Healthcare expenses are generally unavoidable, which is part of the reason so many Americans worry about them. The Kaiser Family Foundation reports that more than 25% of U.S. adults struggle to keep up with their medical bills, and that figure includes folks with health insurance. The problem has gotten so bad, in fact, that medical debt is now the No. 1 source of personal bankruptcy filings in the country. Talk about disturbing.
Why is healthcare so expensive?
What makes medical care such a gargantuan expense? For one thing, health insurance plan premiums have been climbing across the board. Your premium is effectively the annual fee you pay to get coverage under an insurance plan. Think of it like a gym membership fee, only a lot more expensive.
Now some folks are lucky enough to get subsidized insurance in which their employers pay a portion of their premium costs rather than get stuck with that entire bill themselves. But many workers don't, and, not surprisingly, they're the ones most likely to be burdened by premium costs alone. Case in point: Last year, the average nonsubsidized individual plan premium was $393 per month, while the average unsubsidized monthly cost for a family plan was $1,021. Ouch.
Then there are deductibles to worry about. Your deductible is the amount you're required to spend out of pocket before your insurance company will pay for the medical services you receive. If your plan comes with a $1,000 deductible, you'll need to fork over $1,000 of your own money before your insurance company starts covering most procedures and office visits. While some health plans come with a relatively low deductible, other plans can force you to spend many thousands of dollars before coverage will kick in.
And let's not forget copayments, or copays, which most plans require you to pay every time you visit a doctor's office or fill a prescription. Generally, your copay will vary based on the service you receive. While you might pay a lower amount to see your regular doctor, you'll typically be charged a higher copay for visits to a specialist. Furthermore, your prescription copays will usually vary from drug to drug, so planning for them can be a challenge.
If you're having trouble managing your healthcare expenses, you should know that there are several steps you can take to lower them. Here are 15 ways you can reduce your medical bills without skimping on the care you need.
1. Invest in better health insurance
Many folks are tempted to buy cheap health insurance, meaning the plan with the lowest premium. And at first glance, that might seem like a smart way to keep your costs down. However, cheaper health insurance can cost you in other ways.
For one thing, you might come to find that with a lower-cost plan, certain tests or procedures aren't covered. You might also find that you're restricted to a smaller group of in-network providers, making it more difficult to get the care you need.
Additionally, health insurance premiums and deductibles tend to have an inverse relationship -- the less you pay for one, the more you pay for the other. Therefore, if you buy a plan with a relatively low premium cost, you could come to find that your deductible is higher. Similarly, a lower-cost plan might charge a higher copay every time you visit the doctor, and if you go a lot, those bills could add up.
This isn't to say that a low-cost health insurance plan is always bad. But if you have a bunch of known medical issues or have children (who, let's face it, are germ magnets who tend to get sick), you'll probably use your insurance pretty often, in which case paying a higher premium for a lower deductible and copays could make sense.
As an example, say you're choosing between a plan with a $2,000 premium and a $6,000 deductible and one with a $4,000 premium and a $3,000 deductible. If you wind up getting sick or hospitalized on multiple occasions or wind up needing a number of costly diagnostic tests, you might rack up $6,000 in bills you're required to pay out of pocket before your coverage kicks in. In that case, under the first plan, you'll pay $8,000 total -- $2,000 for your premium plus $6,000 for your deductible. Under the second plan, however, you'll only pay $7,000 -- $4,000 in premium costs plus $3,000 for your deductible. Obviously, this example is very basic and doesn't account for other costs you might encounter, like copays, but the point it's meant to illustrate is that sometimes a higher premium is worth paying.
2. Make sure you understand your health benefits
Understanding your health benefits could spell the difference between overpaying for medical services and keeping your costs down. Yet in a study released last year, only 52% of employees with health insurance really understood what their plans would and wouldn't pay for.
If you've yet to review your plan's policies, take some time to read up on what it will cover and what costs you'll be on the hook for. Specifically, figure out which providers are considered in-network and which aren't, because if you go outside your plan's network, you'll typically pay more. Similarly, some services or procedures require referrals from a primary care physician or preauthorization from your insurance company itself. Fail to take those annoying but necessary steps, and you could wind up liable for a host of whopping bills.
If there are aspects of your health plan you don't understand, call the number on the back of your insurance card and speak to a live person about them. That's what those representatives are there for.
