Objective To estimate the lifetime cost associated with the entire population or segments of the population, it was necessary to project the welfare payment pathway for all individuals in the model population from the valuation date and then subsequently aggregate the welfare payments received throughout their lifetime. In this stage of the valuation, the projection module, the future pathway of each individual in the model population was projected forwards, using a dynamic micro-simulation model that reflects the circumstance and life situation of all individuals, conditional on circumstances and characteristics in the previous year. Approach by PwC The cornerstone of the valuation method is the projection module which facilitates the annual projections of the model population. This module utilises a dynamic simulation model to simulate the future lifetime pathway of each person in the model population (baseline dataset) through the annual evolution of the population. This takes each individual in the model population and ages them forwards over the remainder of their natural lifetimes (which is capped at 110 years of age). The circumstances and characteristics of each individual, including the likelihood of welfare payment receipt and the associated annual payment, were projected for each future year from the valuation date, conditional on the value of all measured attributes from the previous year. The simulation model predicts the transitions in selected characteristics for each individual, in each year, and uses the individual’s personal circumstances to influence future transitions. For example, the projection of the 2016 population was conditional on the attributes of each individual recorded in the baseline dataset representing the model population at 30 June 2015. The subset of time-variant attributes simulated from year to year includes: Age; Mortality status; Partnership status, basically partnered or single; Children, number and ages; Education status; Payment category; Utilisation of each payment category; and Derived variables such as duration in class.
Objective To estimate the lifetime cost associated with the entire population or segments of the population, it was necessary to project the welfare payment pathway for all individuals in the model population from the valuation date and then subsequently aggregate the welfare payments received throughout their lifetime. In this stage of the valuation, the projection module, the future pathway of each individual in the model population was projected forwards, using a dynamic micro-simulation model that reflects the circumstance and life situation of all individuals, conditional on circumstances and characteristics in the previous year. Approach by PwC The cornerstone of the valuation method is the projection module which facilitates the annual projections of the model population. This module utilises a dynamic model to simulate the future lifetime pathway of each person in the model population (baseline dataset) through the annual evolution of the population. This takes each individual in the model population and ages them forwards over the remainder of their natural lifetimes (which is capped at 110 years of age). The circumstances and characteristics of each individual, including the likelihood of welfare payment receipt and the associated annual payment, were projected for each future year from the valuation date, conditional on the value of all measured attributes from the previous year. The simulation model predicts the transitions in selected characteristics for each individual, in each year, and uses the individual’s personal circumstances to influence future transitions. For example, the projection of the 2016 population was conditional on the attributes of each individual recorded in the baseline dataset representing the model population at 30 June 2015. The subset of time-variant attributes simulated from year to year includes: Age; Mortality status; Partnership status, basically partnered or single; Children, number and ages; Education status; Payment category; Utilisation of each payment category; and Derived variables such as duration in class. simulation
validation_of_baseline_valuation.docx