Adding It Up

Tal­ly­ing your an­nual health care ex­penses puts you in a bet­ter po­si­tion to man­age them.

Diabetic Living (USA) - - Contents - WRIT­ING CINDY KUZMA

How to bud­get for next year’s health care costs

We know bud­get­ing isn’t the most ex­cit­ing ac­tiv­ity. But tak­ing time to crunch the num­bers once a year puts you in the driver’s seat of your health care spend­ing and has the po­ten­tial to trans­late to ma­jor sav­ings.

“With the ris­ing cost of care, un­der­stand­ing your po­ten­tial out-of-pocket cost is im­por­tant,” says Carolyn McClana­han, M.D., CFP, a physi­cian and cer­ti­fied fi­nan­cial plan­ner with Life Plan­ning Part­ners in Jack­sonville, Florida. It can help you avoid sticker shock and en­sure you have the funds to get the care you need, she adds. So find some time, grab a pen and pa­per, and fol­low these steps to take a look at the year ahead. Your first step is to get a sense of your es­ti­mated an­nual ex­penses. What you’ve spent in pre­vi­ous years can guide you, says Me­lanie Tes­lik, M.S., RN, BC-ADM, CDE, a di­a­betes nurse ed­u­ca­tor at NYU Winthrop Hos­pi­tal in Mi­ne­ola, New York. Gather your past year’s worth of state­ments from your in­surance com­pany, bank, and credit cards. Look at your in­surance plan to see if you met your de­ductible. Then to­tal the fol­low­ing cat­e­gories to get an es­ti­mate of your yearly spend­ing.

1. IN­SURANCE COSTS

Mul­ti­ply your monthly pre­mium (the amount you pay each month to have in­surance) by 12 to get your yearly cost. Add to that your de­ductible (the amount you must meet be­fore your plan kicks in). Also note your out-of-pocket max­i­mum (the most you’ll have to spend each year) as well as your co­pay­ments (set amounts you pay per med­i­cal visit) or coin­sur­ance (your share of a bill).

2. DOC­TOR’S VIS­ITS

Tally them—say, four to your fam­ily doc­tor or en­docri­nol­o­gist, one to the oph­thal­mol­o­gist, one to a nephrol­o­gist or car­di­ol­o­gist. Es­ti­mate the cost based on your de­ductible and, af­ter you’ve spent that amount, your co­pay­ment or coin­sur­ance for each visit.

3. PRE­SCRIP­TION & OVERTHE-COUNTER DRUGS

Ask your phar­ma­cist for a print­out of your med­i­ca­tion ex­penses from the past two or three years to get a sense of which direc­tion costs are headed, rec­om­mends

Di­a­betic Liv­ing ad­vi­sor Marty Irons, RPh. Then look at what you ex­pect to need this year. Be sure you un­der­stand what’s cov­ered un­der your 2019 plan—dough­nut holes and all—so you’re not blind­sided by changes in cov­er­age, adds Irons.

4. PLANNED PRO­CE­DURES

If you’re sched­ul­ing any one­time pro­ce­dures, such as cataract surgery, add in those costs. Call your doc­tor’s of­fice or hos­pi­tal to get an es­ti­mate.

5. SUP­PLIES

This cat­e­gory in­cludes your in­sulin pump, glu­come­ter, and lancets. It also in­cludes any other health sup­plies, such as shoe in­serts, ban­dages, hear­ing aid bat­ter­ies, and saline so­lu­tion for con­tacts. Check your plan de­tails to see what your in­surance will cover—for ex­am­ple, your plan might only cover a lim­ited num­ber of blood sugar test strips, Tes­lik says. And check the list of el­i­gi­ble ex­penses for your FSA (flex­i­ble sav­ings ac­count) or health sav­ings ac­count (HSA) to make sure you fac­tor in all costs. (Be aware: un­spent FSA funds may be lost at the end of the year—so stock up by your dead­line!) Once you’ve found your es­ti­mated yearly to­tal, fol­low these steps to cre­ate a sav­ings plan.

1. DI­VIDE YOUR YEARLY TO­TAL BY 12

This can give you a ball­park idea of what you will be spend­ing (and should be sav­ing for) each month. Note that you might spend more in some months (for in­stance, Jan­uary through March, be­fore you meet your de­ductible). Ac­count­ing for this can help you know when you’ll need cash on hand to cover these ex­tra ex­penses.

2. LOOK AT YOUR CASH FLOW AND SAV­INGS

Do you have enough cash on hand to set aside your full yearly to­tal? Can you also set aside some ex­tra to cover emer­gen­cies? If you can’t set this aside all at once (many peo­ple can’t), look at how you will cover your ex­penses each month. How much of your monthly ex­penses will you cover with your in­come and how much with sav­ings?

If you want to work to­ward a long-term sav­ings goal, McClana­han sug­gests aim­ing to save about one year’s worth of your out-of-pocket max­i­mum. Of course, that isn’t al­ways pos­si­ble—but work­ing to save what you can while re­duc­ing ex­penses ( see box, right, for ideas) still leaves you in a bet­ter po­si­tion fi­nan­cially.

3. STASH THIS CASH IN YOUR HSA OR FSA, IF YOU HAVE ONE

These ac­counts let you pay for health ex­penses pre-tax. De­pend­ing on where you live, this could help you save around 25 per­cent in po­ten­tial taxes, says Scott Riordan, vice pres­i­dent of health & wel­fare ser­vices at Sen­tinel Ben­e­fits & Fi­nan­cial Group in Wake­field, Mas­sachusetts. No FSA or HSA? Use a sep­a­rate sav­ings ac­count or money-mar­ket ac­count.

4. CON­SIDER WHETHER YOUR CUR­RENT HEALTH PLAN

STILL WORKS

Fi­nally, look at all your in­surance op­tions. Would you pay less over­all if you switched to a higher-de­ductible or lower-de­ductible plan? If you have Medi­care, does a sup­ple­ment or Medi­care Ad­van­tage plan make sense? If you need some help, ask your doc­tor, a cer­ti­fied di­a­betes ed­u­ca­tor, or a cer­ti­fied fi­nan­cial plan­ner to help you eval­u­ate your op­tions.

De­ductibles can make es­ti­mat­ing a yearly to­tal tricky. You’ll likely need to count the to­tal cost of of­fice vis­its, pro­ce­dures, and pre­scrip­tions be­fore you meet your de­ductible. Af­ter your de­ductible, you’ll only need to count your co­pay or coin­sur­ance.

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