Life Care Plan Present Value Analysis

We are forensic economists. We do not write life care plans.

A life care planner or treating physician determines what care is needed and for how long. We take that completed plan and answer the economic question that follows it: what is that stream of future costs worth today, in a number that survives cross-examination?

In a catastrophic-injury matter the life care plan is routinely the largest single component of the damages figure — frequently larger than the entire earnings claim. It is also the component most often priced with one blended inflation rate and one round discount rate. That is where the number gets attacked.

How we price a life care plan

We take the plan as written and build the economic model underneath it, line by line.

Every line item gets its own growth rate. Medical cost categories have not inflated at the same rate and cannot be projected as though they had. We map each item in the plan to the appropriate Bureau of Labor Statistics CPI component and apply that component’s own long-run growth rate:

CPI component	Long-run annual growth
Outpatient hospital services	5.41%
Inpatient hospital services	5.22%
Medical care services	3.66%
Prescription drugs	3.00%
All items (general)	2.54%
Physician services	2.39%
Medical equipment and supplies	0.83%
Nonprescription drugs	0.68%

About these rates. The figures above are long-run historical averages of published BLS CPI series over the periods stated in each report. They are not forecasts. Current and near-term inflation in any of these categories may run higher or lower — sometimes materially — and no long-run average predicts a particular year. We recompute each component at the time of the engagement, disclose the series and the averaging window we used, and apply the rates the record supports rather than a fixed house table.

The spread is the point: 0.68% to 5.41%. A single blended rate applied across a plan misprices every line on both ends of that range. Facility charges and outpatient services compound at more than five percent; durable medical equipment and over-the-counter medication barely compound at all. Aggregate them and the answer is wrong in a direction that depends entirely on the mix of the plan.

The discount rate is sourced, not chosen — and matched to the horizon. We discount at the Daily Treasury Yield Curve rate published by the U.S. Department of the Treasury, at the tenor that corresponds to the length of the stream being discounted, stated as of the present-value date and cited to the source. A plan running fifty or sixty years is discounted at the long end of the curve, not at a short rate borrowed for convenience. Growth and discount are applied as separate, visible rates on each line rather than collapsed into a single net figure — so opposing counsel can see exactly what was assumed and test each half of it independently.

Duration comes from published tables. Life expectancy from the National Center for Health Statistics United States Life Tables, by year, sex and age. Where work life expectancy or a fringe-benefit rate is required, we apply the figures established by the vocational expert on the matter rather than substituting our own — the vocational opinion belongs to the vocational expert.

The schedule is auditable. Every row carries the item as the planner described it, its CPT or HCPCS code where one exists, the start and end dates, whether it is a one-time or recurring cost, its growth rate, the discount rate, the present-value factor, and the resulting present value. Subtotals by care category. A large plan runs to two hundred rows and every one of them reproduces.

We model the alternatives. Where the vocational or educational assumptions are genuinely contested, we run the scenarios side by side and present both, rather than picking one and defending it. Counsel should see the range they are actually negotiating within.

The legal framework. In federal court the present-value exercise runs through Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523 (1983), which addresses the discount rate and the treatment of inflation directly. In California, future medical expenses reach the jury through CACI 3903A and the reduction to present value through CACI 3904A. State practice varies and we work to the standard of the forum.

For defense counsel: review and verification

We are equally available to test a life care plan we did not build.

Retained on the defense side we do not opine on whether the care is needed — that is a clinical question for a clinician. We examine the economics, and these are where plans fail:

• One inflation rate across every category. The single most common defect. Ask what rate was applied to durable medical equipment and what rate was applied to facility charges. If the answer is the same number, the plan is mispriced on both ends.
• A discount rate whose term does not match the stream. Over a fifty- or sixty-year horizon the tenor of the rate is not a detail — it is most of the answer. A short rate applied to a lifetime stream, or a single rate applied to streams of very different lengths, produces a number that cannot be reconciled to the yield curve it claims to come from. Ask which published series, at which tenor, as of which date.
• Growth and discount rates that are not disclosed line by line. Where a category’s growth rate sits close to the discount rate at the matching tenor, that item is correctly close to undiscounted — that is what the term structure implies over a long horizon, and it is the right answer, not an error. The defect is not the closeness; it is a schedule that hides both rates inside a single factor so neither can be tested.
• Unit costs unsupported by the sources cited, or drawn from a geography or payer context that does not fit the matter.
• Items duplicated across categories, or bundled so the same service is counted twice.
• Duration and replacement schedules that are internally inconsistent — equipment replaced on a cycle that outlives the life expectancy used elsewhere in the same plan.
• Schedules that do not reproduce. We rebuild the opposing economist’s model from its own stated inputs. It frequently does not come back to the same number.

