$1.18 billion is the current value of future healthcare costs, for Cayman’s retired civil service only, over the next 20-25 years. It has little to do with foreign workers, and will (inevitably) be paid by the Cayman taxpayer.
The damaging effect, and most likely why governments (not just Cayman) do not want to recognize the liability on their balance sheet, is the crippling effect of compounding.
$1.18 billion divided by 25 years equals $45 million that we should be setting aside each and every year.
But worse yet, the (healthcare) inflation rate is growing by 7 percent in the U.S. That means that the estimated $1.18 billion cost is also growing by $78 million each and every year.
To stay with business as usual (i.e. without massive future tax increases), we would need to be setting aside $123 million each and every year. Each and every year we do nothing, we add $123 million to the remaining years, or another $5 million to each and every (remaining) year.
Cayman is indeed in a negative net worth position. We have made the $1.18 billion commitment to pay for retired civil service care, after all.
Because it is not all due today, does not diminish the liability. If you diminish the liability then one has to also say we may or may not pay for those commitments down the road.
Either way, the issues grows by $123 million each and every year. I am not convinced that doing nothing, today, is the way to go particularly for the next generation of Caymanians.
We should recognize the liability, figure out how we are going to pay for it, and be setting aside money now.
***Editor’s Note, noon May 4: This letter has been amended from the original.***