Ep 73: How Do You Calculate Household Services & Life Care Plans? (Part 3 with Dr. Craig Galbraith)

Welcome to the Personal Injury Lawyer Podcast. I'm Clark speaks. This is the anatomy of a personal injury case. Doctor, you had mentioned that there were two things that you were discussing as it relates to household services, and you described one of them. Can you sure continue your well, the example you gave about you know, your mother.

Part of the example had to do with household services, and that's what I talked about. But you also have what's called a life care plan, you know, let's say somebody is injured

and they require, you know, some sort of life care, medical care, not only in the past but let's say, somebody to help them with dressing, you know, washing, washing their hair, these sort of things, those sort of things, are not household services. Household services are things like housework and, you know, taking, you know, washing your car, painting your house, and that sort of thing, sort of things that you would expect that somebody could be employed at. But again, most people have very active other things that they do around the house, you know. They, they, you know, they get dressed. They, you know, take care of themselves. They, you know, maybe watch TV, you know, that sort of thing. The inability to do that is typically what's called a life care plan where if somebody is required to come in and assist with those types of activities, as an economist, now you have specialized life care planners that will come out and look at this, not only in the past because more than likely it's a pass somebody has paid for these sort of things. They've paid for medical costs, but a Life Care planner will come out and then try to put together a plan for the rest of that person's life. You know, if they're catastrophically injured, they may need medical care. They need me, surgeries, they mean therapy, you know, all these sorts of things. And they may need somebody to help them do their, you know, their daily activities. So as an economist, what we do is we look at that life care plan and then we put a value associated with that that, again, is a present value analysis, but it's a fairly difficult one because the different components in a life care plan have different historical inflations. For example, medical care drugs have been going up much higher, let's say, than perhaps having somebody come in and take care of you on a daily basis. So when I do a life care plan analysis and put an economic value associated with that, I have to look at the inflation and historical inflation rates related to a lot of different categories associated with the Life Care Plan. Those are you brought up two things that I really wanted to talk to you about, and I think that they're really important. So let's, let's talk about the household services component first, and then I want to come back to this life care plan that you discussed now that household services when I think of those, I think of those more as household chores. You know, the things that we have to do, cutting our grass,

doing our dishes, changing light bulbs, changing air filters, doing laundry, doing those types of things. And,

you know, it's funny when we're talking about it, in a case of a

people tend to

to sort of

skip past that if you're not careful, you know, but if you're an injured person, who's who's who's now got to figure out how to have these things done. I mean, what it does is it reminds me, I think back to last night at my house, for example. So I've got three kids. I'm married. I have my in laws are in town because one of my children is graduating from high school.

And so I think back, and I look, we had breakfast, you know, we had, I think everybody was out for lunch, and we had dinner, and we kind of hung out in the kitchen after it was over with, and everybody, sort of, you know, enjoyed themselves and then I think, okay, at the end of that, we've got two choices, three choices, as you said, we can leave it, let somebody else do it or clean it up ourselves. And so every day, those chores that it takes to make sure that your how your home is, is clean and sanitary and comfortable is.

It's a time-consuming endeavor. And I've wondered before, you know, like, goodness gracious man, wouldn't it be so great to hire somebody to take care of those things, you know. But then you think those things are never-ending. They just, what would they do? You've got to, you've got to wipe up your countertop, you've got to clean your dishes. You've got to take out the trash. You've got to, you know, if you've got a pet, you've got to walk the dog. If you've got to, you know, just, they're just never-ending. You've got laundry, you've got to put your clothes in the dirt.

Clothes. You got to fold your clothes. You got to put them back in the drawers. You got to clean your wash your car. It goes on and on, yeah, and and, some people do more of that sort of thing than other. I mean, if you're working, you tend to do less of that. If you're not working, if you're to stay at home, Mom, let's say you're doing more of that.

Some people choose to do a lot, you know. I mean, there are some people that repair their roofs, that cut their own trees down, you know. And so it varies from person to person. I mean, we certainly do have some standards, and we know a lot about what people do on the average, but the average is, is an average, you know, everybody who's unique in these type of things.

