Sometimes even the most responsible spenders can run into financial trouble, especially when staggering expenses pop up out of the blue. But if there's one category of expense that might really wreak havoc on your finances, it's medical costs.
In the past year, Americans had to borrow $88 billion to pay their healthcare bills, according to a survey from West Health and Gallup. This means that many people aren't saving enough for medical emergencies, and that's a habit that needs to change.
Will a major medical event damage your finances?
An estimated 45% of Americans fear that a single health event could lead them into bankruptcy, and it's a valid concern. Medical issues are the No. 1 source of personal bankruptcy filings in the country.
But it's not just people without insurance who struggle to keep up with their bills. Even folks with insurance have a hard time covering their costs, especially since so many policies today come with hefty deductibles, costly copays, and exclusions that leave patients on the hook for bills they're forced to cover in full.
Furthermore, having insurance at one point in life doesn't guarantee permanent coverage. Many people lose their insurance when they lose their jobs, or fall ill and can't continue to work. At that point, they're stuck paying for coverage through COBRA (a costly endeavor), buying their own plan, or going without insurance and suffering the consequences involved.
Have an emergency fund
The best way to protect yourself from crippling medial debt is to have savings available. Make a point to have an emergency fund with enough money to cover anywhere from three to six months of essential living expenses. This way, you'll have cash to access if you encounter a large healthcare bill, get stuck paying your annual deductible all at once, or need to buy your own insurance (either a brand-new plan or COBRA) following the loss of a job. You may need to cut back on expenses temporarily to build that level of savings, or get a second gig on top of your main job. But having that money in the bank could prevent you from racking up bills that spiral out of control and land you in a mountain of debt.
Understand your health benefits
Having a solid handle on your health benefits can also help you keep your medical costs down. For example, if your health plan requires you to obtain a referral before seeing a specialist, taking that step could help you avoid a multi-hundred-dollar bill. Similarly, some procedures or diagnostic tests require preauthorization from insurance providers. Failing to go through proper channels could result in a scenario where your insurance company doesn't pick up a costly tab it otherwise would've paid for. Staying in-network can also help you avoid getting your medical claims denied, thereby making your care more affordable.
Be smart about financing medical care
If you do end up getting stuck with a medical bill (or a series of bills) you can't pay right away, don't whip out a credit card and resign yourself to paying that debt over time. Doing so will only cost you money in interest and put you at risk of damaging your credit score in the process. Instead, ask your providers about your financing options, because many will work with you if you're unable to pay in full. Similarly, some providers will cut you a break if the service you need isn't covered by your insurance plan, so it never hurts to speak up and negotiate a lower price for your care.
Medical bills are a major burden even for Americans with insurance. In 2016, the average emergency room visit alone cost nearly $2,000. The best way to protect yourself in the face of healthcare expenses is to know your benefits, be aware of your rights as a paying patient, and have savings on hand to cover the costs you inevitably get stuck paying.