As a pharmacist who’s job is a little different from a traditional pharmacist and who works to help control drug costs for a healthcare organization, I’m acutely aware of the high cost of healthcare in the US. Healthcare costs have rapidly increased over the years and currently outpaces both inflation and wage growth. The rising cost of drugs is a major reason for this increase in costs, but other factors like increase in cost of hospitalizations and medical devices also play a role.
It can be quite disheartening to see people paying an arm and leg to get the healthcare they need, especially the sick and elderly. But on the flip side there are definitely people wasting healthcare dollars by doing things like demanding the brand name medication when the exact same drug is available as a generic. For those of you insisting on getting the brand name medication even when the exact same generic exists, the drug companies (i.e. Pfizer, Gilead, Merck, Otsuka, etc.) thank you for making them rich.
As the rising cost of healthcare is shifting ever more to the individual over employers or even the government, learning to save on your healthcare costs is a good investment of your time and energy. Read on below for some simple ways to save on healthcare costs.
- If you have access to a Healthcare Flexible Spending Account (FSA), fund it. A healthcare FSA is an employee benefit that allows you to set aside a portion of you paycheck before taxes to pay for healthcare related expenses such as deductibles, copays, glasses, dental work and variety of other things. Check your own FSA plan administrator list probably available on your HR website but here’s a list from the IRS and an easier to read version on DiscoveryBenefits.com. It’s probably one of the more under utilized employee benefit when available, I think because most people don’t really understand how it works. The money you set aside into a healthcare FSA is pretax money which not only lowers your taxable income and therefore your overall tax bill, it also escapes payroll taxes such as Medicare and Social Security tax so saves you on those taxes as well. The major con of FSA’s is the IRS “use it or lose it” rule, which means you have to use up all the money by the end of the calendar year, usually December 31st. Some employers may offer a small grace period, but don’t be surprised if yours does not. The maximum contribution limit for 2016 is $2550. You can read a little bit more about FSA’s in my post Save Money with FSA’s.
- If you have access to a Health Spending Account (HSA), consider funding it. An HSA works very similarly to a FSA but deciding to fund one is a bit more complicated since it requires you have a high deductible health plan (HDHP). HDHP has lower premiums but a higher deductible, for 2016 the IRS requires a deductible of at least $1300 for an individual and $2600 for a family to qualify as a HDHP. This translates into possibly higher out of pocket expenses for you (and your family) until you reach the deductible. While you can use the money you put into a HSA for medical expenses you incur now like you can with a FSA, the more desirable strategy is to think of a HSA as a healthcare IRA for use in retirement. HSA’s receive a unique tax treatment which allows the owner to contribute pretax money, grow that money tax-free and then later withdraw the funds tax-free if used for qualifying medical expenses. It’s a triple-tax advantaged account and receives tax treatment like no other investment account. Also, unlike a FSA, the funds in a HSA do not expire but is rolled over year to year. It also has access to a wide variety of investment options like an IRA would. To best maximize a HSA you should try to contribute the maximum yearly limit ($6500 for 2016) and let the money enjoy tax free growth and use the funds in retirement where it’s estimated most couples will easily spend $220,000 on healthcare. Ouch.
- Whenever possible, use generic medications and formulary medications. In general, you will likely save money by choosing to be on a generic medication and/or formularly medication. If your doctor ends up prescribing you an expensive medication, don’t be afraid to ask the pharmacist if there’s a cheaper alternative that the doctor can switch too. A lot of doctors have no idea how much medications cost and to make matters more complicated, the prices of drugs can fluctuate and change over time. A medication that was once very cheap, can suddenly become very expensive. Pharmaceutical companies have been known to buy the manufacturing rights to a drug that isn’t used much and then increase the price by 300% to 500%. Remember, when it comes to medication, generic or cheaper medications do not mean inferior quality or efficacy. Educate yourself and don’t be swayed by fancy direct to consumer drug commercials on TV and in magazines.
- Become familiar with your health plan and formulary. Again, in general being on a formulary medication will likely save you a lot of money vs. being on a non-formulary medication. Most major health plans have a formulary which you should be able to access on their website. Keep in mind the formulary may differ based on what kind of insurance you have and where you are located (i.e. California vs. Georgia). Here’s a link to Anthem Blue Cross Blue Shield’s formulary page as an example. Unfortunately, healthcare insurance is SUPER complicated, but you don’t have to understand every aspect of it to navigate it. Additionally if you have a chronic medical condition(s) for which you take specific medications, you should become familiar with what’s covered on your formulary, preferably before you pick it.
- If you need to be on a specific medication that is expensive, shop around. You should definitely do this if you have to pay mostly out of pocket for the medication. Different pharmacies are able to contract different prices for medications and different manufacturers, meaning Target pharmacy may have a cheaper price on drug X than CVS pharmacy. Don’t forget to check places like Costco, Kaiser and look online. Same is true for over-the-counter (OTC) medications. If you take an OTC medication fairly regularly and have a FSA, ask your doc for a prescription so you can submit it for reimbursement through your FSA.
