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 are a subject’s diagnostic conditions?
- What medically related goods and services do a subject’s diagnostic conditions require?
- What will the medically-related goods and services cost over time?
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 circumstance.
- 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.
To address the third Basic Queston 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.
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:
- Starting Period (usually defined as a specified age)
- Unit Cost
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.
What may not be obvious to a person unfamiliar with life care planning is, 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.
Are you interested in learning more about peer-reviewed life care planning practices and methodologies?
Call 830-953-7189 for a Free Consultation, or fill out this form and we will contact you.
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, 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, 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.
What many analysts and economist fail to recognize is, 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.
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 for how many periods inflation is compounded, and for 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 unit cost into the total expenditure for the item. This often produces a result which itself is 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 which 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, it requires the analyst to arbitrarily assume duration is life long, or less than life long. While reverse engineering a duration may be possible, the result is inferior reliability. Additionally, if the life care planner has employed accrual accounting to formulate the nominal values of expenditures per item, this requires the analyst to convert accounting conventions, which thereby results in disparate nominal values.