Health care costs remain expensive and unpredictable, and many are not prepared to pay them.
A survey from the Board of Governors of the Federal Reserve found that 28% of adults went without some form of medical care in 2022 because they couldn’t afford it. It also found that 23% of adults had an unexpected medical event in the past year, costing a median of $1,000 to $2,000.
If the thought of such an expense has you stressed about your finances, there are steps you can take to minimize the impact that medical costs have on your budget — and your life.
Follow these five steps to better manage current and future medical expenses:
1. Build an Emergency Fund
Having an emergency fund with three to six months’ worth of expenses in a liquid account means that you can help cover an unexpected medical expense — or other unexpected expense. If that amount seems like a lot, try setting a small amount aside each month — even just $25 per week. That will get you into the habit and your savings will add up more quickly than you think.
2. Select the Right Insurance Plan
When it comes to managing medical expenses, one of the most important decisions you can make is choosing your health insurance plan. Be sure to evaluate all of your options during open enrollment season (including those available through a spouse if you’re married) to find a plan that best meets the needs of your family.
Factors to consider include the total potential out-of-pocket costs, including premiums and deductibles; whether your preferred doctors are in-network; and your family’s medical needs.
[Read: How to Negotiate Your Medical Bills.]
3. Take Care of Yourself
Maintaining a health lifestyle won’t eliminate the possibility of an expensive medical event, but it can certainly reduce the risk.
“If consumers can just keep in mind things like getting adequate sleep, having a healthy diet, drinking water and getting exercise, it’s an easy way to save on health care costs,” Jennifer Bourgeois, a pharmacy expert with the discount drug plan SingleCare, says.
Taking care of yourself also means getting appropriate preventive care. By law, most insurance plans fully pay for preventive care, such as annual physicals and cancer screenings.
Making sure that you get such care can save you money in the long term, since your doctor may be able to flag and address risk factors that could lead to costly surgery or medication if left untreated.
[Read: How to Get Help Paying Medical Bills.]
4. Take Advantage of Tax Breaks
In addition to health insurance, your workplace benefits may include access to either a flexible spending account or health savings account. Both enable you to set money aside (before taxes) to cover eligible medical expenses.
HSAs, available only if you have a high-deductible health plan, have the added benefit of rolling over each year, which means you can use the account to save for future health expenses and you won’t pay taxes on your investment growth.
Keep in mind, however, that you lose any money you didn’t spend in an FSA account at the end of the year.
In addition, if your medical expenses amount to more than 7.5% of your income and you itemize your taxes, you may be able to write off those costs. This does not apply, however, to medical expenses you paid for with HSA or FSA dollars.
[Read: Are Medical Expenses Tax-Deductible?]
5. Plan for the Future
While it’s important to manage your health and medical expenses right now, it’s essential to have a plan to address health care costs you may face later in life.
You can prepare for them by maxing out your HSA and saving as much as possible for your retirement expenses. You might also consider purchasing long-term care insurance, which can help offset the cost of care in a nursing home or rehab facility.
“When you start thinking about retirement and financial planning for the future, health care has to be part of the conversation,” Tom McCarthy, senior vice president, head of health care digital experience at Fidelity Investments, says.
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Tips for Managing Medical Expenses originally appeared on usnews.com
