOPE, an international health education foundation, and Chair of the Physician Payment Review Commission (PPRC). I am also a former Administrator of the Health Care Financing Administration. However, I am here today to present only my own views on Medicare, and my testimony should not be regarded as representing the position of Project HOPE or PPRC.

In my comments, I will discuss some of the implications of the financial crisis facing Medicare. My concern is that most of the reforms considered in the last session of Congress and those already being raised in this session do not resolve the long term problems of Medicare and in many cases, not even the intermediate financing needs of Medicare. The public needs to be more aware of the magnitude of the changes needed to keep the Hospital Insurance Trust Fund afloat until the baby boomers begin to retire, in addition to the changes that will be needed to accommodate the baby boomers.

The Need for Reform

Medicare, one of the country’s most popular social programs, is in serious need of reform. The most immediate problem facing Medicare concerns its future financing. Without substantial changes in Medicare’s financing mechanisms, its benefits package, its payment policies or in the basic design of Medicare itself, it will be impossible to provide the medical security that Medicare has promised to present and future generations of seniors.

Medicare’s current financing problems pose short term, intermediate term and long term difficulties for the program. In the short term, Medicare Part B represents a major drain on the budget since three-quarters of its spending is financed from general revenue. This spending exacerbates the deficit a