An employee at a construction site falls from scaffolding and lands on a concrete floor, suffering multiple broken bones and a severe spinal cord injury that will leave him a paraplegic. Until the accident, the 31-year-old man had been healthy and physically fit. Now, he is confined to a wheelchair, in need of special treatment, and facing special medical needs as he ages.
While nothing can reverse the effects of the tragic accident or restore the victim to his previous state, there is a reliable tool that can assist in estimating the scope and cost of his future care needs, as well as outline prevention steps that address the effects of aging on a disability. That tool is a life-care plan, which is increasingly being used by insurance carriers, self-insured companies and other parties, particularly in catastrophic workers' compensation cases.
"I've been in this business more than 25 years, and in the past we rarely established life-care plans. We didn't employ them typically until much later, sometimes two or three years out. Since then, we have taken a more proactive stance in obtaining life-care plans. We need to know what's going to be expected in a catastrophic claim from a financial standpoint and to assist with the medical management of the case," says Sheila McGraw, assistant vice president of claims, responsible for workers' compensation, at General Casualty Insurance, a regional carrier active in 25 states.
Life-care plans can be used in a number of circumstances: when someone becomes catastrophically ill or injured, in personal injury cases, in cases of acquired birth injury such as cerebral palsy, and increasingly with elder care management when an older person has a serious illness.
IDENTIFYING FUTURE NEEDS
In the workers' comp arena, a life-care plan is used in catastrophic injury cases. It projects the required treatment over the life of the expected patient, including surgeries, therapy, medicine and other care issues, and the estimated cost. The plan also allows insurance companies to set aside reserves or reach settlements to cover future medical costs, and to identify potential health risks that will likely arise in the future. The plans also help identify health risks that will likely result from the effect of aging on the disability and implement prevention and mitigation measures. They help establish expectations for care, and mitigate risk exposure for insurance companies with regard to reinsurance requirements on multi-million-dollar claims. Lastly, they provide a baseline of opinion of future medical needs in litigated cases.
"A life-care plan is a tool we would utilize to help identify the future exposure on a claim based on the ultimate medical needs of the individual. Based on those projections and estimates, we would set aside reserves and/or evaluate a file for potential settlement," says Karen A. Lowrey, claims supervisor for the Injured Workers' Insurance Fund, which provides workers' compensation insurance to employees of the State of Maryland and to private employers in the state.
Admittedly, life-care plans are not for every workers' comp case, given the cost involved for preparing a plan, which could amount to thousands of dollars. "This is not something you would utilize on run-of-the-mill claims, but in the case of very serious injuries," Lowrey says.
The life-care planning process typically begins as soon as a patient's condition is stabilized after a catastrophic injury. This may involve a life-care planner and a case manager working closely together.
To project future medical needs and costs, the life-care planner would take into consideration the age and general health of the individual, the life expectancy, and how the normal aging process affects this disability.
"In very serious and catastrophic claims, we will use the life-care planning process as soon as practical. We want to make sure that we are more aggressive early on and up front," McGraw says. "Our goal is to combine life-care planning with medical-care planning as early on as possible. With life-care planning, you have a much better picture of what you can expect, from the financial piece to the medical-management piece."
Because the life-care plan projects future health needs, it is also identifies health risks that could have an impact on the patient's future needs. Implementing prevention steps can mediate those health risks.
Consider the case of "Jane," a 68-year-old part-time employee of a major retail store, for example. Jane fell at the store, suffering a spinal cord injury. As a result of the accident, she was found to have pre-existing osteoporosis that had predisposed her to a compression fracture of the lumbar spine. Her life-care plan included treatment of her underlying osteoporosis, and also stressed the importance of weight-bearing exercises that she could do at home.
Projecting the future medical needs of an individual is also the basis of structured settlements that provide for payments over time to cover medical costs. For example, based on an individual's life expectancy, future treatment requirements, and the cost of ongoing care, pain management, and other medication, it is determined that a person needs a certain dollar amount each year for general medical treatment. In addition, the life-care plan estimates the individual will require a hip replacement every eight years. Based on these expectations, a settlement is structured by the insurance company and financed with annuities.
A life-care plan can also come into the spotlight in the case of litigation. In some cases, both the plaintiff and the defense may hire life-care planners to determine the scope and cost of future medical needs. The opinions of the life-care planners then become evidence in the case and are used to determine a settlement or award for medical needs. A life-care planner also could be hired to review and give an expert opinion on an existing plan.
In addition, life-care plans are used in cases of third-party responsibility, or subrogation, for medical claims. For example, with a worker injury at a construction site, it may be determined that while the injured employee worked for the electrical contractor, it was the plumbing contractor that was ultimately responsible for the circumstances causing the accident.
Life-care plans are also needed to meet Medicare set-aside requirements, which stipulate that money earmarked for future medical treatment be used for that purpose. This is necessary should the individual face other health issues in the future that are covered by Medicare.
Finally, a life-care plan also helps insurance companies to mitigate their risk and determine their claim exposure with regard to reinsurance requirements. Typically, reinsurance becomes an issue at a certain dollar amount, such as $2 million or $3 million. If a life-care plan estimates that the claim, over time, will approach that number, the insurer must notify its reinsurance company.
"The bottom line with a life-care plan is that everyone has a much better picture of what to expect the projected long-term medical costs to be with regard to medical management of a serious and catastrophic injury or illness," McGraw adds.
While life-care plans have important financial components to provide for future costs, the medical management and prevention are also vital parts. With a life-care plan, an individual's long-term medical needs are anticipated and provided for, including proactive treatment and preventive care to help achieve a maximum state of health and well-being.
Without a life-care plan that addresses needs as they arise and identifies potential risks in the future, the effects of aging and the onset of other medical conditions could further compromise the person's health.
PATRICIA McCOLLOM is a former chairwoman of the Commission for Case Manager Certification. She is also president of LifeCare Economics and CEO of the International Academy of Life Care Planners in Ankeny, Iowa.
CAROLE STOLTE UPMAN
is a commissioner and former chairwoman of the Commission for Case Manager Certification. She is also founder and president of Chesapeake Disability Management, Inc., and director of Maturity Concepts: Care Management & Consulting, both of Towson, Md.
November 1, 2005
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