And it's very important, because household services, many time, are actually a greater loss than the income. If you're a stay at home mother who you know is, you know, 50 years old and now you plan on spending it with your your husband, or something like that, and you're injured there, you didn't plan on going back to work, you weren't working in the past. And so almost all of your economic loss, really, when you think of it now, there's different types of economic loss, but related to production and activity, is really going to be household services. And got another thing that's important to do is household services go to the end of your life expectancy. You know, you do things around the house.

You know, basically to do the housework, to clean basically into your life expectancy, where your loss of salary and income is For how much longer you're planning on working. And that's usually a lot shorter. You know, even if you retire at 65 you still might live for another 20 years. And so that that's a loss of household services for another 20 years. And so household services, many times for retired people, for people that aren't working,

tends to be extremely large, and many times larger than the loss of income. Well, so, so that makes sense. And then also that adds to me another question, which is,

so I have a

client who we've worked with for a long time, and we're very close to him and to his family, and they have a very, very, very close family. And he was, he was paralyzed in an accident, and his daughter, who's just a phenomenal human being.

It's just She's steps up. She's the things that she's done to take care of him have been remarkable and inspirational. And so I and so she's contributing so much on a daily basis to taking care of him and to and to doing the things that need to be done to make sure that he's healthy and happy and safe, and then I wonder, like, what happens? How do you I mean, what happens if she was hurt? What happens if she can't do those things anymore? Or another example, let's do it in reverse, and what happens if a child is hurt and has special needs, and the parents, or the parent are doing all these things to take care of that child, and then, and then, and then,

and then later, when the child's 4050, years old, those parents die. Now, what happens to the child who's going to take care of that child? Then, all right, that's a good point. And remember, I talked about some of the most difficult things to do as a forensic economist, trying to figure out the mitigation is one of them. You raise the issue of children and people that don't actually have started into the workforce and have an established salary or a lifestyle of household services and so forth, trying to figure out what a child would have done. But for an injury is probably one of the most difficult. You know, there's several ways of doing it, you know. Again, we do have some published data right now that helps us, but everybody is unique. Again, published data uses averages. Well,

certainly we know, for example, that a child is likely to go into a profession and earn a certain amount of money based upon a number of different things. And some of these things I can look at, I can put into a model. But let's say they're in high school, and somebody in high school is injured, but they were planning on, you know, going to graduate school, intentions are a very important part. Once you get into high school, intentions become a very important part to try to predict what somebody could have done in the future. But again, looking at the future when you don't really have a strong past to rely upon is extremely difficult and and so you know, figuring out the but for income from a child or the but for household services that that person could have contributed as they've gotten older and gotten married and stuff like that, for somebody who hasn't already established that pattern of life is a very difficult thing for a forensic economist to do, and you got to make sure that you do rely upon the good, solid, published research to be.

Will do that? Well, there's another piece of this too, especially in our world, which is

we're using this information not for the purposes of

of you know, of academics where we're using this purpose, this information for for legal purposes, and we have an additional constraint that we can't introduce evidence that is speculative, a judge won't allow us to present that to a to a jury. So so that makes it even more difficult. Because, you know, it seems like to me that if we were looking at it from academic perspectives, we could theories become plausible and important and possible in a legal context. You know, we are limited by that, by that, uh, that speculation. And so does that play a part in Yeah, it does. And that's the importance, again, of making sure that you use published material, because once something's published and well established, then it becomes less speculative, and certainly is allowable. So again, when you're looking at the future try to predict the future income of a child. There are models that have been published based on data. You know, it's just not theory, but it's actually looking at the data that tried to give a good prediction about if somebody's in a certain situation, the parents make a certain amount of money. They live in a rural area, an urban area. You know, there's a number of different components. You can put it into a formula, and these formulas have been published and well established in the forensic economic literature that that overcomes that problem of speculation. You're always making predictions. I mean, when you think about it, anything, anytime you talk about the future, there's an element of speculation to that, what you need to do as a forensic economist is make sure when you talk about the future, it's well established, it's published, it's well argued. There's established, recognized theories associated with that and that, then that overcomes that element of speculation that the judges are concerned about. Well, let me ask you this. So back to our example of maybe a parent that has a child that is taking care of them on a daily basis, or a child who's injured and they have a parent that's taken to taking care of them on a daily basis. Do you have ways of quantifying that and accounting for the fact that maybe those parents won't be there forever, sure, or maybe that child will have other obligations that take them away from being able and who provides that care, then, well, the example that you gave probably would have been more of a Life Care planner to do something like that. So if you have a parent taking care of an injured child,

