Use the following information for questions 23 through 25. …
Use the following information for questions 23 through 25. On January 1, General Hospital entered into a capitated contract with ABC Health Plans to provide healthcare services to 200,000 of ABC’s covered lives. The contract is a global risk contract, and does not contain any risk sharing provisions. In researching General’s historical lag between when claims occur and when they are paid, you obtain the following information: Claims paid in the month they are incurred: 15% Claims paid in the month after they are incurred: 50% Claims paid two months after they are incurred: 25% Claims paid three months after they are incurred: 10% You determine that the medical claims expense recorded for the months of March, April and May were $30 million, $27 million and $21 million, respectively. During the month of June, General paid $25 million of medical claims, of which $3 million were for services rendered in June. You also learn that General received but has not yet paid invoices from healthcare providers for services rendered to lives covered under General’s global risk contract; the invoices total $5 million of which $2 million relate to services rendered in June. What is the estimated medical claims expense General should record for the month of June, assuming the historical lag schedule information is the most reliable information available?