How Much to Budget for Medical Expenses: A Planning Guide
Many adults feel the pressure to act responsibly on matters related to their money and well-being. The most important aspects of their finances are the planning related to medical expenses and enhancing the health outcomes. However, most people overlook the need to budget for medical expenses by thinking that health insurance may cover most of those costs. They think about deductibles and the copay model of the medical insurance company and think that everything can be handled without any pressure.
As much as medical insurance companies co-pay your medical fees, it is imperative to place a premium on medical expenses when conducting your budgeting priorities. This fact is because, in most cases, the insurance companies may not cover out-of-pocket costs, and one may fall at risk of inability to finance some medical expenditures.
According to the bureau of labor statistics, households spend approximately 8% of their income on health care costs which amounts to roughly 7% of their pre-tax income. This is regardless of the health insurance cover, as premium health care plans may require out-of-pocket expenditure, which is drawn from personal income.
Against this backdrop, a fair question, therefore, should be, ‘how much should I budget for medical expenses?’ when considering answering the question, there are several things that come to mind, including
- How can I determine the total health care on it?
- What should be the health priority to consider?
- Is there an emergency fund that I can set up to help cover some medical expenses that should arise?
- How can I leverage health savings accounts?
- What health insurance choices should I consider to support a more significant proportion of my medical bills?
- How should I budget and plan for future healthcare costs today?
There are three items that can help in preparing medical budgets for unexpected medical needs:
- Personal and family healthcare history and lifestyle.
- Healthcare providers’ data and receipts.
- Share different healthcare costs covered by your insurance and medical financing plan.
How Much to Budget for Medical Expenses: Understanding your Medical Cost Shares
Medical insurance plans have different cost-sharing payment plans to help develop a medical budget. Some of the terminologies used in relation to cost-sharing plans include;
A deductible is the total amount of money one can pay for medical services before an insurance plan starts making payments.
This is the fixed amount of money paid for medical services or doctor visits.
This is the proportion of the total medical bill that is paid. This amount can be unpredictable and difficult to calculate in advance as it is hard to predict the medical charges before care is given. However, a medical facility estimates the amount of money related to particular care.
This is the maximum amount of money paid for medical care as covered by an insurance policy. This policy stipulates the amount to be paid for the deductible in addition to the coinsurance and copayment plans.
How Much to Budget for Medical Expenses: The Determination of the Total Medical Budget
When determining a medical budget for your health care needs, the three categories of healthcare costs that you might consider:
Routine Healthcare Costs
This cost refers to the anticipated medical expenses regardless of fluctuations. A case in point is the expenses for regular prescriptions and medical checkups.
Unexpected Healthcare Costs
These costs refer to expenses that go to urgent medical procedures since they are unpredictable and hard to plan.
Fixed Premium Healthcare Costs
These are the medical expenses set aside to pay for health insurance cover. In most cases, the expenses are deducted from your paycheck every month.
A good guide could be the previous health costs incurred when determining how much to plan for in relation to medical expenses. Plans set on past experiences are best for predicting what may be required for future healthcare expenses.
Therefore, the foundation of medical budgeting is to review past receipts from healthcare providers and insurance covers and go through your credit and bank statements to identify medical expenses paid out of pocket in previous years.
If you lack the receipts, you can always contact the health care providers or insurance company to furnish you with documentation that can help you in medical budget planning. You can identify the routine and fixed healthcare expenses on an annual basis in the past years and develop an anticipatory medical plan.
However, it is imperative to add an extra amount of money for any emergency operations that may lead to extra unanticipated medical costs. A case expects a child through surgical procedures, which might not be easy to protect earlier in advance. In that case, planning for out-of-pocket expenditure without relying entirely on the insurance covers can help in cushioning any budgetary shocks caused by medical emergencies.
How Much to Budget for Medical Expenses: Medical Scenarios to Consider When Preparing a Medical Budget.
One should factor in the number of incidences when deciding when and how to prepare a medical budget and what amount of money is ideal for catering to different scenarios.
An accident of any type with a large magnitude may affect your health, whether physical or psychological, and you may require a substantial amount of money. Expenses related to accidents may go to injury clinics, wheelchairs, and to some extent, require you to visit a physical therapist if an accident affects the dental structure, additional costs to visit a dental clinic or buy dental-related products such as clear braces.
Sports of any kind, including football, baseball, American football, cricket, tennis, basketball, and rugby, are prone to accidents and injuries. In that case, it is essential to have a well-defined medical plan and budget that can cater to any eventualities related to sports. Healthcare needs might go to an injury clinic, surgical facilities, and physical therapists.