the Life Care planner would put a value associated with that and say that, well, you know that is worth a certain amount of money that you, you know, the parents are doing it now, but if the parents leave, you'd come in and you'd hire a, you know, a person on a daily basis to take care of that. That's part of the Life Care Plan aspect. I, as a forensic economist, like put a value to that. I can, you know, discount that into present value, but that's probably more something that a life care planner would do that as an example. Well, so one of my one of the things that I find interesting, you did a report for us recently, and one of the things that I thought was really interesting was in relation to the life care plan that you just described, and you touched on it a few minutes ago. And I wonder if you could go into a little bit more detail, the idea, the concept is this, we've talked about time value of money, and generally $1 today is worth more than $1 later, and that So what tends to happen is, when we put together a life care plan in a catastrophic case, maybe it's ten million or something. And what will happen is the defense lawyers will come back and say, well, if it's 10 million in the future. That means you got a discounted over over 25 years, and that means it's two and a half million dollars today. And then you come back and you say, that's not right, that that you're you're doing this wrong. And the reason is because the increase in cost of medical care tell me if I'm saying this right, the increase in cost of medical care actually outpaces inflation. So instead of discounting that, you need to actually add to that 10 million and instead it might be like 12 or 13 or $14 million because of that, of the way that the cost of medical care is increases faster than the cost of other No, I think you said it exactly right, and that's why I look at probably 20 different components of a life care plan. Because when you look at the rate of inflation, which is the the pace that you know things increase, prescription drugs increase at a different rate than non prescription drugs,

let's say physical therapy, increases at a different rate than than going to see a physician. And so you have to look at these different components, which is what I do. And I take a life care plan, and I put it in these different components as to trying to determine what the inflation rate would be for these different elements. And then you you add it all up, and there are absolutely, there are some elements.

Elements of a life care plan and medical care that do

go up faster than you can discount it, in which case that would be more valuable than if you were to simply do the multiplication. But there are other ones that can be discounted. So the key thing is to look at the different components in a life care plan and be able to do the appropriate inflation as well as the discounting associated with these different things, and that's the proper way to do a life care plan.

Welcome to the Personal Injury Lawyer Podcast. I'm Clark speaks. This is the anatomy of a personal injury case. Doctor, you had mentioned that there were two things that you were discussing as it relates to household services, and you described one of them. Can you sure continue your well, the example you gave about you know, your mother.

Part of the example had to do with household services, and that's what I talked about. But you also have what's called a life care plan, you know, let's say somebody is injured

and they require, you know, some sort of life care, medical care, not only in the past but let's say, somebody to help them with dressing, you know, washing, washing their hair, these sort of things, those sort of things, are not household services. Household services are things like housework and, you know, taking, you know, washing your car, painting your house, and that sort of thing, sort of things that you would expect that somebody could be employed at. But again, most people have very active other things that they do around the house, you know. They, they, you know, they get dressed. They, you know, take care of themselves. They, you know, maybe watch TV, you know, that sort of thing. The inability to do that is typically what's called a life care plan where if somebody is required to come in and assist with those types of activities, as an economist, now you have specialized life care planners that will come out and look at this, not only in the past because more than likely it's a pass somebody has paid for these sort of things. They've paid for medical costs, but a Life Care planner will come out and then try to put together a plan for the rest of that person's life. You know, if they're catastrophically injured, they may need medical care. They need me, surgeries, they mean therapy, you know, all these sorts of things. And they may need somebody to help them do their, you know, their daily activities. So as an economist, what we do is we look at that life care plan and then we put a value associated with that that, again, is a present value analysis, but it's a fairly difficult one because the different components in a life care plan have different historical inflations. For example, medical care drugs have been going up much higher, let's say, than perhaps having somebody come in and take care of you on a daily basis. So when I do a life care plan analysis and put an economic value associated with that, I have to look at the inflation and historical inflation rates related to a lot of different categories associated with the Life Care Plan. Those are you brought up two things that I really wanted to talk to you about, and I think that they're really important. So let's, let's talk about the household services component first, and then I want to come back to this life care plan that you discussed now that household services when I think of those, I think of those more as household chores. You know, the things that we have to do, cutting our grass,

doing our dishes, changing light bulbs, changing air filters, doing laundry, doing those types of things. And,

you know, it's funny when we're talking about it, in a case of a

people tend to

to sort of

skip past that if you're not careful, you know, but if you're an injured person, who's who's who's now got to figure out how to have these things done. I mean, what it does is it reminds me, I think back to last night at my house, for example. So I've got three kids. I'm married. I have my in laws are in town because one of my children is graduating from high school.

