Medical coverage is likely the most important aspect of financial planning. Healthcare expenses can be unpredictable and even with some form of insurance, emergency medical expenses can put a huge burden on your finances. To plan for medical coverage, you need to evaluate all of your medical insurance options, set aside money to pay for any out-of-pocket medical expenses, and determine what your long term medical expense needs will be, especially if you are planning to retire. The purpose of creating this medical coverage plan is to establish a method of accessing quality care without putting a huge burden on your financial resources when you get sick or injured.
1. Determine What Medical Coverage Options Are Available to You
When creating a plan for medical coverage, it’s extremely important to understand the various forms of medical coverage available to you. There are many factors that affect the types of medical coverage you’ll qualify for including your age, where you live, whether you’re employed, and what kind of job you have.
Some common types of medical coverage include:
Employer sponsored medical coverage; often less expensive than purchasing individual coverage because the employer pays a portion of the premium.
Government programs; for example, Medicare and Medicaid, and other state programs.
Individual medical coverage; for people that are self-employed, do not work for a company that offers medical benefits, or simply prefer to purchase individual coverage. While often more expensive, individual coverage allows you to choose the provider network, deductible, and copay structure that suits your personal needs and budget.
It is very important to identify the most cost-effective medical coverage program that provides adequate protection for your healthcare needs.
2. Establish a Budget for Uninsured Expenses
Even though you may have medical coverage, there are still many medical expenses that will not be covered by your policy. These uninsured medical expenses, such as copays, deductibles, and uncovered medical services, can quickly add up to a large amount. Therefore, you should make sure to factor these expenses into your overall financial plan.
There are several methods to handle out-of-pocket expenses:
Review your insurance plan’s terms: Know exactly what medical services are included under your plan, and what is not.
Open a Health Savings Account (HSA): If you are eligible, an HSA is a great way to save for medical expenses using tax-free dollars.
Create an Emergency Fund: Building an emergency fund to cover unexpected medical expenses will keep you from having to go into debt when medical emergencies arise.
Budgeting for your out-of-pocket medical expenses now will give you the peace of mind that you will be able to afford the medical care you need when you need it.
3. Plan for Long-Term Healthcare Needs
Your medical needs can change significantly over time, especially as you grow older. Therefore, it’s critical to plan for not just your present medical expenses, but also for future needs, including long-term care, and managing chronic illnesses.
You should consider the following:
Long Term Care Insurance: LTCI is designed to cover the costs associated with nursing homes, assisted living facilities, and in-home care.
Retirement Medical Expense Costs: As you begin to prepare for retirement, it is important to understand how to pay for your healthcare costs, especially as you grow older.
If you take the time to plan for future medical expenses, you will ensure that you will have the medical coverage needed to live comfortably and with dignity, as you age.