Americans are GREAT consumers…arguably the best in the world! In 2011, we spent almost 18% of the gross domestic product on health care – more than any other nation in the world! Then why are we SO bad at understanding our health care spending?
I recently spoke to a VERY smart women who told me she was embarrassed to say she had NO idea how much her recent surgery was. As consumer-driven Americans, I think we know HOW to be smart consumers, but we don’t apply our normal buying rules to healthcare. And why SHOULD we, when there are so many reasons not to? First, it’s a complicated system that most don’t fully understand. Then there’s the fact that pricing isn’t transparent – before having a procedure on my dog, I have a full menu of pricing. NOT so, with my own medical care. Finally, the end user (that’s you and me) isn’t paying for the service - instead “insurance is paying for it,” so why do I need to worry about the costs?
Here’s the main reason we all need to take notice. Health care costs are skyrocketing, insurance is covering less and we’re being forced to be smarter buyers. And, this is a big expense on your monthly budget line. In the last 3 years, healthcare costs are up about 30% with huge increases in out-of-pocket expenses. Have you had a 30% pay raise to fund that?
As Healthcare Reform comes into full swing over the next few years, we thought it would be good to offer up some money-saving tips you can apply now and into the future!
1. Stay Healthy
Says easy, does hard, right? Yes, but it’s SO true and it’s the #1 way to keep your costs down!
It is well-documented that obesity and lack of physical activity are the 2 biggest health risk factors in America today. And there are as many stats out there as calories in a Big Mac, but here’s one that sums it up pretty nicely: obese women rack up an extra $3,613 a year in medical spending. Yikes! That’s $300 a month! So, to recap: weight down + activity up = costs down.
2. Pair an FSA/HSA with a CDHP/HDHP
Sorry, I know that’s a lot of letters! Let me es’plain! Choosing a Consumer Directed Health Plan (CDHP) or High Deductible Health Plan (HDHP) can slash your annual healthcare expenses – they might be up to 50% less expensive than a traditional insurance plan. They have a higher deductible with more out of pocket expenses, so require more cost-conscious decisions. You should investigate this type of plan unless you have chronic medical issues that require more medical care and costs.
Some types of health insurance plans allow you to take advantage of a Flexible Spending Account (FSA) or Health Savings Account (HSA). These accounts allow you to sock away money from your paycheck BEFORE the taxes come out. For most people, that’s 25-30% more money. Then, the account can be used for allowable health expenses. It’s like getting a discount on your health expenses. I don’t know about you, but I like getting discounts on stuff I hate to buy! Today, only 13% of people are taking advantage of these accounts. They’re easy to set up and use, so check into this ASAP! Click here if you want to learn more about these accounts!
3. Know YOUR needs, so you don’t over-insure!
Today, most people get their insurance through their employers and are given 2 – 3 plan choices. In the future, with government subsidies and exchanges, it’s possible we will have MANY options. We won’t be able to use the advice my friend’s dad used to give: “just get the maximum amount of insurance available and you should be fine.” Probably OK advice 30 years ago when insurance was cheap!
Realistically, if you’re healthy, go to the doctor once a year for your check-up and a mammogram (both of which are now 100% covered under most insurance plans with Healthcare Reform), you may just need to have enough insurance for the random catastrophe (God forbid!). Buying more than that could be wasting your hard-earned money.
Start tracking how much you spend on your healthcare costs NOW! If you know your typical healthcare needs and expenses, it’ll be much easier to make the right choice for your health AND your wallet when reviewing a few plans this year (and potentially many more in the future).
Ready for more? Click here to see 3 more tips for controlling healthcare costs!