Investing In Your Life: 4 Ways to Take Control of Health Care Spending
by Judy Martel
July 17, 2014
When people think of investing, they typically think about the number-crunching that goes along with building a financial plan. But an important part of investing in yourself and your future involves health care planning. The benefits of remaining healthy will show up in your wallet in the reduced need for care.
Prevention Is the First Line of Defense
"Nearly two-thirds of health care dollars are spent on chronic illnesses that are preventable," said Devon Herrick, a health economist and senior fellow at the National Center for Policy Analysis. "If you eat right, exercise, don't smoke, drink in moderation and generally take care of yourself, that's going to be your most effective yet cheapest intervention, vs. saying, 'I'm going to live the life I want,' get a lot of medical screenings and take a lot of drugs; well, that’s not a good investment. In fact, it’s probably a horrible investment."
Herrick said that research shows most medical screenings do not save money in the long run. “You simply have to screen too many individuals to find illnesses like cancer.” Yet, while there are no statistics specifically on what preventive care saves an individual in medical costs, at a minimum it delays the need for care—possibly for many years.
But beyond the basic preventive care of eating well and exercising, you also need to practice preventive care with your insurance, by working up front to better manage your costs. Here are four recommendations for becoming a smart health care consumer:
1. Understand your insurance coverage. The difference between in and out of network can have a big impact on what you pay. And what is in and what is out is not always clear. Andrew Kravit, the president of Kravit Estate Holdings, was thrilled over the impending birth of his second son. But marring the otherwise joyous event was some unwelcome and unexpected financial news.
“My wife had some blood work done at a lab, and when she went back for the second round, they asked her for a $1,900 balance from the first visit,” Kravit said. After contacting the insurance company, he discovered that the lab the doctor sent her to was not within the Kravits’ insurance network, and the tests were considered optional and therefore not covered. Kravit was on the hook for the entire balance.
“No one had ever explained to us that because it was optional, it wouldn’t be covered,” he said. “I knew we had already met our deductible, so I didn’t ask the question, and they didn’t volunteer the information. It was a misstep for sure, but now we know to check beforehand.”
2. Pay attention to location. Costs for services can vary greatly depending on where you go. If you don’t do your homework ahead of time, you could suffer a big bite to the wallet, Herrick said.
Herrick recently spoke with a woman who was ordered to get a CT scan by her doctor and sent to the facility in the same medical center. Later, she was socked with an unexpected bill for $2,700. “She had no idea that prices vary,” he said. After asking a few questions, she discovered there was another clinic within walking distance that charges less for CT scans. “She went there for the second test, and it cost $435, vs. $2,700 the first time.”
Herrick advises avoiding hospitals for routine tests and labwork if there is an alternative location. “Hospitals are the worst possible places to get medical care [in terms of charges],” said Herrick. “They have a different billing system that is more expensive.”
3. If you’re healthy, consider saving on insurance premiums. Kathy Andio, a fitness instructor, takes care of herself and rarely goes to the doctor. Because she is healthy, she purchased an inexpensive, catastrophic-coverage insurance plan under the Affordable Care Act that keeps her monthly premiums to a minimum.
With her type of plan, Andio will pay most routine health care costs out-of-pocket, but she doesn’t expect that to make much of a dent in her finances. “I never go to the doctor because I don’t need to,” she said. “I eat well and exercise regularly; I haven’t eaten sugar in probably 10 years.”
Herrick believes the popularity of tax-preferred Health Savings Accounts, or HSAs, will increase under the Affordable Care Act. When combined with a high-deductible plan, the consumer gets a significant tax break on qualified medical costs, plus a lower health insurance premium on the policy.
The HSA allows individuals to put aside money, up to $3,300 for an individual in 2014, in an account that can be used for medical costs. Unused money rolls over into the next year. “I don’t go to the doctor that often, and my HSA has $21,000 or $22,000 in it,” Herrick said.
4. Investigate payment options. Herrick said if doctors think your insurance will cover everything, they will order tests or make recommendations for care differently than if you are paying any or all of the costs out-of-pocket.
“If you let the doctor know you are price sensitive because you have a high-deductible plan or a high out-of-pocket cost, they might give you options for care or change their recommendation,” he noted.
It’s also possible to negotiate fees with some health care providers if you pay cash up front, but you have to be persistent, Herrick said. “There are the published cash prices—which no one pays—and then there is the cash price you are able to argue and negotiate.”
Herrick also recommends accessing online tools such as HealthcareBluebook.com and ClearHealthCosts.com to research prices before a major procedure. Once you plug in your ZIP code, you can get an idea if you are paying a good price for services.
As the health care system evolves and the Affordable Care Act takes root, consumers will find life is more complicated when it comes to health care, said Herrick. But if you take the time to ask questions, do a little research, shop around and choose the right insurance plan, it could make a big difference in your bottom line. “Act like a consumer, as opposed to acting like a passive patient,” he said.