3. Request generic drugs
If you're used to paying a small fortune for brand-name medications, it's time to ask your doctor if there's a generic alternative available. From a medical standpoint, there's generally no harm in opting for a generic version of the medication you take, and that move alone could save you a considerable amount in copays. In fact, it's estimated that 90% of generic drug copays cost less than $20, compared to just 39% of brand-name copays.
4. Buy medications in bulk
If you have a medication you take on a regular basis, it pays to see whether it's available in 90-day supplies. Not only will this save you a few trips to the pharmacy (and the gas money associated with them), but it could also save you money. In some cases, you might pay less for a three-month supply of medication than you would for a single month's supply.
5. Ask your providers for free medication samples
Doctors' offices tend to be inundated with pharmaceutical reps looking to promote their newest drugs. As such, providers usually have a number of samples on hand, which means that you, as a patient, should feel more than comfortable asking for one. Imagine your doctor prescribes a drug whose monthly copay is $30. If that same provider is able to send you home with a two-month supply, you'll shave $60 off your medical costs, just like that.
6. Apply for a patient assistance program
If you're struggling to keep up with the cost of your medications, you can try applying for a patient assistance program. These programs are offered by drug companies and nonprofit organizations, and they're sometimes state sponsored. To qualify, you'll generally need to demonstrate a financial need for assistance and prove that paying for the medication in question will constitute a major hardship. But if you're approved, you could instantly lower your costs while getting access to the drugs you need.
7. Review your medical bills thoroughly before paying them
To err is human, and the good folks who work in medical offices aren't immune to mistakes when submitting claims to insurance companies or sending out bills. But if you pay every bill you get before reviewing it thoroughly, you might end up shelling out money for services you never even received. Sometimes, all it takes is a coding error for a service that should cost you $30 to cost $1,000 instead, or your insurance company might deny a claim altogether if the medical codes attached to it don't make sense. That's why it's crucial to study your medical bills and question any line items that don't look right.
8. Negotiate the services your insurance won't cover
The next time you find yourself in need of a service your insurance company won't pay for, don't just resign yourself to covering its cost in full. Instead, let your medical provider know that you're paying out of pocket and see what he or she can do to assist. Sometimes medical offices will offer a reduced rate to patients without insurance or without coverage for a service they require. Even if you don't snag a reduction, you might manage to get on a low- or no-interest payment plan so that you can finance that treatment without being charged extra.
9. Appeal denied insurance claims
It's not unheard of for an insurance company to deny a claim, thereby leaving you on the hook for the cost of the service in question. But before you give up on having that item covered, try appealing the decision instead. The appeals process will vary from company to company, but generally it'll involve filling out some forms and requesting that your insurance provider reconsider its decision.
You might need to enlist the help of a doctor or medical professional to be successful. For example, if your insurance company denies a procedure that's not associated with the condition you're being treated for, you might need your physician to provide a letter of medical necessity explaining why you had to undergo it. Generally, doctors are willing to help with this.
It also pays to enlist the help of a health advocate, which some companies provide to employees. As the name implies, a health advocate can get involved in your case and fight with your insurance company on your behalf to secure a more favorable and less costly outcome.
10. Request and retain copies of your medical records
While you don't necessarily need a record of every single office visit you attend, it pays to request copies of your medical records whenever you undergo a yearly physical with bloodwork or undergo specific diagnostic tests. This way, if you wind up switching providers, you'll have key information for your new doctor that might help you avoid unnecessary medical tests -- tests that could cost you money. Of course, it's common practice for medical providers to request copies of records from one another, but at that point, you're at the mercy of an office you no longer go to. In situations in which time is of the essence, having those records yourself could be crucial.
11. Avoid the ER for non–life-threatening medical issues
Accidents and sudden illnesses are often inevitable, but if they happen after hours, your regular doctor won't be available to help address them. Rather than head straight to the emergency room, visit an urgent care center instead if the issue isn't life-threatening. ER costs have climbed in recent years, so much so that as of 2016, the average patient was looking at $1,917 per visit.
Even if you don't have a deductible to worry about (say, your plan doesn't have one or you've already met yours), chances are your ER copay will be far more expensive than what you'd pay at a walk-in clinic (usually, urgent care centers charge the same copay you'd see at a specialist), so you can save money off the bat by staying out of the hospital. Incidentally, walk-in clinics tend to offer faster service, so you'll probably be in and out quicker by going that route.
