Thursday, March 29, 2012

How to Plan for Medical Expenses During the Year

Dorothy Wheaton, PA-C 

Unexpected bills can wreak havoc on our lives, both financially and emotionally.  Most of us live on a budget and we plan out the year with expected and unexpected bills such as school, car repairs, and home repairs.  However, many of us do not plan for medical expenses.  There are many things we can do to help ourselves and loved ones with unexpected medical expenses.  There are two steps that can be taken to limit exposure to unplanned medical expenses.

Step 1 – Financial planning  
The first step is financially planning and preparing for medical expenses.  Some medical expenses may be eligible to receive various tax breaks. 

Tax Deductions
When preparing your taxes, remember that if your total medical expenses exceed 7.5% of your gross income, it can be deducted as part of itemized deductions.

Flexible spending accounts (FSA)
Check to see if you are eligible to set up an FSA through your employer.  This is an excellent way to plan for medical procedures.  FSA’s allow you to save money using payroll deductions and the money comes out pre-tax lowering your overall income and reducing your taxable income.  The only catch is that you have to really try and plan exactly how much you will spend, since excess funds are lost at the end of the year.

Health reimbursement accounts (HRA)
Some employers offer an employee benefit whereby the employer will reimburse an employee for medical expenses. Most HRA reimbursements are tax-free. 

Health savings accounts (HSA)
Individuals can set up a  health savings account  (HSA), either themselves or through a group plan with their employer. HSAs, like FSAs, are a pre-tax savings account. Unlike FSAs, health savings plans do not have a "use-it-or-lose-it" feature for accumulated savings. Health savings account holders can use their savings funds to pay for medical expenses on a tax-free basis. 

Step 2 - Life Style Changes 
The second step in preparing for medical costs is living a healthier lifestyle.  A healthy lifestyle is crucial to saving money in medical costs down the road.  A large number of the most expensive and/or chronic medical conditions are a direct result of being overweight or engaging in unhealthy activities such as smoking.  Many of us have bad habits, that quitting alone would free up extra money for unplanned expenses, such as drinking or cigarette smoking. Making a real effort to start going to the gym more, to reducing the intake of fatty foods and quitting smoking or excess alcohol consumption can lead to huge savings both in medical expenses and the cost saved on not spending on those vices.  If you have multiple vices start small, pick one and go from there. 

Walk, jog, run…just do something
Maybe you are 25 pounds overweight, you barely exercise, and your weekends consist of binge drinking and fast food.  Start with something simple, maybe a 15 minute walk after work.  After a couple of days, try a short jog.  If you have a close friend at work or a significant other get them involved with you.  It is much easier for most of us to exercise when we can make it as enjoyable as possible.  

Eating to much of the wrong things 
Instead of ordering a large sausage pizza for dinner, order a small cheese and side salad with a light dressing.  Cut back on your red meat and try adding fruits and vegetables to your diet.  Drinking little to no soda and as much water will help you feel amazingly better.  I hear people say things like, ‘I have to have my mountain dew or I will go crazy!’ This is not true; you will not go crazy without a daily dose of 20 ounces of soda.  You’re only giving yourself an excuse to stick to bad habits that cost you money and will result in poor health.

Not so fast, fast food
One of the best ways to save and limit the fast food we eat during the week is pack a lunch.  Do not make excuses, we can all make a sandwich or bring some leftovers. Try it for 2 weeks and then add the money you saved by not eating out every day at work.  

Limit your alcohol intake
Is drinking in excess your problem?  This tends to be more of an issue for the 21-35 crowds. Try changing your routine to maybe going out just one night on the weekends and then plan to do something active.   You don’t have to run marathon, but try doing something that gets you up and moving.    

Get to the doctor
Lastly, one of the easiest things we can do (but many do not) is when your sick, go to the doctor.  If you are sick or even just not feeling right, a trip to your family doctor can go a long way in the end.  

You’re probably not going to be able to utilize all of these preventative measures at first, but changing your lifestyle to account for even a few will yield results, you only get one body and you must take care of it.  Through a combination of financial planning and healthy lifestyle changes you can be well equipped to deal with or altogether prevent major healthcare expenses.

Dorothy Wheaton, PA-C, is the lead clinical provider for  Careworks Convenient Healthcare, a US company operating retail clinics and urgent care centers in the Northeast United States.

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