What Is the Proper Way to Define a Future Medical Requirement within a Life Care Plan, and Why is Proper Definition Important?

A Properly Defined Future Medical Requirement in a Life Care Plan Contains Six Independent Variables, All of Which Are Necessary to Reliably Formulate the Cost of Future Medically-related Care.

The Three Basic Questions of Life Care Planning

According to the published, peer-reviewed tenets, methods, and best practices of the American Academy of Physician Life Care Planners, a properly formulated life care plan answers three basic questions:

What is a subject's condition?

What medically-related goods and services does a subject's condition require?

How much will the medically-related goods and services cost over time?

Defining Medically-Related Goods and Services

To address the second Basic Question of Life Care Planning, a life care planner must specify which medically-related goods and services are needed by a subject to accomplish the Clinical Objectives of Life Care Planning, which are:

Diminish or eliminate physical and psychological pain and suffering.
Reach and maintain the highest level of function given an individual’s unique circumstances.
Prevent complications to which an individual’s unique physical and mental conditions predispose them.
Afford the individual the best possible quality of life in light of their condition.

Quantifying Future Medical Costs

To address the third Basic Question of Life Care Planning, a life care planner must quantify, in monetary terms, how much the specified medically-related goods and services will cost, throughout each item’s specified duration of necessity.

The Six Independent Variables Required for Proper Definition

For a life care planner to reliably quantify the value of medically-related goods and services, and for others, such as a financial analyst or an economist who may be tasked with quantifying a life care plan in present value, the life care planner must define six independent variables:

1. Item
2. Starting Period (usually defined as a specified age)
3. Quantity

4. Interval
5. Duration
6. Unit Cost

Example of a Properly Formulated Future Medical Requirement

An example of a properly formulated future medical requirement defined by the preceding six variables is: Beginning at age 51, 1 wheelchair, every 5 years, for 22 years; unit cost $100. The preceding sentence defines each of the requisite independent variables:

Item: Wheelchair
Starting Period: 51
Quantity: 1
Interval: Every 5 years
Duration: 22 years
Unit Cost: $100

By defining the following six variables, the life care planner has provided the information necessary to formulate the value of 1 wheelchair every 5 years for 22 years using cash accounting, which, for purposes of quantifying a life care plan, is more reliable than accrual accounting. See Accrual v. Cash Accounting and Why It Matters.

Medical Opinions Within Life Care Planning Variables

What may not be obvious to a person unfamiliar with life care planning is that each of the first five variables, i.e., item, starting period, quantity, interval, and duration, all constitute independently expressed medical opinions. For example, it is a life care planner’s opinion that a wheelchair is needed, and that one wheelchair instead of two wheelchairs is needed, every five years instead of every seven years, and for twenty-two years instead of for thirty years. In order to be deemed admissible, medical opinions must be supported by a person with the capacity to formulate such opinions, i.e., a physician.

Proper Formulation of Future Medical Requirements: A Prerequisite for the Formulation of Present Value

Something that many life care planners don’t realize, or don’t appreciate, is that they often serve as a single member of a larger team of damages valuation experts. In the same vein, something that is often overlooked, and often not understood, is that a financial analyst’s or an economist’s ability to reliably formulate a present value assessment of a life care plan is contingent upon the life care planner properly defining all of the six independent variables that characterize a properly defined future medical requirement.

Risks of Altering Medical Variables

What many analysts and economists fail to recognize is that the first five independent variables that characterize a properly defined future medical requirement within a life care plan are each independent medical opinions, and they change and/or modify them at great risk of intentionally or inadvertently expressing their own medical opinions—something for which most analysts and economists are not qualified.

Common Errors in Life Care Plan Formulation

It is common for an analyst to find future medical requirements in a life care plan that do not contain a starting period, or a quantity, or an interval, or a duration, or a combination of missing variables. Here are some examples:

Absence of Starting Period

“One wheelchair, every 5 years, for 22 years; unit cost $100.” This results in an analyst needing to assume a start date for care (a medical opinion he/she is rarely, if ever, qualified to render). The start date affects all subsequent periods as a function of the defined interval. This then affects how many periods inflation is compounded, and how many periods discounting is performed, for each discrete instance of consumption.

Absence of Quantity

“Starting at age 51, the subject will require visits to a pain management specialist over a 22-year period; unit cost $100.” In this case, the analyst is required to “reverse engineer” a quantity, possibly by dividing the unit cost into the total expenditure for the item. This often produces a result that is itself less than reliable, as many life care planners use accrual, instead of cash accounting. This then requires the economist to assume the intention of the life care planner and convert what is assumed to be accrual accounting to cash accounting, which thereby results in disparate nominal values.

Absence of Interval

Starting at age 51, 5 wheelchairs over 22 years; unit cost $100. The absence of an interval is also problematic, as it requires the analyst to “place consumption of the item within specific years”, or worse, to choose an arbitrary period (such as the average placement (Year 11, for example). Note: if an analyst makes the mistake of doing either of these things, they—often inadvertently—end up rendering a medical opinion (which is outside the scope of their professional capacity). To do so often produces results that are less than reliable, as many life care planners use accrual, instead of cash accounting. This requires the economist to convert accounting conventions, which thereby results in disparate nominal values.

Absence of Duration

Starting at age 51, 1 wheelchair every 5 years; unit cost $100. The absence of a duration requires the analyst to attempt to reverse-engineer duration by dividing total expenditure for the item by quantity times the unit cost, or, worse, to arbitrarily assume duration is lifelong or less than lifelong. While reverse engineering a duration may be possible, the result is inferior reliability. Additionally, if the life care planner has employed accrual accounting to determine the nominal values of expenditures per item, this requires the analyst to convert accounting conventions, thereby resulting in disparate nominal values.