Medical Expenses

By Kaitlyn Szabo • October 16, 2019

For far too many people, receiving medical care leads to a financial nightmare. Medical debt is a pervasive challenge for families in the United States, and our current healthcare system is inaccessible and unaffordable for thousands of low-income earners. 

Yes, this crisis is daunting, but there are small action steps you can take to negotiate medical bills today and manage medical expenses in the future.

Negotiate Medical Bills

Often, you can negotiate reasonable repayment plans to reduce costs. Here’s how:

• Ensure the charges are correct by confirming you received everything listed.
  • Learn about medical billing from the Office of the Minnesota Attorney General
• Set up a payment plan. Explore low- or no interest or income-driven options.
  • Ask about billing charges, fees, or a prompt pay discount.
• Apply for financial assistance, either through Medicaid or the health provider.
  • Here is an additional list of resources to explore for further assistance.

Open a Health Savings Account (HSA)

Many health insurance companies and financial institutions offer a Health Savings Account (HSA). With an HSA, an individual can set aside money pre-tax through a payroll deduction or post-tax on their own for qualified medical expenses.

• Funds roll over year-to-year and remain even if you switch insurance, jobs, or retire. 
• An HSA can be used for your dependents, even if your plan does not cover them.
• Find an option that works for you at HSA Search.

An HSA can be used to cover expenses not covered or reimbursed by insurance. Qualified medical expenses include deductibles, copayments, and other items under IRS Pub. 502.

• Premiums and expenses incurred before establishing the account do not qualify. 
• Qualified distributions are not taxed. Keep your receipts with your tax records.
• Non-qualified distributions will result in owed taxes and potentially a 20% penalty.

HSA Eligibility

You will need to enroll in an “HSA Eligible” High Deductible Health Plan (HDHP). Individuals, their family, or their employers can contribute to an HSA. Contributions by individuals are tax-deductible. Employer contributions may reduce taxable income.

• In 2019, the max contribution for individuals is $3,500 and is $7,000 for a family.
• In 2020, the max contribution for individuals will be $3,550 and $7,100 for a family.

Is an HSA the right fit?

One good thing about an HSA is that they offer tax-advantages which can be particularly helpful in retirement. However, if you are struggling to get by month-to-month or cannot afford a high deductible, this may not be the best option.

If you decide that an HSA is not the right fit for you, we still encourage you to evaluate your current savings plan for medical expenses.

• Set a goal to save enough money in a savings account to cover your deductible.
• Practice a new money mindfulness tactic to reduce your anxiety about health costs.
• Know your rights as a consumer so that you can advocate for your needs.

Money Management E-Newsletter: September 2019