If you're mired in debt because of healthcare costs, you're not alone. According to a recent report by the Centers for Disease Control, 57.8 million people had difficulty paying medical bills in the first six months of 2011. Several studies have also found that a majority of those who file for bankruptcy do so because of financial trouble brought on by medical expenses.
Difficulty paying medical bills doesn't just affect the uninsured. Even those with coverage come up against healthcare charges that are hard or impossible to pay and find themselves needing help with debt. Budgeting for inevitable healthcare expenses helps you avoid getting buried in an avalanche of medical bills and can give you debt help for existing healthcare financial obligations.
Take the following steps to budget for healthcare expenses:
- Add up all sources of healthcare costs - Tally up healthcare costs over the last year. Besides your insurance premiums*, include out-of-pocket costs such as insurance deductibles and co-pays. Also figure in the cost of medications and services not covered under your insurance, such as vision and dental care. And include miscellaneous healthcare costs like alternative medicine (chiropractic and acupuncture), fitness club membership and vitamins.
- Compute your monthly healthcare total - Once you have your grand total for healthcare costs, divide by 12 to see what your average monthly medical cost is. This gives you the amount of money you need each month in order to meet your medical responsibilities. If you find that this amount is higher than your budget can comfortably fit, you'll need to lower your expenses or bring in more money each month.
- Open a medical reimbursement account - If you are employed and receive health insurance through your employer, you may be able to open a health reimbursement account, such as a Health Savings Account (HSA) or a Flexible Spending Account (FSA). Essentially a bank account for your medical expenses, such an account allows you to save money before taxes to pay for your healthcare.
- Maintain an emergency fund - As its name implies, an emergency fund enables you to pay for unexpected medical emergencies when they arise. Having such a fund is especially important if you don't have a health reimbursement account. Scour your budget to see where you can squeeze out some extra money each month and direct it into a savings or money market account.
Keep these tips in mind regarding budgeting for healthcare expenses, and you'll be able to rest easy about your finances when it's time to visit the doctor.
*Your healthcare premiums may change in the coming year due to Obamacare. Recalculate as necessary using your new premiums.
About the Author:
Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies' Home Journal, Parenting, Entrepreneur and The Los Angeles Times.