And so I think back, and I look, we had breakfast, you know, we had, I think everybody was out for lunch, and we had dinner, and we kind of hung out in the kitchen after it was over with, and everybody, sort of, you know, enjoyed themselves and then I think, okay, at the end of that, we've got two choices, three choices, as you said, we can leave it, let somebody else do it or clean it up ourselves. And so every day, those chores that it takes to make sure that your how your home is, is clean and sanitary and comfortable is.

It's a time-consuming endeavor. And I've wondered before, you know, like, goodness gracious man, wouldn't it be so great to hire somebody to take care of those things, you know. But then you think those things are never-ending. They just, what would they do? You've got to, you've got to wipe up your countertop, you've got to clean your dishes. You've got to take out the trash. You've got to, you know, if you've got a pet, you've got to walk the dog. If you've got to, you know, just, they're just never-ending. You've got laundry, you've got to put your clothes in the dirt.

Clothes. You got to fold your clothes. You got to put them back in the drawers. You got to clean your wash your car. It goes on and on, yeah, and and, some people do more of that sort of thing than other. I mean, if you're working, you tend to do less of that. If you're not working, if you're to stay at home, Mom, let's say you're doing more of that.

Some people choose to do a lot, you know. I mean, there are some people that repair their roofs, that cut their own trees down, you know. And so it varies from person to person. I mean, we certainly do have some standards, and we know a lot about what people do on the average, but the average is, is an average, you know, everybody who's unique in these type of things.

And it's very important, because household services, many time, are actually a greater loss than the income. If you're a stay at home mother who you know is, you know, 50 years old and now you plan on spending it with your your husband, or something like that, and you're injured there, you didn't plan on going back to work, you weren't working in the past. And so almost all of your economic loss, really, when you think of it now, there's different types of economic loss, but related to production and activity, is really going to be household services. And got another thing that's important to do is household services go to the end of your life expectancy. You know, you do things around the house.

You know, basically to do the housework, to clean basically into your life expectancy, where your loss of salary and income is For how much longer you're planning on working. And that's usually a lot shorter. You know, even if you retire at 65 you still might live for another 20 years. And so that that's a loss of household services for another 20 years. And so household services, many times for retired people, for people that aren't working,

tends to be extremely large, and many times larger than the loss of income. Well, so, so that makes sense. And then also that adds to me another question, which is,

so I have a

client who we've worked with for a long time, and we're very close to him and to his family, and they have a very, very, very close family. And he was, he was paralyzed in an accident, and his daughter, who's just a phenomenal human being.

It's just She's steps up. She's the things that she's done to take care of him have been remarkable and inspirational. And so I and so she's contributing so much on a daily basis to taking care of him and to and to doing the things that need to be done to make sure that he's healthy and happy and safe, and then I wonder, like, what happens? How do you I mean, what happens if she was hurt? What happens if she can't do those things anymore? Or another example, let's do it in reverse, and what happens if a child is hurt and has special needs, and the parents, or the parent are doing all these things to take care of that child, and then, and then, and then,

and then later, when the child's 4050, years old, those parents die. Now, what happens to the child who's going to take care of that child? Then, all right, that's a good point. And remember, I talked about some of the most difficult things to do as a forensic economist, trying to figure out the mitigation is one of them. You raise the issue of children and people that don't actually have started into the workforce and have an established salary or a lifestyle of household services and so forth, trying to figure out what a child would have done. But for an injury is probably one of the most difficult. You know, there's several ways of doing it, you know. Again, we do have some published data right now that helps us, but everybody is unique. Again, published data uses averages. Well,

certainly we know, for example, that a child is likely to go into a profession and earn a certain amount of money based upon a number of different things. And some of these things I can look at, I can put into a model. But let's say they're in high school, and somebody in high school is injured, but they were planning on, you know, going to graduate school, intentions are a very important part. Once you get into high school, intentions become a very important part to try to predict what somebody could have done in the future. But again, looking at the future when you don't really have a strong past to rely upon is extremely difficult and and so you know, figuring out the but for income from a child or the but for household services that that person could have contributed as they've gotten older and gotten married and stuff like that, for somebody who hasn't already established that pattern of life is a very difficult thing for a forensic economist to do, and you got to make sure that you do rely upon the good, solid, published research to be.

