1. Not having an emergency fund
Even the most experienced budgeter can’t predict the future, so having an emergency medical fund is important. This is especially relevant if your health insurance plan has a high deductible. Even though the Affordable Care Act (ACA) mandates that the maximum for out-of-pocket expenses be capped at $6,350 in 2014, you don’t want to find yourself unprepared to pay that if it is all billed at once. Use your deductible as a starting point for deciding how much to set aside.
Care can be expensive even with a comprehensive insurance plan. If you find yourself taken to an emergency room in an ambulance, for example, you may receive separate bills for the ambulance ride and your hospital stay. Depending on your insurance coverage, you could have two copays of $250 each. The determination of what counts as an “emergency” can be highly subjective depending on your insurer, so you’ll want to have a safety net.
Even if your insurance plan has great coverage and is completely paid for by your employer, there’s always a chance you could lose your job and find yourself needing to purchase new coverage. Having a separate emergency medical fund will ensure you and your family won’t need to dip into your savings for these costs—and is an important step in protecting yourself from medical bankruptcy.
2. Disregarding small items
It’s easy to forget things like bandages, vitamins, and over-the-counter drugs when budgeting for medical expenses. Some consumers lump medicine cabinet expenses in with grocery budgets, but since these costs are not as regular as food costs you’ll want to keep them separate—even that 99-cent bottle of rubbing alcohol. These items can add up and belong in your medical budget, no matter how trivial they seem.
Not sure how to track these sporadic, low-cost items? Start by taking an inventory of your medicine cabinet. List all items and the associated costs of your preferred brands, and how quickly your family goes through them. From there, you can calculate and incorporate monthly costs into your larger budget.
3. Not tracking past medical expenses
Keeping a record of your past year’s medical expenses is a great way to predict what you’ll face in the coming year and how to prepare for it. If you’re a seasoned budget-keeper, you already know some of the basics. Still, health costs run the gamut from aspirin to lab tests to insurance premiums, so even the most diligent consumers can leave out some details.
This portion of your medical budget is for recurrent costs like insurance premiums, copays and prescription costs, since your emergency fund is for rare events. Once you have a tally of your previous year’s expenses, use it as a jumping off point for how much to budget this year. Be sure to budget carefully for any additional planned procedures in the coming year, such as a hip or knee replacement or pregnancy.
4. Overestimating the power of free services
Take a good look at what your individual insurance plan covers so that you are clear as to how much care will cost you. Free preventive care has been touted for the past few months, but know that there is a difference between things that are essential health benefits and those that qualify as free preventive care—and that a ‘covered’ service isn’t necessarily free.
While it is true that many services are now free, it’s important to know the restrictions around preventive care services. Many of the no-cost preventive services are only available to high-risk adults, or adults over a certain age. Additionally, many preventive visits and screenings are only offered once per year, so don’t count on going more often unless you plan on paying. In order to know which costs you will be responsible for, consult your insurance provider’s summary of benefits.
Lacie Glover writes for NerdWallet Health, a website that empowers consumers to find high quality, affordable health care and insurance.