A stethoscope laying atop a pile of folded hundred dollar bills.

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Life has a way of throwing unplanned bills our way, like sudden car or home repairs. But Northwestern Mutual's 2020 Planning & Progress Study reveals 77% of Americans are worried about another unanticipated expense: healthcare bills. 

Medical bills are a huge source of debt for many Americans, to the point where they're a major driver of personal bankruptcy filings. And unfortunately, even Americans with health insurance are often left with exorbitant bills, from deductibles to copays to coinsurance. 

If you're worried that a health emergency could derail your finances, it's imperative that you take steps to prepare. Here are some options. 

1. Pad your emergency savings

Having three to six months' worth of living expenses in a savings account is a good way to protect yourself from all types of financial emergencies -- medical issues included. If you're short on emergency cash, make an effort to pad your bank account when you can. Perhaps there's a month where you reap savings by snagging lots of groceries on sale. Or gas prices might drop, meaning your transportation costs decline. Take advantage of these small but meaningful savings opportunities. 

2. Contribute money to a flexible spending account

With a flexible savings account (FSA), you allocate money each year for health expenses. You generally have to use the cash in that year. You won't be taxed on that portion of your income because the money comes out of your paycheck before tax. In other words, put $1,000 into an FSA, and that's $1,000 the IRS won't tax you on. But just as importantly, an FSA will serve as a dedicated source of healthcare funds. If you wind up in the ER with a large copay, you can take the money from that account rather than wonder how to come up with the cash. 

3. Put money into a health savings account

Health savings accounts (HSAs) work similarly to FSAs in that you reap immediate tax savings for contributing. But there's a key difference: With an FSA, you're setting money aside for one year of medical bills only. With an HSA, your funds never expire. So if you contribute $1,000 to your account one year and you only spend $300 of it, you can carry the remaining $700 into the future and use it whenever you need. Furthermore, any HSA funds you don't use can be invested and grown into a larger sum. In the long run it will be easier to cover healthcare costs as they arise. 

One thing you should know about HSAs is that not everyone can participate. To contribute, you must be enrolled in a high-deductible health insurance plan. If you get health coverage through your employer, your benefits coordinator can help determine whether you're eligible. And if you buy your own insurance, it will be designated as HSA-eligible or not on healthcare.gov. 

Medical bills catch a lot of people off guard and can easily be a source of financial stress. Your best bet is to have funds on hand to cover them, whether in a general savings account earmarked for emergencies or a tax-advantaged account like an FSA or HSA. If you make an effort to set money aside for healthcare, you won't have to worry about how to pay for your care when things go south. Instead you can focus your energies on recovery.