From paying for prescriptions to covering co-pays, medical expenses can take an oversized bite out of your budget. In fact, nearly 1 in 5 Americans say that health care costs are a major financial burden.1
Health care costs are only expected to rise in years to come. Your best remedy: Reduce spending now while also preparing for future costs. Here’s how to do that.
1. Be proactive about preventive care. From immunizations and annual physicals to dental cleanings and cancer screenings, preventive care often comes at low or no cost. These services can unearth issues before they become a problem and help you to stay healthy, reducing medical expenses in the long run. “Take advantage of all the preventive care that comes with your plan,” advises Benjamin Isgur, Fidelity Investments’ vice president of health care thought leadership. “Don’t leave anything on the table.”
2. Do some homework on your health plan options. Researching health plans isn’t a scintillating experience for most people. But to make the most of your money, it’s important to understand each plan’s premium, in-network providers, deductibles, prescription coverage, and yearly out-of-pocket maximum. Keep in mind that you may need to make some tradeoffs. For example, higher premiums can come with lower deductibles while lower premiums can come with higher deductibles. Most health care organizations will provide online support tools to help you make the right decision.
As you review your options, consider your historical health care usage. “Obviously, the past is not always a predictor of the future,” says Isgur. “But looking at your use of prescription drugs, doctors, and hospitals can provide some breadcrumbs along the path to understand which might be the better health coverage choice for you and your family.”
Also consider any additional medical spending you anticipate in the next year that falls outside your historical spending patterns, such as pregnancy-related care.
To learn how to make the most of your annual benefits enrollment, read Fidelity's Annual Enrollment Guidebook.
3. Whenever possible, stay in-network. It’s most cost-effective to have health care coverage where your preferred providers are part of that plan’s network. If you go outside the network, you’ll likely pay a considerably higher out-of-pocket price. Before making appointments with new providers, confirm that they are in-network. This is especially important if you have a chronic condition and may be referred to specialists, says Isgur. “You might have 5, 10, or even 20 years of going to that doctor,” he says. If they’re out-of-network, those costs will quickly add up.
4. Consider an HSA. If you’re enrolled in an HSA-eligible, high-deductible health plan, you may be able to contribute pre-tax dollars to a health savings account (HSA). That money can be used for dozens of qualified medical expenses that range from acupuncture to X-rays. One big advantage of an HSA is that there isn’t a time limit on when you must spend the cash. You can pay for current expenses or use the money as a cushion for future needs, such as covering the sky-high medical costs that can arise during retirement. In addition, you can be reimbursed for qualified medical expenses that occurred weeks, months, years, and even decades past if you keep those receipts.
Potential HSA benefits:
- Funds roll over from year to year.
- You get to keep unused savings in the account.
- If your health plan and HSA are through your employer, the money will stay with you even if you switch jobs.
Another big benefit is that an HSA is triple-tax advantaged.2 The HSA is the only account with this feature. Your initial contributions are untaxed, your investment grows tax-free, and withdrawals are tax-free if spent on qualified medical expenses. HSAs are a great way for someone to save for both near-term and long-term health care needs.
For 2024, the IRS contribution limits for HSAs are $4,150 for individual coverage and $8,300 for family coverage.
If you're 55 or older and not enrolled in Medicare during the tax year, you may be able to make a catch-up contribution, up to $1,000 per year. Your spouse, if age 55 or older and not enrolled in Medicare, could also make a catch-up contribution, but will need to open their own HSA.
In 2025, the limit on individual coverage contributions will increase to $4,300. For family coverage, it will go up to $8,550. The $1,000 catch-up amount will stay the same.
Read Viewpoints on Fidelity.com: 3 healthy habits for health savings accounts
5. Capitalize on a health care FSA. A flexible spending account (FSA) allows you to set aside pre-tax money to pay for qualified medical expenses, helping you to save an amount equal to the taxes you would have paid. Like an HSA, FSA dollars can be used for a wide array of purchases, including prescriptions, co-pays, bandages, and crutches. In 2024, eligible employees are each allowed to set aside up to $3,200 to cover qualified expenses.
FSAs come with nuances, however. While some plans give you a grace period of extra time to spend the money or allow you to carry over up to $640 from 2024 to 2025, many are considered “use it or lose it.” That means you must spend the money within the plan year, or it’s forfeited.
Typically, you can’t save in an FSA and an HSA in the same year. But if you have an HSA-eligible health plan, your employer may offer a limited purpose FSA, which lets you put aside pre-tax money for eligible dental and vision expenses.
6. Make the most of all employer benefits. In many cases, employers provide health-related perks that go far beyond expected care. For instance, you may be eligible for nutritional coaching, gym membership reimbursement, or free mental health services. “Everyone should take a second look at all the benefits available to them. There's potentially a lot to take advantage of,” says Isgur. “There are many different health-related benefits that sometimes have a low utilization because people don't know about them.”
Read Viewpoints: 4 ways employer benefits can help you save money
7. Deploy simple strategies to save on prescriptions. There are multiple ways to save on your medications, including using lower-cost generics. Not all drugs have a generic counterpart, but when available, a generic can come at a fraction of the cost of a brand name drug. Keep in mind that you can’t make this switch without your doctor’s OK, as generic medications are not always suitable for all people, says Aditi Sharma, a vice president on Fidelity’s Financial Solutions Team. Also, the pharmacy closest to your home may not be the cheapest place to fill your prescription. Instead, use your plan’s preferred pharmacy, or for ongoing prescriptions, order a 90-day supply of your medication through a mail-order pharmacy. The mail-order prescription will be delivered directly to your home and typically comes at a reduced cost compared with a 30-day supply, says Sharma.
Read Viewpoints on Fidelity.com: How to save money on prescription drugs
8. Review your statements for errors. Just over 4 in 10 adults—43%—say they have received a medical or dental bill they thought contained a mistake.3 Among the errors cited: being billed for something that should have been covered by their health plan, billed for services not received, and billed again after payment was made. “Check your statements before paying them,” Sharma says. “There are times when they can be wrong.” If you spot something that seems incorrect or unclear, call your provider’s billing department and ask the representative to review the information.
9. Handle health issues when they arise. Addressing medical concerns can be time-consuming and potentially nerve-wracking. So it can be natural to ignore a problem and simply hope it goes away. “You are human, you have fears, you have other priorities,” acknowledges Sharma. “But consider the consequences. If you go to the doctor 5 years down the line instead of now, things can get worse, and the treatment can be much more expensive. The sooner you face it, the better off you are.”
10. Adopt a healthy lifestyle. