Reducing the Cost of Medical Expenses

For many, medical expenses can be an ongoing burden and hinder us from making other purchases, saving for retirement and improving our quality of life. In order to prevent these consequences it is important to have a solid understanding of what our medical coverage does and does not cover and to take steps to prepare for the unexpected. The following recommendations can help avoid and prevent paying more than you should for medical care.

Step One: Use a Health Savings Account (HSA)

If you are eligible for one, using an HSA can help to reduce the after tax cost of medical expenses and have the added benefit of being used as a vehicle for de-facto retirement savings.

If you're generally healthy and want to save for future health care expenses, an HSA may be an attractive choice. Or if you're near retirement, an HSA may make sense because the money can be used to offset costs of medical care after retirement.

On the other hand, if you think you might need expensive medical care in the next year and would find it hard to meet a high deductible, an HSA might not be your best option.

Like any health care option, HSAs have advantages and disadvantages. As you weigh your options, think about your budget and what health care you're likely to need in the next year.

Step Two: Review Your Health Insurance Policy

Knowing what your health plan does and does not cover is critical if you want to make informed decisions about your medical care. Be sure you know what your copays are for prescriptions and doctors’ visits so that you can include them in your budget. Learn about your deductible and any co insurance that may become effective after the deductible is met. Know which doctors and specialists are in your network so that you don’t end up paying more for care from a doctor who is outside of your network. These things are often over looked or not considered until after the fact and the financial impact can be way too big for something that could have been easily avoided with a little bit of education.

Step 3: Negotiate with Your Insurance Company

One way that insurance companies make money is by operating under the assumption that most people will not dispute the coverage decisions that they make. There is a great deal of fine print that can be interpreted one way by an insurance company and another way by a policy holder. With a bit of effort you may be able to negotiate with your insurance company about claims and, in some cases, making a formal appeal or complaint can result in a reversal of their initial decision not to cover something.

Step 4: Negotiate With Your Health Care Provider

Increasingly, medical providers are willing to negotiate with patients on the cost of care, particularly when the alternative is the risk of not getting paid at all. High out-of-pocket costs are increasingly common as health insurance coverage, both private policies and employer-supplied coverage, trends toward higher deductibles and co-pays.

If you are uninsured or your insurance doesn't cover a procedure, ask if the medical provider would be willing to do it for the same price they would get reimbursed for from an insurance company or Medicare. That could knock about 30% to 40% off of the cost and many doctors and hospitals are open to doing that.

The "Health Care Blue Book" lists the "fair price" for medical claims, which is what providers would typically accept from insurance companies as payment in full, and is usually less than what a patient gets billed.

Step 5: Negotiate a Payment Plan with Your Healthcare Providers

Many providers are willing to reduce the cost of procedures if you are willing to pay in full on the day of and, if you do not have insurance at all or you have a high deductible, then you can request a self-pay discount or an interest free payment plan.

Going directly to the billing department of the hospital or care provider can help reduce the burden and get you speaking to the person who is actually processing your payments. Most billing departments will accept even a small monthly payment to avoid sending the bill to collections. It is when you do not pay at all that a bill is sent to collections, and then you start paying interest.

Last Resort

If the hospital or doctor won’t give you a break and your medical bills are out of control, enlist the help of a nonprofit or professional advocate that can help bargain for you. There are specialists who typically keep a percentage of the reduction they negotiate for you — perhaps a third. These services often provide one-on-one coaching, including negotiating with doctors and hospitals.