Output can be a full rebuttal report, a consulting-only memorandum, or a deposition-preparation outline for the examining attorney. Where we are retained in a non-testifying consulting capacity, we work within whatever protections that role carries in your forum.

What we are not

We are	We are not
Forensic economists	Life care planners
Retained to value a plan	Retained to write a plan
Testifying to economic method and present value	Testifying to medical necessity or standard of care
Available to either side	Aligned with either side

If you need a life care plan authored, you need a certified life care planner or a physician. We work alongside them routinely — the planner’s opinion is cited as the planner’s opinion, and our schedule is titled as being based on it. We hold no financial interest in who prepares the plan, which is precisely what makes the economic opinion independent of it.

Nationwide

Life care plan present-value work is a document-and-data exercise. It does not require a local office, and we take these engagements in all fifty states, in federal and state court. We work to the damages law of the forum — present-value rules, collateral-source treatment and structured-judgment provisions differ meaningfully between jurisdictions, and the model is built to the forum’s standard rather than to a house template.

What this costs

We try to keep this proportionate. Most life care plan present-value analyses come in at $2,500–$3,000. That is our fee for the economic work — not the value of the plan itself, which in a catastrophic-injury matter is usually a seven-figure number.

Some engagements cost more, and we will say so before you retain us rather than after. What pushes it up is scope: a plan running to several hundred line items, multiple vocational or educational scenarios modelled side by side, a rebuttal to an opposing economist’s schedule, or a compressed deadline. Deposition and trial testimony are billed separately.

You will have the number before you commit to the work.

Who does the work

Roman Garagulagian, Ph.D. is the economist on the engagement and the economist who is deposed.

Send us the plan. We will tell you what it is worth.

Email or upload the completed life care plan and we will come back with a price and a realistic turnaround. If there is a deadline, say so in the form and we will tell you honestly whether we can meet it.

Or call (213) 245-1232.

Frequently asked questions

How do you calculate the present value of a life care plan?

Every line item in the completed plan is placed on the timeline the planner specified, grown at the published price series matching that category of care, and discounted at the rate matching the length of that particular stream. Growth and discount appear as separate, visible rates on each line rather than collapsed into a single net figure, so opposing counsel can see exactly what was assumed and test each half of it independently.

What discount rate do you use?

The Daily Treasury Yield Curve rate published by the U.S. Department of the Treasury, at the tenor corresponding to the length of the stream being discounted, stated as of the present-value date and cited to the source. A plan running fifty or sixty years is discounted at the long end of the curve, not at a short rate borrowed for convenience.

What medical cost inflation rate do you apply?

Each item is matched to its Bureau of Labor Statistics CPI component and grown at that component’s own long-run rate. Those components span roughly 0.68 percent a year for nonprescription drugs to 5.41 percent for outpatient hospital services, which is why a single blended rate misprices every line at both ends of the range. The figures are long-run historical averages, not forecasts, and we recompute each component at the time of the engagement.

Where do the life expectancy and duration figures come from?

Life expectancy comes from the National Center for Health Statistics United States Life Tables, by year, sex and age. Where work life expectancy or a fringe-benefit rate is required, we apply the figures established by the vocational expert on the matter rather than substituting our own — the vocational opinion belongs to the vocational expert.

What legal standard governs the present-value calculation?

In federal court the present-value exercise runs through Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523 (1983), which addresses the discount rate and the treatment of inflation directly. In California, future medical expenses reach the jury through CACI 3903A and the reduction to present value through CACI 3904A. State practice varies, and we work to the standard of the forum.

Do you write the life care plan yourself?

No. We are forensic economists, not life care planners. We are retained to value a plan, not to write one, and we testify to economic method and present value rather than to medical necessity or standard of care. If you need a plan authored, you need a certified life care planner or a physician.

Can you review or rebut an opposing life care plan’s economics?

Yes, and we take that work on either side. The four defects we look for first are one inflation rate applied across every category, a discount rate whose term does not match the stream, growth and discount rates that are not disclosed line by line, and unit costs unsupported by the sources cited. Retained on the defense side we do not opine on whether the care is needed — that is a clinical question for a clinician.

Do you take matters outside California?

Yes. Life care plan present-value work is a document-and-data exercise that does not require a local office, and we take these engagements in all fifty states, in federal and state court. We work to the damages law of the forum, because present-value rules, collateral-source treatment and structured-judgment provisions differ meaningfully between jurisdictions.