Reserving Long Term Medical Claims

In this paper, the use of life contingencies to establish reserves for claimants requiring lifetime medical care is explored. In evaluating such claims, consideration should be given to the effects of inflation, discounting for interest, life expectancy, the impact of the claimant's medical condition on life expectancy, and the accurate measurement of medical costs. The evaluation is made in three phases: a claims evaluation, a medical evaluation, and an actuarial evaluation. The claim evaluation consists of gathering accurate information about the claimant's medical condition and the current cost of providing medical care. The medical evaluation consists of using the medicate information obtained from the claim evaluation to estimate the effect on the claimant's life span. Information obtained from the claim and medical evaluations is combined with assumptions regarding interest, inflation, and mortality to produce the actuarial evaluation.