When a certified life care planner develops a life care plan for an individual, they do not take into consideration funding issues and who will have to pay for what. Rather, they identify needs, and the costs associated with the necessary care and/or rehabilitation are listed according to the going rates where that individual lives.
A life care plan analysis takes a look at the actual life care plan – the items and costs listed – and boils it down to the bottom line for the plaintiff and his or her attorney. The analysis shows what the plan is actually worth.
A Real Life Example
Zach had a major workplace injury and is in litigation against his employer. He’s 50 years old, but due to his medical conditions and the results of his injuries, his rated age is 60, meaning he has the body of a 60 year old.
Zach’s life expectancy is 15 years. He has a wife, 2 kids, and 3 grandchildren. According to his life care plan, without including health insurance coverage, the total annual expense to his family, considering his spouse as his caregiver, is $304,228.00 per year. That equals a total lifetime expense to his family of $4,563,420.00 (over the 15 years he is expected to live).
An individual and their family will look at this life care plan, see a bottom line number of over $4.5 million dollars, and will likely feel overwhelmed. This number will set itself into the back of their minds. It will influence how much money they think their case is worth, and will influence their relationship with their attorney – often in a stressful way.
The Analysis Breakdown
These numbers worry clients because they think they have to settle their case and net at least $4.563 million just to cover medical expenses (and this is not including pain and suffering, lost wages, loss of consortium claims, etc.)
However, there are several ways a life care plan analysis, conducted by professionals, can approach this number in order to encourage settlement or give peace of mind to the claimant.
100% Out of Pocket
As we saw in the example, Zach’s life care plan quotes him a lifetime expense of $4.563 million (or $304,228 per year for the remainder of his life). That’s assuming every service and item listed in the plan would have to be paid for 100% out of pocket. In all likelihood, that will not be the case.
But let’s pretend Zach will have to pay everything out of pocket. We’re looking at $4.563 million needed across the span of 15 years. Well, what does that amount look like today, in order to reach $4.563M over the next 15 years? If Zach were to receive some money today, and invest it properly through a variety of vehicles and resources, he could reach $4.563M in 15 years.
Do you know what that amount needed today would be? $3,784,500.
With proper guidance from experienced financial professionals, Zach could be given the tools to turn $3.78 million into $4.563 million over the span of 15 years.
As we mentioned earlier, in most cases the services and items listed on a life care plan will not be paid for 100% out of pocket. A life care plan analysis will determine which line items in the plan will be “covered” and which will be “noncovered.”
Taking into Consideration Insurance & Benefits
In this example case, Zach is a Medicare beneficiary, and many items and services listed in the life care plan will be covered by Medicare. Included on the next page is an example of a life care plan analysis. It shows how an analysis breaks down covered versus noncovered items only in terms of Medicare, and what final costs may actually look like.
In many instances, an individual may also be eligible for Medicaid, and that would cover additional items in the life care plan. Lastly, an individual may have private insurance that can help cover other items and services.
Once you start to consider that an individual will most likely be at least partially covered, the numbers first presented in the life care plan become even more manageable.
As illustrated earlier, the ultimate $4.563 million that Zach and his family were told they need over 15 years was already boiled down to $3.784 million, once it was factored in that they could invest this initial money over the 15 years Zach is expected to live.
Now let’s factor in Zach’s Medicare coverage.
Medicare is covering $101,935 annually of the $304,228 Zach and his family will need. Therefore, only $202,293/year for 15 years needs to come out-of-pocket of the client. When you factor in the same methodology mentioned before, considering investments over time, the amount Zach would need today would be $2,577,640.
The Value of the Life Care Plan Analysis
We’ve gone from $4.563 million to $2.577 million. The second number is a lot more palatable to a plaintiff and his or her family. It will influence what they think is an acceptable number when in settlement negotiations. It helps the attorney understand what amount they need to advocate for their client.
Just like that, one can see the value of having a life care plan analyzed by an experienced professional.
Milestone Consulting offers life care plan analyses as one of our many settlement-related services. We use our experience and expertise as settlement consultants to look at the Life Care Plan from a holistic standpoint, and see how it will factor into a plaintiff’s life in the bigger picture.
Get Expert Advice from John Bair
If you believe your loved one would benefit from a life care plan, John Bair can help connect you to the right person. John has guided thousands of plaintiffs through the settlement process as co-founder of Milestone Consulting, LLC, a broad-based settlement planning and management firm. Milestone’s approach is comprehensive and future-focused.
John’s team has guided thousands of clients by taking the time to understand the complexities of each case. They assess the best outcome and find the path that enables each client to manage their many needs. Read more about Milestone Consulting at http://milestoneseventh.com/.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).