When it comes to healthcare expenses, we can only control so much. Things like the type of health plans employers will offer, changes in premiums and deductibles, and unexpected health events are all beyond our control. Thankfully, on the flip side, there are numerous tactics we can use to lower our out-of-pocket expenses. Here are three simple things you can start doing today to reduce your medical expenses.
1. HSAs: SO VALUABLE, YET SO MISUNDERSTOOD
Health Savings Accounts (HSAs) are one of the least understood retirement investment vehicles. An HSA is a tax-deductible savings account that's used along with an HSA-qualified high-deductible health insurance plan. Here are some current guidelines to keep in mind when considering an HSA:
- A high-deductible plan is defined as at least $1,300 for an individual and $2,600 for a family.
- In 2017, individuals can deposit up to $3,400, or $6,750 for families, in their HSA accounts.
- Account-holders who are 55 or older can deposit an additional $1,000 in catch-up contributions.
- Like 401(k)s, employers can contribute money into their employees’ HSA accounts.
- Once enrolled in Medicare, you can no longer contribute to your HSA, but you can withdraw money you previously contributed.
HSAs offer tax advantages and flexibility that translates into compounded savings. Comparing HSAs to 401(k)s, we find that when it comes to federal taxes, contributions to both are pre-tax. But while 401(k) investments and withdrawals are federal tax deferred, those for an HSA are not taxed. In general, the federal tax treatment of HSAs allows you to put money away for healthcare costs while also lowering your taxable income. It's important to speak to your tax advisor to understand the specific tax impact for your individual situation, including relevant state tax implications.
Like 401(k)s, you want to look closely at the investment vehicles offered by your HSA administrator, with a goal of minimizing expenses with choices that include no-load or load waived mutual funds.
Yes, you can use HSAs to pay for health expenses whatever your age. But with experts estimating the average couple retiring at 65 will need nearly $300,000 for healthcare during retirement, it makes sense to look at the HSA as part of your retirement investment portfolio. If you can pay your current medical bills and allow your HSA funds to build tax-free from one year to the next, you'll be in a strong position as you age and your healthcare expenses rise.
What happens if you don't need all the money you save for healthcare expenses? When you turn 65, you can withdraw the money penalty free, but not tax free (unless being used for a qualified medical expense), for any purpose.
2. YOU “CAN” NEGOTIATE
When I was ready to give birth to my son, we drove (very quickly) to the hospital affiliated with my obstetrician. Of course, prior to starting my relationship with her, I had confirmed she was in-network with my insurance provider. A few weeks after having my son I received an astronomical bill from the anesthesiologist who was shockingly not in-network. I had assumed that all the medical staff at this in-network hospital would be, well, in-network. Unfortunately, this was not the case, so I rolled up my sleeves and negotiated the price down to an in-network provider's fee.
- First, as with all negotiating, simply do it. If you don't speak up, you won't get anything.
- The Human Health Experts, a company in Florida that specializes in advocating for patients, suggests trying to get past customer service to the patient access department or decision-makers in the billing department.
- Ask for itemized bills and review them carefully. Look for things like double billings, errors, and unfamiliar names.
- There are experts who specialize in helping people navigate their insurance plans and erroneous bills. If you can't get traction on your own, seek out credible referrals for this type of health care advocacy service. Some employers are starting to offer access to private advocates as part of worker benefit packages, so you may want to start by asking your human resource department if it's a benefit they offer.
3. STAND UP FOR YOUR HEALTH
Arguably, the best way to control health care costs is to stay healthy. Dr. Michael Roizen, the chief wellness officer at the Cleveland Clinic and co-author of numerous books with Dr. Mehmet OZ, was speaking at a recent event I attended. Some of the suggestions he shared are not new news but good reminders, such as not smoking, making good food choices (lots of greens), choosing appropriate portion sizes, and managing stress.
He also told us to jump. Did you know that by simply jumping twenty times a day, you can help to build bones? I had no idea. His main point, however, was that there are plenty of less arduous things we can do to help maintain good health. In other words, we don't all have to be marathon runners in order to get a good bill of health. Whew.