How to plan for health care costs

Medical expenses are a fact of life in the U.S. — so is the hardship many Americans experience paying those bills. A record $140 billion in medical expenses went unpaid last year, according to a recent study in the Journal of the American Medical Association.

But whether you're just starting your career or preparing for retirement, there are ways to plan ahead to cover health care costs. For those who qualify, look into a tax-advantaged Health Savings Account (HSA) or a Flexible Spending Account (FSA). HSAs are available to people with a high-deductible health plan.

"You own that, and you get to put pre-tax dollars there. It earns interest, and if you change employment you can take it with you," explained Dan Geltrude, an accountant and founder of Geltrude & Company. But FSAs are different. 

"It is pre-tax dollars. However, it's owned by your employer. It doesn't earn interest, and you must spend it within the planned year," he said.  

$300,000 in bills

According to a Fidelity Retiree Health Care Cost Estimate, an average retired couple in 2021 may need approximately $300,000 saved to cover rest-of-life health bills.

"That number is staggering. So what to do? Well, you need to start saving as early as possible," Geltrude said. "As the saying goes, Best time to plant a tree? Twenty years ago. Second best time is today. So start putting those dollars aside in anticipation of what costs you're going to have in retirement — especially for health care."

He also recommended staying in-network when seeking medical care to keep overall costs down. For patients who might find themselves stuck with a mountain of out-of-network charges, the No Surprises Act could offer some protection starting next year. 

Ultimately, Geltrude advised: "Don't just accept your medical charges as is. You're the consumer — you have the right to question these things." 

Review your medical bills carefully and check for unreasonable charges. You can also ask for financial assistance from health providers or opt into a monthly billing plan. "There could be some negotiating in those costs," Geltrude said.