5 Tips for Budgeting Healthcare Costs
It can be easy to think that your health insurance premium and out-of-pocket costs are the only things you can manage when it comes to healthcare expenses. It’s even easier to think that your insurance will cover the majority of your medical expenses. The truth is, budgeting for your health extends beyond simply managing your insurance premiums and copays.
With rising healthcare costs, it’s as important as ever to manage your health budget, trim unnecessary spending in certain areas, and have a plan for the unexpected. We’ll share several tips for managing your healthcare expenses and getting the most out of your spending.
1. Review Your Current Healthcare Expenses
Before you can begin to budget better for your health, you have to know how much you’re currently spending. This might seem simple, but, in truth, most people don’t take a big picture look at their healthcare spending. You might already be factoring your health insurance costs into your budget, but what about other costs?
Gym memberships, yoga classes, massages, nutritious foods, and health supplements like vitamins and protein are all investments into your health and wellbeing. However, are they all being taken into account in your budget? It’s important to look at your health spending holistically. That means identifying expenses beyond insurance costs and doctors’ visits. You might find you’re spending much more on your health than you thought. You might also find areas where you can easily spend less.
While it might be daunting at first, the goal for your review should be to take inventory of all your health costs, identify which areas are most important to you, and find areas you can cut back on. Once you’ve accomplished this, you can determine a better budget.
2. Determine Your Total Healthcare Budget
After you’ve reviewed your current healthcare spending and found areas where you can cut back, it’s time to take the next step and determine your total budget. This can seem challenging at first and may require prioritizing your needs.
From budgeting for your insurance premiums to paying for a gym membership and ordering prescriptions, begin by thinking of your health “needs” and “wants.” For example, your gym membership may fall under the “need” category for maintaining your health (and even helping to prevent future health expenses), but the upgraded membership that includes tanning and personal training may be an unnecessary “want” that cuts into your budget.
To further help determine your budget, divide your health expenses into three sub-categories:
- Fixed Expenses: These are expenses that are set and predictable, like insurance premiums, gym memberships, or medications you take regularly.
- Routine Expenses: These are your anticipated healthcare costs. Think of routine expenses like your copay for an annual checkup or the cost of a one-time prescription.
- Unexpected Expenses: These costs can be difficult to predict, like an unplanned trip to the emergency room or an urgent medical procedure. While you can’t completely plan for these expenses, you can make sure you have an emergency fund for when they arise.
Once you’ve categorized your expenses into needs or wants and determined your fixed and routine costs, you can set a clear budget.
3. Create an Emergency Fund
Unfortunately, you can’t plan for every expense. Sometimes illnesses or accidents occur that simply can’t be accounted for. This is why it’s important to set aside an emergency fund in your healthcare budget. An emergency fund is an account that is set aside to help pay for any unexpected medical emergency, including medications, procedures, or treatments that are not completely covered by your insurance.
Creating an emergency fund that you can use in case of a medical emergency is a good plan. This is especially true if your health insurance has a high deductible. While it’s difficult to determine the best amount for an emergency fund, you should at least try to have enough funds to cover your deductible.
4. Use an In-Network Provider
Another helpful way to reduce healthcare costs and maintain your budget is to use in-network providers if you have insurance. A provider that is part of your health insurance network has agreed to accept an approved amount for specific services. This means an in-network doctor might charge $200 for a specific medical service and your insurance has an approved amount of $100 for that service. In this instance, you would save $100 by using the in-network provider.
5. Save On Medication Costs
Many Americans struggle to manage their healthcare costs, with prescription medications often accounting for a large portion of a person’s out-pocket-costs. In fact, 1 in 4 U.S. adults report having difficulty in affording their prescription drugs. Prescription discount cards or Rx coupons can help reduce your healthcare costs. Not to be confused with insurance, a discount card or coupon offers savings on cash prices for prescription drugs at participating pharmacies.
The America’s Pharmacy prescription discount card is available to individuals and families for free, regardless of insurance or financial status. Simply search online to find the best prices on your prescription, choose how you want to get your card or coupon, and show it to the pharmacist to receive your discount. You can also save on the go by downloading the America’s Pharmacy mobile app.