Health care costs have been rising. Part of the reason could be an increased reliance on emergency care, but a lot of it could be chalked up to an aging population. People have a better chance of getting a disease or ailment the longer that they live. In 1960, newborns in the U.S. could expect to live slightly more than 71 years. Now they can expect to live just under 79 years.
Here are six ways to help you navigate the health care cost maze and potentially save:
1. Coordinate plans
Two-income couples should coordinate their insurance benefits. It might make sense to opt out of one plan and choose the family option on another. On the other hand, maintaining coverage with two providers can make sense, if one fills the gaps of the other. For example, one spouse may have better options for prescriptions, a lower deductible or a wider network of physicians. Then, the other may be able to take the insurance benefit as a lump sum benefit. A growing number of employers are offering a “cash in lieu of” or “pay in lieu of” benefits option, under which the employer offers a taxable “opt out” amount if an employee declines coverage because they’re covered under their spouse’s health plan.
2. Check your bills
According to a Consumer Reports survey from 2014, 7% of patients found serious errors in their hospital bills. Those who paid $2,000 or more out of pocket for their care were twice as likely to find errors. These errors can range from typos and wrong codes all the way to forgetting to declare prior authorization for tests, procedures or seeing specialists. If you spot an error, then send a certified letter requesting a corrected bill and a copy of all documentation to your insurer, and contact the billing departments of both the insurance company and the physician’s office.
3. Follow doctor’s orders
The Centers for Disease Control and Prevention (CDC) reported in September 2016 that one in four Medicare participants age 65 or older with blood pressure issues—around 5 million people—do not take their blood pressure medicine as directed. In fact, 20% to 30% of prescriptions for chronic health conditions are never filled, and about half are not taken as prescribed, according to the CDC. Between $100 billion and $300 billion of avoidable health care costs have been attributed to non-adherence in the U.S. annually, representing 3% to 10% of total U.S. health care costs, according to a Johns Hopkins study.
4. Use medical expense deductions
If you incur extraordinary medical expenses in one year, you can deduct from your taxable income the medical costs that exceed 10% of your adjusted gross income (AGI). This can include out-of-pocket insurance premiums and a host of other expenses. See IRS Publication 502 for the complete list, and talk to you accountant about how the deduction may apply to you. For example, if you earned $80,000 in AGI, then your threshold is $8,000. Let’s say that you incurred $10,000 of medical expenses. You could write off $2,000 on your tax return.
5. Know your plan benefits
Take advantage of the free and discounted services offered by your health plan. Many providers subsidize flu shots, gym memberships, nutrition classes, health-risk assessments and other preventive care.
6. Explore a Health Savings Account (HSA)
If you have a high-deductible health insurance plan with lower premiums, then you may wish to explore an HSA. Funds contributed are not taxed when deposited, if made through your employer. And if you're on your own, they are 100% deductible (up to the legal limit). Withdrawals to pay qualified medical expenses, including dental and vision, are never taxed. Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free. Finally, you can invest the money should you wish to take advantage of potential compound interest.
Did you know? One of the best ways to save on overall medical expenses is to take care of yourself and your home. Bad habits can be costly, in both higher premiums for insurance and long-term expenses. Practice good hygiene, and take steps to avoid accidents at home. Small changes today can lead to better results in the future.
Justin J. Kumar embraces a proactive, systematic investment management approach with a customized, proprietary system to help guide his clients toward their financial goals.
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