Lots of talk in Bermuda this week about this latest initiative to win over the hearts and minds of senior men and women facing astronomical health costs - budget busters that have the real potential to turn their golden years from gold to lead.

Lots of discussion of who got signed up, who didn't, how the process was handled, who will and won't be eligible, whether it was fair or unfair, and the real crux of the initiative, how many senior citizens will ultimately need this service (and have to be enrolled) because they cannot afford any health care.

Lots of narrative about the offering itself, and it is a comprehensive offering featuring even a $2,000 prescription credit per year per person.

All noble, all altruistic, all very politically sanctified, all very free - except - for the most important thing of all.

No one, no one currently is talking about the present and future cost. Opposition MP Grant Gibbons did quantify his numbers at upwards of 65 million a year, but where are the real numbers?

Every single financial plan that has any chance of success, whatsoever, needs success experience models run using what-if scenarios to project the probability of achievement. Why? Because the components that make up the what-if model can vary. Inflation can be more (or hopefully less than expected); costs may grow out of control (or better yet, be contained carefully); growth projections of need may become skewed upward, if economic conditions stagnate or decline. Thus, in the modelling process slight and significant variations in assumptions are calculated as the model is run (iterations) thousands of times. The results can demonstrate with a degree of certainty (but never complete clarity) the percentage probability of financial success.

Risk managers know this simple concept only too well. With extraordinarily sophisticated proprietary software and statistical information, they model in reverse because their goal is to calculate the probability of disaster not happening. To them, a non-happening (read no hurricane) is a financial success; premiums remain invested longer, reserves grow, share prices remain solid.

The Estimated Cost of Future Care.

As citizens and residents of this Island, we have to be concerned about this latest collective health care initiative. And it is collective, because we are either going to use it or have to pay for it. How then can we as layman estimate where our collective responsibility begins and our collective liability ends. By using the variable components listed above, we try building a simple present and future value spreadsheet (see detailed chart).

Financial planning for a project, a goal, a retirement investment plan whether for a individual or a government (yes they need to plan too) involves at a minimum, compiling the information related to the project as the following:

• Number of individuals participating - 8,000

• Estimate of cost per individual - $10,000 per year. We made an assumption between the high and low costs of health insurance products out there - ranges from $7,000 - $18,500 say $13,000 less the $3,000 per year required to be paid by the participants. Leaves a nice round number of $10,000 per individual senior per year

• Number of years needed - projections are for 10 years because extrapolating out further is not productive at this time - and does not fit on the chart

• Annual health care inflation assumption in our economic environment - 15 percent This percentage increase is supported by data from AARP - American Association of Retired Persons, our local insurer commentary a couple of years ago and our own government whose costs were 22 percent that year.

• Growth projections of increased need - add an additional 1,000 persons per year projected to reach the golden years. No mortality percentages were entered and assumptions were that no more than 10,000 seniors at any one time would be using the Future Care Service. At any rate, the numbers will only be bigger if more sign-up.

• Source of investments to fund these costs and rate of return estimated to be realised on investments - unknown at this time.

In 10 years or less, we are at 35 percent of the annual Bermuda government budget. The burden for our children and grandchildren has taken a quantum leap.

These are my estimated numbers using actual costs taken directly from authoritative source statements in local and international publications.

I want someone to challenge these numbers. Check my calculations and tell me that I am not even close to the real projections. Please, let us hear from you, anyone who has an opinion. No one wants to be told that they are wrong, but today, I am hoping against hope that I am very wrong.

What are your thoughts on how to pay for this our collective liability? Government issued bond debentures, an investment for all into our future; increased taxes: consumption, payroll, stamp duty, or income; or a massive collaborative effort to increase revenue generating companies and industries into Bermuda. I know what I'd prefer, but it is not up to me.

Yours for a better Bermuda.

Sources: Bermuda government estimate of health care inflation

AARP 20-year health cost inflation figures

Estimated number of retirees, RG and Bermuda Census

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP is a Certified Financial Planner™ Practitioner. She provides independent fee-only cross-border tax, estate, investment, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or phone 735-4720.