Newsflash: healthcare is expensive.
Policy wonks have debated solutions to the mushrooming healthcare cost crisis for years. It’s abundantly clear that there’s no silver bullet, let alone a silver clip or magazine. In large part, the responsibility to control healthcare-related expenses falls on healthcare consumers themselves.
That means you.
The first step in controlling your healthcare expenses is figuring out exactly how much you’re paying each year for the care and coverage you need. According to the Centers for Medicare and Medicaid, per person healthcare expenditures exceeded $10,000 in 2012; they were far higher for older Americans and those with pre-existing health conditions.
That’s a lot of money. Not all healthcare expenditures are made out-of-pocket at the point of service, like scheduled premiums paid on Cigna and Aetna Medicare Advantage plans; some aren’t even borne directly by patients. But much healthcare spending is, and it’s crucial for all patients to recognize that the decisions they make can dramatically affect their net costs.
Let’s take a closer look at how to calculate your healthcare costs and what you can do to manage them.
Monthly Premiums
Most healthcare consumers pay monthly premiums to their insurance payer. Premiums vary widely based on the policyholder’s age, gender, health status, and other factors, as well as the policy’s coverages, deductible, and coinsurance/copayment requirements. (More on those below.) If you’re exploring a marketplace plan, use plan “metal” levels — Bronze, Silver, Gold, and so on — to get a rough sense of your likely premiums.
Deductibles
Your deductible is the amount you’re required to pay out of pocket before your insurance coverage kicks in. Bear in mind that deductibles can vary for different services and may not apply at all to routine services like preventive office visits. With some exceptions, deductibles generally do apply to non-routine services, hospitalizations, and the like. If you’re willing and able to bear higher premiums in exchange for a lower deductible, you could come out ahead in years when you use lots of healthcare services.
Coinsurance/Copayments
You’re not completely free and clear once you hit your deductible. Less generous policies — certainly Bronze and Silver plans, but sometimes higher metal levels as well — require coinsurance payments or copayments (don’t worry about the distinction, for now) for services incurred above the deductible. These payments can vary widely, up to 50% or more of total service costs in some cases.
Out-of-Pocket Overages
Pay attention to your policy’s out-of-pocket maximums — the annual limit above which you’re no longer required to make any out of pocket payments for healthcare expenses (not including premium payments). On less generous plans, out-of-pocket maximums can be quite high, so they may only come into play after catastrophic events. If you expect to need significant care over the course of a year, consider seeking out a higher-premium policy with lower out-of-pocket maximums.
Are You Controlling Your Healthcare Costs?
Just like any budgeting exercise, setting healthcare costs expectations is a constant battle. And, unlike lower-stakes domains, healthcare budgeting is made more complicated by the considerable uncertainty that attends all forward-looking planning around health and wellness. You might feel great now, but who’s to say you won’t need a much higher level of care in a few years’ time — or suffer a sudden setback that scrambles your best-laid plans?
No one, that’s who. All you can do is apply the budgeting best practices you know so well — and do everything you can to stay well. Fortune will handle the rest.
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