Author
By: Brian Piper, PhD
A life care plan is an organized plan for current and future needs and associated costs for a person who has experienced catastrophic injury or has chronic health care needs. A forensic life care plan looks at the specific care needs and costs for a person because of an injury that is the subject of litigation. A forensic life care plan should separate care needs due to the injury from care needs the person had if the injury had not happened. This blog post discusses several needs where costs may be overstated if the additional costs due to the injury are not separated from a person’s normal expenses.
Most recommended items in a life care plan is for new or additional services the person would not have needed absent the injury. However, some items may also replace normal expenditures. The correct approach in a forensic life care plan is to include only the additional expenses associated with the item by subtracting the normal expenses from the total cost. Two common examples that involve significant costs are wheelchair accessible vans and residential facility care.
Wheelchair Accessible Vans
A person who is wheelchair-bound due to an injury may need a wheelchair-accessible van for transportation equal to that before the injury. This is particularly true when the person needs a power wheelchair. The van modifications vary if the injured person will be the driver or only a passenger. New vans with wheelchair modifications cost from $40,000 to $70,000 or sometimes more.[1] However, the van usually replaces a normal vehicle the person would have purchased absent the injury. The cost of the normal vehicle should be subtracted from the total cost of the modified van in a forensic life care plan.
Example Offset Calculation
According to Kelley Blue Book, the average price of a new vehicle in December 2019 was about $39,000.[2] If a new wheelchair accessible van costs $55,000, the appropriate cost to include in a forensic life care plan would be $55,000 – $39,000 = $16,000 in current costs each time a van needs to be purchased or replaced during the injured person’s lifespan. Failing to subtract the normal vehicle expense overstates the additional cost of each van by $39,000 and may improperly inflate the total cost of a forensic life care plan by hundreds of thousands of dollars over the injured person’s lifespan.
Residential Care Facilities
For catastrophic injuries, life care plans may recommend extended inpatient rehabilitation or permanent placement in a skilled nursing facility, assisted living facility, or group home. Besides supervision and medical care, these facilities provide housing, food, and may provide other personal items and services like toiletries, laundry, transportation, internet and cable television. If a forensic life care plan recommends an injured person live in a facility, some or all these normal living expenses should be subtracted from the cost of the facility.
Which normal expenses should be subtracted depends on the living situation of the injured person absent the injury. Household expenses are classified as individual consumption or joint consumption. Examples of individual consumption items are food, clothing, and automobiles used only by the injured person. The cost of any of these items the facility provides should be subtracted from the facility charge.
Joint consumption items are items that are used by more than one member of a household. Examples of joint consumption are housing, utilities, automobiles used by multiple household members, and furniture. If the injured party lived alone before the injury joint consumption items should be subtracted from the cost of the residential facility. If the injured party is married or otherwise lived with others before the injury, no offset for housing should be made because the same or substantially similar total housing expenditures will be made, even without the injured party present in the household. For minors, this offset would begin once the injured person reaches age 18.
Normal individual and join consumption expenses vary based on household income and household size. The US Bureau of Labor Statistics conducts a Consumer Expenditure Survey each year. The survey results estimate individual and joint consumption based on age, sex, income, and household size.[3] These statistics can be used to calculate the normal expenses to be subtracted from a facility charge.
Example Offset Calculations
The Genworth Cost of Care Survey, 2019 estimated the median annual cost of an assisted living facility at $48,612 per year and the median annual cost of a semi-private room at a skilled nursing facility at $90,155.[4]
Consider an injured 58-year-old man who is married and needs to be placed in a skilled nursing facility. The injured person’s pre-injury household income was $80,000 per year. Normal personal expenditures on food should be subtracted from the facility charge, but no housing costs should be subtracted. According to the Consumer Expenditure Survey, a person with these characteristics has average food expenditures of $8,421.[5] The appropriate cost to include in the life care plan would be $90,155 – $8,421 = $81,734 per year.[6] Failing to subtract personal consumption would overstate the total cost of this person’s life care plan by $210,525 in current costs for a life expectancy of 25 years.
As another example, consider a single 30-year-old woman who earned $45,00 per year and lived alone before her injury but now needs to live in an assisted living facility. Her normal expenditures for both food and housing should be subtracted from the facility charge. According to the Consumer Expenditure Survey, a person with these characteristics has average food expenditures of $4,966 and average housing expenditures of $15,370, for total normal expenses of $20,336 per year in current costs.[7] The appropriate facility cost to include in the life care plan would be $48,612 – $20,339 = $28,276 per year. Failing to subtract normal expenses would overstate the total cost of this person’s life care plan by $1,077,808 in current costs for a life expectancy of 35 years.
Correctly subtracting normal expenses in forensic life care plans is a potentially complicated process, but it is worth getting right, since failing to subtract normal expenses can improperly inflate the cost of the life care plan by hundreds of thousands or millions of dollars. RPC life care planners and economists work together to address normal expenses correctly in our life care plans.
For additional information on RPC, or to discuss a case, contact Brian Piper, PhD
[1] http://www.blvd.com/wheelchair-vans-for-sale/new
[2] https://mediaroom.kbb.com/2020-01-03-Average-New-Vehicle-Prices-Up-Nearly-2-Year-Over-Year-in-December-2019-According-to-Kelley-Blue-Book
[3] https://www.bls.gov/cex/tables.htm#crosstab
[4] https://www.genworth.com/aging-and-you/finances/cost-of-care.html
[5] https://www.bls.gov/cex/2018/CrossTabs/agebyinc/x55to64.PDF
[6] For simplicity, inflationary adjustments to the Consumer Expenditure Survey’s 2018 estimates have been omitted here.
[7] https://www.bls.gov/cex/2018/CrossTabs/sizbyinc/xone.PDF