OBJECTIVES: While many cost-effectiveness analysts devote considerable effort to estimating the costs of the intervention, most do not rigorously evaluate the medical cost implications of the disease. Medical cost data is often old, inaccurate, or ignores the cost implications over time. Using actuarial methods, we develop rigorous estimates of the stream of medical costs associated with breast and colorectal cancer. METHODS: Using a 350,000 annual member, 7-year longitudinal claims database, we assessed the full stream of treatment costs following, and leading up to, the diagnosis of cancer. To aid analysts so that they need not add Markov states for each year of the disease in order to capture these costs, we demonstrate how, using life contingencies, this detailed cost stream can be represented as single present value or annualized cost. RESULTS: Many cost-effectiveness analysts do not incorporate the full stream of medical costs associated with a disease. As a result, they typically underestimate medical costs. For example, for preventive interventions, the increased costs prior to formal diagnosis should be considered because preventing the disease may avert some of these costs as well. Further, because the medical costs are inevitably higher in the earliest years of a disease, and because the use of discounting effectively weights early costs more heavily than later costs, the repeated use of a single average annual cost value will underestimate the present value of the stream of costs. CONCLUSIONS: The use of actuarial methods allows for improved estimation of the stream of costs associated with cancer.