Quarterbacking Present Value in Life Care Planning

 Most certified life care planners – including Stokes & Associates- report lifetime future medical costs in current year dollars. One feature of the legal system is that awards for future pecuniary losses are determined at the time of adjudication. This creates a mismatch between when a cash flow is required to meet a future medically related liability and when the funds are awarded to pay that future liability. The process is analogous to a quarterback trying to complete a pass to a moving target downfield. Medical care costs are not stationary. How quickly they move (i.e., the inflation rate) depends on the type of future item or service and when it will be required.
 
     Furthermore, an award given today to fund future medical care costs can also be put in motion. Our quarterback is on the move. The growth rate of an award intended to fund future medical care can be thought of as the interest earned or the rate of return it may generate. If medical care costs grow faster than anticipated or the rate of return is less than expected, the quarterback will have underthrown the target. Estimating how much money is required today to fund future medical care while accounting for future medical cost inflation and the rate of return on a present-value lump sum involves time value of money calculations. These calculations, performed by an economic expert, help ensure adequate funds are available to meet future liabilities.
 
NOTE:
This month’s newsletter is written by Dr. Shael Wolfson, the new Director of Economic Services at Stokes & Associates.

     Dr. Wolfson consults in the field of Forensic Economics, specializing in personal injury, wrongful death, wrongful termination, medical malpractice, mass torts, and business interruption claims. He has provided testimony in matters before US District Courts and state courts in Colorado,  Georgia, Louisiana, Mississippi, Alabama, Nevada, Texas and West Virginia. He continues a legacy in the field that began in 1974 with his father, Dr. Melville Z. Wolfson, a Ph.D. economist and law school graduate. Dr. Wolfson has a bachelor’s degree in economics and finance (NYU), master’s degrees in Economics (FSU) and Financial Economics (UNO) as well as doctorate in Financial Economics (UNO).