Physiological Age, Health Costs, and Their Interrelation

M. Govorun, B. L. Jones, Xiaoying Liu () and D. A. Stanford

North American Actuarial Journal, 2018, vol. 22, issue 3, 323-340

Abstract: We demonstrate the impact of an observable health-related quantity on the evaluation of individual physiological ages by extending the phase-type aging model proposed by Lin and Liu in 2007. In their model, an individual of a given calendar age has a determinable distribution of his or her physiological age. In our article, we use observable information to refine this distribution, thereby better connecting physiological age with the health of the individual. We illustrate our model using health cost data, and we investigate the impact of an observed health cost on the distribution of an individual’s physiological age. We also explore the impact on the expected present value of future health costs.

Date: 2018
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DOI: 10.1080/10920277.2017.1404476

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