Prenatal care involves the trade-in and treatment of pre-pregnancy health issues. Therefore, medical budgets should factor in pregnancy complications, labor, and delivery for both babies and mothers.
Postpartum care is care given after birth to both mothers and babies. Services such as a well child visit require parents to occasionally take their children to child health facilities to ensure they grow healthy and develop normally. Such visits start after a few days of the child’s delivery and continue until the child turns 18 months.
Food and Skin Allergies
In some cases, food and skin allergies pose emergency health risks as they are unpredictable. When having a food allergic reaction, most people consult doctors online to provide a virtual doctor prescription in relation to food allergy safety.
On the other hand, a skin allergy might require antibiotic skin ointment, which in most cases requires out-of-pocket payments.
How Much to Budget for Medical Expenses: Prioritizing Health and Medical Costs.
Once you have determined the annual healthcare costs incurred in the previous years, the next step is to prioritize medical expenses when developing your household budget. It is, however, imperative to enroll in online education platforms that can help establish the best way to manage your finances in relation to medical expenditure plans.
Medical costs should be prioritized in the same manner as mortgage, utility bills, transport, food, taxes, and rents are budgeted. Therefore, it is imperative to prioritize medical expenditure over other less essential services or products.
Therefore, medical expenses should be considered ‘needs’ and not ‘wants’ and should incorporate prescriptions, doctor’s visits, insurance premiums, emergency operations, etc. Therefore, it is time to adjust your perspective on medical expenditure and give significance to healthcare costs deserving of medical budgetary plans.
How Much to Budget for Medical Expenses: Setting up an Emergency Fund
There are unexpected healthcare costs that pose a challenge when planning. When developing a budget for health care costs, it is imperative to consider the creation of an emergency, which is an account that satisfies to cater for medical emergencies, including medication and procedures that your medical insurance company might not entirely cover.
Therefore, experts recommend saving some money for at least 3 to 6 months as an emergency fund to cater for unexpected medical bills. The fund can help you finance your medical needs without having to dip into your savings or take credit that may disrupt your financial plans.
If considering starting an emergency fund, the best option will be starting small and focusing on the goal. The most important thing is the commitment to the emergency fund, regardless of the amount of money you put in.
How Much to Budget for Medical Expenses: Leveraging Health Savings Account
In addition to having an emergency fund, it is also essential to have a special savings account that you can fund by use of your income or have your employer finance based on an agreed-upon plan that can help cover healthcare costs. The three main tools are related to health care savings.
A personal health savings account financed through a high-deductible health insurance plan. This plan helps offer high deductibles with lower premiums. The money is deducted from the pre-tax income directed to eligible healthcare expenses, including prescriptions, eyeglasses, and dental and medical needs.
Healthcare savings account funded by employers. This can be organized by a reimbursement arrangement where your basement account is financed by your employer to be spent on predetermined healthcare needs. The account can be rolled over to the presiding year should it be untouched. However, after leaving the company, the money cannot be given to you but to the company.
A flexible spending account. This type of healthcare plan takes money from your account deposits, pre-tax income, and paychecks for qualified medical needs. This can be financed by both the employer and employee based on a maximum contribution provided by the law. However, unlike the health reimbursement account, the amount contributed cannot be rolled over after the end of the year.
How Much to Budget for Medical Expenses: Evaluation of Medical Insurance Choices
Before enrolling in a medical insurance plan, it is essential to critically evaluate the medical insurance options available that are best suited for you and your family. It is essential to consider the hospitals, pharmacies, and doctors referred by the insurance company. It is also essential to consider the cost of prescriptions, copays, deductibles, and premiums of each insurance company under your review.
It is also essential to factor in your health history when determining the different healthcare coverage options available. This can help identify insurance choices best suited to your medical conditions or family needs. Suppose you or your family member has multiple prescriptions or visits a doctor frequently. In that case, it is recommended to go for an insurance choice with more expensive plans that can satisfactorily cover medical needs.
If you are self-employed or an entrepreneur, it is equally essential for you to research online for insurance plans that might cater to you and direct participants of your business. Therefore, it will be recommended to choose a smaller insurance company or one that fits your income and budgetary plans.
Medicaid is a federally funded public health insurance program designed to assist low-income individuals and families. As a result, it offers coverage for long-term care for the American people. The majority of persons who participate in the insurance plan do not have other forms of insurance. The program’s objective is to lower the out-of-pocket expenses that most impoverished individuals are obliged to endure to cover personal and family health care expenditures. This scheme often funds nursing homes, doctors, community health centers, and hospitals.
Early planning helps make meaningful financial commitments for your and your family’s medical needs tomorrow when developing a medical budget. With a well stipulated medical plan and budget, factor in the best options to enhance your commitment or prioritization of medical needs financially.