How Much Healthcare Will Typically Cost You During Your Life
It goes without saying, but we'll say it anyway: Healthcare is expensive and the stress caused by healthcare costs is probably making a lot of us even sicker. When you find out how much healthcare will cost you over your lifetime, you may find yourself wanting to book a cardiologist appointment STAT—because chances are it's a lot more than you think it is, even if you're healthy.
While even patients with insurance can find medical costs overwhelming, to say the least, there are some options to make healthcare expenses at least somewhat less debilitating and daunting.
Finance expert, HerMoney columnist and author Jean Chatzky talked with Parade about healthcare spending throughout our lives, plus great tips on how to better plan for medical expenses, including emergency medical bills for unexpected illnesses and injuries.
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Let's rip off the band-aid: How much will healthcare cost the average person over a lifetime?
People don't think ahead of saving for their healthcare expenses. Using the $2,100 figure over a lifetime from the Synchrony Lifetime Healthcare costs study, the average person can expect to spend more than $320,000 including insurance premiums and out-of-pocket expenses over their lifetime.
That sum is a college education, that is many houses, that is multiple cars, and although we save for things like college education and houses and cars, we don't usually save for health expenses.
As a result, what we find is that many adults delay recommended medical procedures.
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Can you tell us about the difference between expected medical costs versus actual medical costs?
This was documented by research in the Life of Healthcare Costs study: Like many things, people think they spend less on healthcare than they actually do. They took a look at insured Americans who have a health plan and found they're underestimating their cost of care by 145 percent each year. To put that in dollar terms, the respondents to this survey said they believe they are spending $850 on healthcare annually, not including healthcare premiums, but they're actually spending around $2,100.
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That's a big discrepancy. How can patients better predict how much they'll spend on medical expenses per year?
What you've spent in the past is a pretty good marker for what you'll spend going forward. This is particularly true for the people who have the same medical issues year in and year out, so take a look backward at things like allergies, diabetes—those types of healthcare costs from previous years, both reimbursed and unreimbursed. Unless you're tracking those costs, we know that you probably don't have a very good idea of where your resources are going.
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What are some smart ways to save for routine healthcare costs?
One suggestion is to open a separate savings account for those health expenses. An HSA would be one of those accounts. The amount that you can contribute to an HSA in 2023 is $3,850 for individuals or $7,550 for families. People 50 and over can make an additional catch-up contribution of $1,000. You do what you can. Let your prior health expenses be your guide and you should understand that delaying medical procedures often winds up in bigger expenses down the road.
It's kind of like the 'clean our gutters' of finances—if you don't clean your gutters, you are going to wind up with problems that end up in expensive flooding in your basement. If you don't plan for your medical expenses, you'll cost yourself tens of thousands and sometimes hundreds of thousands of dollars.
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For whom do you recommend health savings accounts (HSAs) specifically?
I recommend HSAs for people for whom a high-deductible health plan is the right choice. You qualify for HSA by purchasing a high-deductible health plan. These tend to be best for people who don't have a ton of medical expenses and chronic conditions, as well as for anyone who can't afford a more expensive health plan. They tend to be the most economical on the market.
If you have an HSA, you should absolutely think about using it as a powerful financial tool, where you can save 25 percent on current health expenditures. If you don't need all of the money in it, you can invest it. There are a lot of tax incentives for HSAs.
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Can you explain the difference between HSAs and FSAs?
There is a lot of confusion between HSAs and FSAs. Flexible spending accounts (FSAs) are use-it-or-lose-it accounts, health savings accounts never have been—you put money in, regular contributions like you do for a 401K, use whatever money you need to, and invest the rest. Save all your receipts so that down the road in retirement, if you've paid for health expenses out of current cash flow and not HSA, you can pull that money from HSAs and not get taxed on that.
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Synchrony Bank
What are some easy ways to keep track of medical expenses?
There are so many! You can use pencil and paper. It's easy if you have access to your healthcare provider online because they'll make those records accessible for you. You can use Mint or You Need a Budget. If you pay your medical bills through a health savings account, you can use that as your record.
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What if someone has an unexpected medical emergency? Those can be really expensive, especially if ambulances are involved.
If you have an emergency savings account, this is an emergency! I'm always struck to see people who don't want to pull money from their emergency savings accounts even in an emergency.
You can use credit cards. Care Credit offers financing as a way to pay over time for medical procedures, and often, if you make your payments during the window of time they give you, you won't have to pay interest. Definitely read the agreement, because you need to pay it off during that window in order to not pay interest. There is, I believe, a credit approval process. Prequalification runs a soft check to let you know if you'll be approved, if you move forward it'll count as a hard check on your credit report.
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What sorts of accounts work best for emergency funds?
Generally, I recommend high-yield savings accounts as a place to keep those emergency funds. You'll want an account with an interest rate of 4 percent or more.
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Medical debt is a leading cause of bankruptcy in the United States. Are there any alternatives you recommend for those worried about soaring medical costs?
As of April 11, 2023, medical debt under $500 will be removed from credit reports. That will really remove the lion's share of medical debt from people's credit reports, as 70 percent of people with medical debt have it for $500 or less.
Often, I think consumers don't want to talk about what the number is going to be before they have the medical intervention or procedure. We should be asking questions about how much something is going to cost and then using the information that is publicly available from the Healthcare Bluebook to shop around. Shopping around is necessary for this day and age, and if you then can't afford it, you can look into payment plans before you go through with a procedure. You can often reach out to the area agency on aging to see if there are resources there that are available to you, qualifying for Medicaid in certain circumstances.
Always look at your medical bills, particularly those from the hospitals, because there are often line items that don't belong to you.
You can't use an HSA and FSA simultaneously, but if you have a regular health plan, using an FSA to pay for non-covered medical expenses allows you to pay for those things with pre-tax dollars, so you're saving 20 to 30 percent on them. So if you pay $700 on contact lenses, or you have braces for your kids, that's huge savings.
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What should a patient do after the fact if they get a huge and potentially unexpected medical bill?
Getting your hands on the Healthcare Bluebook is a good place to start. There are healthcare advocates that make a living of looking at bills and parsing through them to see what is a viable charge and what is not.
The first thing that you need to do is get in touch with your insurance company. Don't avoid your insurance company. Get on the phone, and explain what happened. Then, if you feel like you're at a loss, you can often talk to a social worker at the hospital or medical center who can help you get in touch with a healthcare advocate.
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What other advice do you have for managing medical and healthcare costs?
People should set aside what they can. Consumers have a lot of different financial responsibilities, and when we look at the level to which people are contributing to their retirement, to 529s for their kids, this is another thing you have to save for. We know that people are often not maxing out in those other categories. You should try to do what you can if you can put away something. If you get a big fat tax refund, or a bonus, stash some money away.
I also don't want to soft-pedal the advice about how important it is to stay healthy. I wrote a book called Age Proof with a doctor, Mike Roison, about the intersection of health and finances. There is this mistaken belief that all of our healthcare spending goes to pay for our oldest people in the last years of our life.
In reality, 70 percent of our healthcare spending goes to paying for chronic conditions. If you avoid toxins, cigarette smoke being the biggest, if you get up and move—10,000 steps a day is a great start—if you eat foods that you love that love you back and do what you can to reduce stress, whether that's yoga or a bubble bath, you're going to go a long way.
