Preparing and Coping With Unexpected Medical Costs

Each day, more and more Americans add unaffordable medical debt to their list of financial challenges. For example, in the case of our own financial counseling provider, Accel, in 2008 more than 15,000 of their counseling clients claimed medical issues were at the root of their financial difficulties. And their challenges were significant. More than 30% of the people in this group had past-due medical bills to deal with. It’s a problem for the employed and unemployed alike. While many jobless folks struggle to afford health insurance and even individual doctor visits, those fortunate enough to have insurance are being burdened by additional expenses associated with healthcare coverage cutbacks and rising medical costs.

According to U.S. News and World Report, 41% of working-age Americans—72 million people—reported having trouble paying off medical debts in 2007, though most were insured at the time care was given. Of course, it’s impossible to predict if and when you might have unexpected medical costs, but careful planning and diligent budgeting can help eliminate a lot of the pain that results from medical debt, while helping you ensure medical bills don’t cause additional financial hardships.

Accel’s recommendations for maintaining your financial health, along with your physical health, include some basics:

Planning
Be realistic with your medical budget. Review your history and think carefully about your future to accurately plan for premiums, co-pays, deductibles and out-of-pocket expenses. It’s very common for out-of-pocket expenses to exceed $1,000 per year (in addition to the cost of insurance premiums).

Managing your health insurance
Although it’s expensive, maintaining healthcare coverage costs far less than extraneous out-of-pocket costs associated with even simple procedures. For those unable to afford insurance, contact your state’s human services department to determine eligibility for Medicaid, Medicare, or the State Children’s Health Insurance Program.

If you’re insured, it’s important to stay current with your policy. Recent cutbacks have likely caused changes in coverage. Double-check your overall coverage (medical, dental, vision), co-pays, policy limits, and special services. Consult with your doctor to ensure all procedures are covered (tests, lab work, etc.). Call your insurer to clarify any outstanding questions.

Finally, be sure to take advantage of your employer’s healthcare spending account options. Both flexible spending accounts and medical savings accounts offer pre-tax savings plans that allow users to draw on them to cover medical expenses as they occur. Health reimbursement programs offer other benefits. Be sure to know all the rules before you begin contributing. It’s especially wise to check on spending limits and rollover policies.

Dealing with medical debt
For those already saddled with medical bills, there are a few ways to help control the debt, and none of them include using a credit card to pay it off! Using credit cards to pay medical debt should be avoided at all costs, so begin by requesting an itemized bill. You can check carefully for errors and, if necessary, appeal insurance company denials. You can also challenge your bills, when needed, or negotiate the cost of some services. Especially in the case of uninsured patients, doctors and hospitals will often reduce prices. Many are even willing to work out interest-free payment plans.

Considering your future healthcare costs
Set a realistic goal for estimated future healthcare costs and start saving for them immediately. Consider purchasing long-term care insurance when you can afford the extra expense. It can save you thousands of dollars in the long run. And, make sure your investment and retirement strategy—which should blend a mix of taxable and non-taxable investments—takes healthcare costs into account.

Staying healthy
Prevention is always the best strategy. You’ve heard it before: eat a balanced diet; exercise often; don’t drink, smoke, or do drugs; go in for your annual physical on time ... and, an apple a day doesn’t hurt either!