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Although you may be at the peak of health right now, unexpected medical conditions can develop quickly — and costs may start to spiral out of control. According to the Kaiser Family Foundation, more than one-quarter of U.S. adults struggle to pay their medical bills, a figure that includes the 62% of those who have work-sponsored or independent health insurance. Around 40% of Americans racked up medical-related debt in 2014, and medical debt is also the number one reason for filing personal bankruptcy in the United States. And considering that 69% of Americans have less than $1,000 in savings and 34% of Americans have no money saved in the bank, it’s no surprise that one ill-timed emergency room visit or unexpected surgery could derail your finances. However, there are ways to plan ahead and ensure you aren’t paying more than necessary for medical bills.
Create a Budget
First thing’s first: if you don’t currently have a budget — or your existing budget doesn’t allow you to put away any savings — you’ll need to change that. Unfortunately, many Americans lag behind when it comes to financial literacy. According to a report from the Organization for Economic Corporations, 18% of American teenagers never reach “proficiency” levels in financial literacy. So if you’ve never created a budget before, where do you start?
You’re going to need to know exactly how much you’re spending on the necessities and assess where you can cut back on extras. Be sure to track all expenditures to keep things from slipping through the cracks. You’ll likely need to drastically reduce leisure activities, eating or ordering out, how much you pay for cable or video streaming, and spontaneous orders on Amazon. You may also want to take a look at your utility bills to determine if you might have missed overcharges there. For instance, insulating your attic properly could save you 10-50% on your heating and cooling bills and prevent roof repairs, which means you could be saving more on a monthly basis than you might think. If you need to bring in extra income in order to save, you may want to think about selling some items you own on eBay or the Facebook Marketplace, getting a side hustle, or even downsizing your living space. While making these sacrifices won’t exactly be pleasant, you might find that being less anxious about your financial situation will be well worth it.
Start an Emergency Fund
Now that you’ve got a handle on your budget, you can open an emergency savings fund and start depositing money. You may want to consider having this account be online only, as this can ensure the money is accessible in an emergency but won’t allow you to be tempted to use these funds for other means. You can set it up so that a portion of each paycheck is distributed to this account or that there’s an automatic transfer made there from your checking account every month. Start small, but start to add to the amount whenever you can. You may want to consider putting your tax refund or yearly bonus into this fund, as well. Ultimately, you’ll want this account to have enough to cover three to six months’ worth of expenses, at the least.
Get to Know Your Insurance Plan
Before you have to seek out medical treatment, it’s a good idea to become very familiar with your health insurance plan. You’ll want to know exactly what your deductible is, if you have a co-pay or co-insurance, what your out-of-pocket maximum is, and which providers and doctors are within your network. This will allow you to get a better idea of what you might owe in different situations and which medical providers will drive up your costs. If you aren’t able to see your own in-network physician, it’s a good idea to go to an urgent care facility in lieu of an emergency room. After all, 85% of urgent care facilities are open seven days a week. However, before you go to the closest urgent care center, you should do your research and make sure that this facility actually accepts your insurance. Because the urgent care market is now highly fragmented, it’s easy to mistake a freestanding ER for an urgent care center or assume that an urgent care center has a relationship with your insurance provider; you may not realize your error until you get the bill, so you’ll want to figure out this information before you actually need to use it.
Ask For Itemized Bills and Lists of Charges Upfront
If you are planning to have a surgical procedure performed and want to make sure you actually have the money in your emergency fund to cover it, you should ask the hospital for a complete list of charges before you get on the operating table. That way, you’ll have a clear picture of your financial obligations and may even be able to negotiate costs ahead of time. Whenever you receive medical treatment in an emergency situation, ask for an itemized bill. In some cases, this can allow you to catch errors and negotiate on costs if you feel there’s been a mistake made. That’s not the case every time, but it’s still a good idea to have a clear understanding of exactly what your treatment was worth.
Freeze Your Account
If you happen to be hit with a particularly large bill and even your emergency fund can’t cover everything, don’t panic. You should be able to ask your provider to “freeze” your account to allow you more time to pay. When this is done, your provider can’t collect payment or turn the account over to creditors for a specific amount of time. You may be able to ask for a six-month delay. In other cases, you may be able to work with the medical facility on a payment plan that can give you some breathing room and extra time.
Medical emergencies are already stressful enough without having to worry about the costs. By taking the time to prepare for these unexpected events in advance, you should be a lot less stressed and be ready to take on these challenges.