The Healthcare Cost Challenge

There is consensus across a number of studies that the United States spends twice as much as comparable countries on healthcare

How can you prepare for rising healthcare costs?

If you are healthy…

Group plans through your employer are less costly than private insurance. You may choose to elect a high deductible plan (HDHP) if you are a healthy individual. A HDHP will give you the ability to save pretax into a tax deferred health savings account (HSA). HSA limits for 2022 are $3,600 per year per individual or $7,200 per a family. HSA funds can be invested and grow tax deferred until you need them. If you are self-employed your state’s insurance exchange will provide you with coverage and cost options, or look into group rates with any professional associations you may belong to.

If a diagnosis means you need regular support from healthcare professionals…

Group employer plans are the lowest cost coverage option for families or individuals who are more reliant on health care services. Many companies will give participants access to a range of supplemental health services including mental health, virtual doctor services, fitness, and prescription drugs. Flexible spending accounts (FSA) are a simple and tax effective way to pay for your medical costs. The IRS allows for a per person contribution of $2,750 into an FSA per year. Most providers will have a list of how FSA funds need to be spent. If you have children a dependent care FSA is a good option. Most of the funds contributed to your FSA need to be spent before year end. FSA rules change regularly so check with your provider for updates. Be aware that FSAs are sponsored by your employer so if you plan to leave a job you will need to abide by your company’s FSA guidelines. Be prepared to spend down your account before you separate from employment.

If you are in retirement…

Close to your 65th birthday you will apply for Medicare. Keep in mind Medicare is not free. Your Medicare Part B premiums are deducted from your social security income. Premiums are based on total household income. Medicare does not cover all medical services including certain prescription drugs. Where Medicare has limits, a supplemental policy (MediGap or Medicare advantage plan) can fill some of those service gaps. Lastly, most insurance policies only cover long term care for a short period. It is important to look into long term care coverage OR have a dedicated savings account for that purpose. Look out for future newsletters on this topic.

When reviewing your cash flow, account for current and future medical costs. Having an emergency cash reserve can also give you peace of mind around unexpected medical expenses