12. Don't let health issues escalate
Going to the doctor for seemingly minor health problems can be a hassle. After all, the last thing you want to do is take time off from work just to get a pesky cough checked out. But what happens when that cough evolves into pneumonia, and you land in the hospital and rack up thousands in medical bills? Suddenly, you're not only putting your health at risk but are also paying more money than necessary for an issue that could've been easily resolved.
The takeaway? Get ahead of health issues before they worsen. In some cases, a $25 copay to your doctor's office could save you thousands in hospital costs. Incidentally, in a study released earlier this year, 20% of Americans admitted to avoiding the doctor to minimize their medical bills. But that's a move that can backfire and a risk not worth taking.
13. Sign up for a flexible spending account
Paying for your medical expenses with pretax dollars can save you a bundle on healthcare costs. That's why so many people are grateful for flexible spending accounts, or FSAs. If your employer offers an FSA, it pays to sign up. Currently, you can contribute up to $2,650 a year in pretax dollars to pay for expenses such as doctor office visits, drug copays, prescription eyewear, and certain medical supplies. You can even use your FSA to pay for travel to and from medical facilities.
Here's how FSAs work: You decide how much you want to contribute up to the maximum, and your employer then deducts that amount evenly from your paychecks throughout the year. As you incur medical expenses, you'll either use the debit card provided by your FSA administrator to pay for them, or you'll pay with your own money and then submit claims for reimbursement. Your savings, meanwhile, will be a function of how much you contribute to your FSA combined with your effective tax rate.
So let's say you max out your FSA for the year and your effective tax rate is 25%. In doing so, you'll save yourself $662.50 in taxes.
The only caveat with regard to FSAs is that they operate on a use-it-or-lose-it basis, so if you overfund your account and don't accrue enough eligible medical expenses during your plan year, you risk forfeiting the difference. Some plans, however, offer a grace period that gives you extra time to deplete your balance, thereby minimizing that risk.
14. Open a health savings account
A health savings account, or HSA, is a tax-advantaged account designed to help you save money on medical expenses. As is the case with an FSA, HSAs are funded with pretax income. But unlike an FSA, you don't have to use up your HSA balance within a given plan year. Rather, you can carry it over and use it when you need it. Furthermore, whereas the money you put into an FSA just sits there when you're not using it, your HSA money can be invested so that it grows.
Eligibility for an HSA, however, is more restrictive than with an FSA. To qualify, you must have a high-deductible health insurance plan, which, for the current year, means a deductible of $1,350 or more per individual and $2,700 or more at the family level. And anyone on Medicare can't sign up for an HSA.
If you do qualify, you can contribute up to $3,450 a year to your HSA as an individual or $6,850 as a family. If you're over 55, you can make a $1,000 catch-up contribution to your HSA as well.
As is the case with an FSA, your tax savings with an HSA will depend on your total contribution and effective tax rate. But here's another tax break you'll get: As long as you withdraw funds from your HSA to pay for qualified medical expenses, any gains you see on your investments will be yours free and clear of taxes. Talk about a double win.
15. Sign up for Medicare on time
Medicare eligibility begins for seniors starting at age 65, and while Part A, which covers hospital visits, is generally free for enrollees, Parts B and D, which cover doctor visits and prescriptions, respectively, charge premiums. Your initial enrollment period to sign up for Medicare begins three months before the month of your 65th birthday and ends three months after the month in which you turn 65. But if you fail to enroll during that seven-month window, you'll face a 10% upcharge on your Part B premiums for every 12-month period you were eligible for coverage but didn't enroll. Go too long without Part D coverage, and you could face a penalty there as well.
Therefore, it pays to sign up on time to avoid paying more than necessary for Medicare. Not only will doing so help you avoid penalties, but it could help you avoid having to pay for medical services in full should health issues arise at a time when you aren't covered.
Don't get hurt by healthcare costs
Healthcare can eat up a disturbing portion of your budget, no matter your age, so take steps to minimize this whopping expense as much as you can. Even if you only manage to cut your costs by a few hundred dollars a year, that's still money you can use for other purposes. And in some cases, you might easily save thousands by being vigilant. Either way, it pays to explore your options for lowering your medical costs -- not just for the actual savings but for the peace of mind that comes with knowing your healthcare needs won't drive you into debt.