Lots of talk in Bermuda in the last couple of weeks regarding the latest initiative to win over the hearts and minds of senior men and women facing health costs, those budget busters that have the real potential to turn their golden years into lead.

Lots of discussions about those who made the initial sign-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 unlimited doctor visits and even a $2,000 prescription credit per year per person.

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

No one, no one currently is talking health costs today and in the future in real numbers. What is the rate of health care inflation? What controls will be in place to limit runaway costs? What is the cut off point for those not willing to practice good health habits? It is troubling that there is talk of means testing but none about personal responsibility for one's own health, or incentives for those seniors who work at maintaining healthy lifestyles. Is the message here that those who fail the means test, will indirectly be picking up part of the cost?

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 is a financial success, but inevitably, a revolving population will get sick. That is what insurance is for - the What ifs.

By using the variable components listed below, we build a simple present and future value spreadsheet to project out the costs and the risk associated with those costs. Financial planning for a project, a goal, a retirement investment plan whether for an individual or a government (yes they need to plan too) involves compiling the information related to the project as the following:

• Number of individuals participating - 2,378 then increasing by 3,000 in 2010 and 2011 and then incrementally to 10,000 by 2013.

• Estimate of cost per individual - $7,000 (gross $10,000 per year less $3,000 paid individually by the participants).

• Number of years needed - projections are only for 10 years because extrapolating out further is not productive at this time.

• Annual health care inflation assumption in our economic environment - 15 percent. This percentage annual increase is supported by data from AARP - American Association of Retired Persons, our local insurers 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. Note, however, that later last week, one insurer estimated more than 11,000 will need this programme.

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

In ten years or less, the costs are up to 25 percent to 30 percent of the annual Bermuda government budget. The burden for our children and grandchildren has taken a quantum leap.

This is simple present and future value maths calculations using actual costs taken directly from authoritative source statements in local and international publications. I am a financial planner. I have to plan for present and future costs that will impact my clients and my family. If I cannot plan for them, how can I tell them what to expect in achieving their financial success goals? How can anyone?

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 help pay for pay for it. How then can we as layman estimate where our collective responsibility begins and our collective liability ends? I want someone to challenge these numbers. Check my calculations and tell me that I am not even close to the real projections. No one wants to be told that they are wrong, but today, I am hoping that I am very wrong.

Finally, what are your thoughts on how to pay for this, our collective liability? Should we consider Government issued bond debentures? While another Bermuda investment that Bermuda residents can participate in, bond debt still has to be repaid at some future date. Will increased taxes do the trick? Consumption, payroll, stamp duty, or an income tax? Or, will it be a massive collaborative effort by every resident to increase revenue generating companies and industries into Bermuda.

I know what I would prefer, but it is not up to just me. We need all of you to work for a Better Bermuda.

Sources: Bermuda government estimate of health care inflation

AARP twenty 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.