It's hard to plan for retirement, and one of the trickiest questions is: How much should I save?

The honest answer is: It depends. "The best-laid plans can be undone by a messy divorce, a disabling disease, or a stock market crash," Jonathan Skinner, a professor of economics at Dartmouth College, wrote in a study on the topic. Your future health-care expenses are almost impossible to predict, for example, especially as Congress considers big changes to the system.

Aug. 26 (Bloomberg) -- Medicare continues to exhibit remarkably slow growth: a modest 3 percent over the past year. That’s great news, but a debate is raging about whether this is caused by a weak economy (and therefore will reverse as the economy recovers) or other factors (and therefore may persist, drastically improving the budget outlook).

With the first Baby Boomers headed for retirement within a bare decade, worries are growing about the huge burden this group will place on the federal budget in the 21st century--and politicians are busy unveiling plans to keep Social Security and Medicare afloat.

How realistic are such fears? In a study in the Journal of Economic Perspectives, Ronald Lee of the University of California at Berkeley and Jonathan S. Skinner of Dartmouth College underscore the high degree of uncertainty attached to current demographic and economic projections.

Only a few years ago, it looked as if the U.S. had finally managed to put a leash on surging health-care expenditures, which consume some 14% of gross domestic product. Now, with costs picking up steam again, the search is on for ways to control spending--not only to ease the pain for current employers, workers, and taxpayers, but also to lighten the massive burden that lies ahead when the baby boom generation enters its retirement years.

One potentially useful tack is suggested by a new study by economist Jonathan Skinner of Dartmouth College and physician John E. Wennberg of Dartmouth Medical School that focuses on geographic disparities in Medicare spending. Specifically, the study looks at differences in outlays and care for patients in the last six months of their lives, a period that accounts for some 30% of total Medicare expenditures.

The Senate voted in June to require upper-income seniors to pay higher premiums for their Medicare insurance. President Clinton, while expressing support for the general idea of means-testing Medicare, forced Republicans to drop the plan. But new research suggests that the GOP was on the right track. When it comes to Medicare, lower-income seniors are paying the bills for betteroff recipients. The reason: Rich people use more medical services, especially physicians' services. And they live longer, so they have more years to cash in on Medicare.

Economists Mark McClellan of Stanford University and Jonathan Skinner of Dartmouth College compared the lifetime cost of Medicare taxes with the flow of benefits from the health plan for the elderly. As expected, they found that today's retirees enjoy a substantial subsidy from today's workers: Benefits for a couple that turned 65 in 1990 will exceed the taxes they paid, on a present-value basis, by $33,600. But the researchers were in for a surprise when they looked at the flows of money within that age group. They found that each individual with an income below the median will transfer, on average, $800 to individuals with above-median incomes.

True, upper-income elderly have paid more taxes: A person in the top 10% of this cohort paid $7,600 more in taxes than one in the poorest 10%. But the better-off seniors use $8,600 more in lifetime Medicare benefits than do the poorest retirees.

Medicare was established in 1967, so today's elderly paid taxes for only part of their work lives. In contrast with today's retirees, McClellan and Skinner found that today's 52-year-olds--who were 22 when Medicare began--can expect an average subsidy from younger workers of only $2,200 per couple. But lowerincome members of this group will still end up subsidizing richer ones.