- Practice preventative medicine through regular check-ups, keeping a healthy body weight, regular exercise, good sleep hygiene, eating a healthy diet, and getting routine vaccines. In my job, we often refer to something we call the three footstools of health which are sleep, diet and exercise. The idea is that taking good care of these three aspects of your life will be the foundation for good health. So start by making sure you have good sleep hygiene and are aiming to get 7-8 hours of sleep a night, eating a healthy well-balanced diet and getting regular exercise at least 3-5x/week for 30 minutes a day. Of course it’s really hard to be able to do all this everyday but aim for 80% of the time. In general it will cost you a lot more if you get sick than if you invest some time and money into prevention.
- Don’t go in for everything that ails you and on the opposite end of the spectrum don’t avoid going to see your doctor for years and finally show up when you’re very sick. I was watching a Korean drama recently where the main character gets a cold from getting water thrown on her earlier in the day (on a totally random note, it’s a huge pet peeve of mine how Koreans always think you get a cold by being cold or getting wet. Colds are caused by viruses! Don’t try to convince my mom or any other older Korean lady though). Anyways, of course she develops a fever and chills (which is actually very rare with colds therefore implying she somehow got the flu? Which is caused by a virus too by the way). The hero then tries to rush her to the hospital. Incidentally, she recovers fully by the next day. End of random example So I went off on a tangent here, but my point is don’t go to the doctor and especially not the emergency department for every little thing that ails you. And on the flip side, don’t avoid going to the doctor for years and years and until you have to amputate your foot from undiagnosed diabetes. True story for diabetics by the way.
- Avoid the emergency department (ED) unless it’s really an emergency. ED visits are generally the most expensive type of medical visit and should be reserved for true emergencies. As a bonus, you usually also have to wait hours to be seen. Yay (sarcasm for those who can’t tell from the printed words). I think the average wait time to be seen in an ED when you’re not dying from a gunshot wound or stroke is like 4 hours or something like that. Instead check to see if you can visit an urgent care clinic many of which are open pretty late. Other options could be to make a same day appointment or have a telemedicine appointment for that rash or persistent cough. Now if you’re having chest pain with pain radiating down your left arm or your exsanguinating blood from somewhere in your body, then please go to the nearest emergency department or call 911!
- If you are young and healthy and have no dependents, probably pick the cheapest healthcare coverage and/or premiums available to you. Do the math and consider a high deductible health plan (HDHP). Then you can also fund an HSA (see #2 above).
- If you incurred a lot medical expenses during the year, exceeding 10% of your adjusted gross income (AGI), for example due to a major illness or surgery, look to see if you can deduct it from your taxes. It’s pretty hard to qualify for this tax deduction because you have to exceed 10% of your AGI and that’s a high threshold. Still, maybe one year your AGI was low because you were unemployed for a part of the year or you did incur some major medical expenses, then you might qualify. You also have to itemize your deductions to claim the deduction and it’s only the unreimbursed medical expenses exceeding 10% of your AGI that can be deducted. So for example, if your AGI is $100,000, the first $10,000 of medical expenses can’t be deducted. Only the expenses exceeding $10,000 can be deducted. However, you could use a healthcare FSA or HSA to pay for the medical expenses you can’t deduct.
- Ask a lot of questions to your healthcare providers. If your doctor tells you go get some lab work done, ask what it’s for and if you really need it. If your doctor prescribes you some medications, ask what they are for and if you really need it. If your doctor tells you that you need some procedure, ask what it’s for and if you really need it. You get the picture right? I’d say a fair amount of labs, medications and even procedures ordered aren’t truly necessary. I’ve personally refused to perform some specific lab work or pick up certain medications after I asked questions and did some research on my own. I’m definitely not advocating you don’t listen to what your doctor or pharmacists tells you but rather to make informed decisions. So before you dutifully stick out your arm for a blood draw at the lab or pick up the slew of meds ordered for you at the pharmacy, ask what it’s for and if you really need it. Similar to finance, the more you know, the more you should be able to cut the excess and stick to what you really need.
- Marry someone in the healthcare field. I’m half-joking, but seriously this will save you a lot of money on healthcare costs. First, people who work directly in healthcare usually get really good healthcare coverage for super cheap or free. I get comprehensive healthcare insurance for myself and my family completely free as part of my benefits package. Had I purchased a plan for a family of 4 through the California marketplace, I’d be paying roughly $1500/month for comparable coverage or $18,000/year or if we were to go through my husband’s work benefits, we’d be paying ~$600/month to cover our family. Also, those of us who work in the healthcare field can better filter what’s necessary and what’s not and find way to save on costs. We also tend to have friends or colleagues in healthcare who can get us discounts on everything from medical procedures to glasses to dental work.
So there you go, some simple ways to save on healthcare. Well, hopefully simple. ?? Hopefully you were able to pick out at least one or two items that could help you save some money. If you have any other good simple or not so simple ways to save on healthcare costs, share with us below in the comments!