Will do that? Well, there's another piece of this too, especially in our world, which is

we're using this information not for the purposes of

of you know, of academics where we're using this purpose, this information for for legal purposes, and we have an additional constraint that we can't introduce evidence that is speculative, a judge won't allow us to present that to a to a jury. So so that makes it even more difficult. Because, you know, it seems like to me that if we were looking at it from academic perspectives, we could theories become plausible and important and possible in a legal context. You know, we are limited by that, by that, uh, that speculation. And so does that play a part in Yeah, it does. And that's the importance, again, of making sure that you use published material, because once something's published and well established, then it becomes less speculative, and certainly is allowable. So again, when you're looking at the future try to predict the future income of a child. There are models that have been published based on data. You know, it's just not theory, but it's actually looking at the data that tried to give a good prediction about if somebody's in a certain situation, the parents make a certain amount of money. They live in a rural area, an urban area. You know, there's a number of different components. You can put it into a formula, and these formulas have been published and well established in the forensic economic literature that that overcomes that problem of speculation. You're always making predictions. I mean, when you think about it, anything, anytime you talk about the future, there's an element of speculation to that, what you need to do as a forensic economist is make sure when you talk about the future, it's well established, it's published, it's well argued. There's established, recognized theories associated with that and that, then that overcomes that element of speculation that the judges are concerned about. Well, let me ask you this. So back to our example of maybe a parent that has a child that is taking care of them on a daily basis, or a child who's injured and they have a parent that's taken to taking care of them on a daily basis. Do you have ways of quantifying that and accounting for the fact that maybe those parents won't be there forever, sure, or maybe that child will have other obligations that take them away from being able and who provides that care, then, well, the example that you gave probably would have been more of a Life Care planner to do something like that. So if you have a parent taking care of an injured child,

the Life Care planner would put a value associated with that and say that, well, you know that is worth a certain amount of money that you, you know, the parents are doing it now, but if the parents leave, you'd come in and you'd hire a, you know, a person on a daily basis to take care of that. That's part of the Life Care Plan aspect. I, as a forensic economist, like put a value to that. I can, you know, discount that into present value, but that's probably more something that a life care planner would do that as an example. Well, so one of my one of the things that I find interesting, you did a report for us recently, and one of the things that I thought was really interesting was in relation to the life care plan that you just described, and you touched on it a few minutes ago. And I wonder if you could go into a little bit more detail, the idea, the concept is this, we've talked about time value of money, and generally $1 today is worth more than $1 later, and that So what tends to happen is, when we put together a life care plan in a catastrophic case, maybe it's ten million or something. And what will happen is the defense lawyers will come back and say, well, if it's 10 million in the future. That means you got a discounted over over 25 years, and that means it's two and a half million dollars today. And then you come back and you say, that's not right, that that you're you're doing this wrong. And the reason is because the increase in cost of medical care tell me if I'm saying this right, the increase in cost of medical care actually outpaces inflation. So instead of discounting that, you need to actually add to that 10 million and instead it might be like 12 or 13 or $14 million because of that, of the way that the cost of medical care is increases faster than the cost of other No, I think you said it exactly right, and that's why I look at probably 20 different components of a life care plan. Because when you look at the rate of inflation, which is the the pace that you know things increase, prescription drugs increase at a different rate than non prescription drugs,

let's say physical therapy, increases at a different rate than than going to see a physician. And so you have to look at these different components, which is what I do. And I take a life care plan, and I put it in these different components as to trying to determine what the inflation rate would be for these different elements. And then you you add it all up, and there are absolutely, there are some elements.

Elements of a life care plan and medical care that do

go up faster than you can discount it, in which case that would be more valuable than if you were to simply do the multiplication. But there are other ones that can be discounted. So the key thing is to look at the different components in a life care plan and be able to do the appropriate inflation as well as the discounting associated with these different things, and that's the proper way to do a life care plan.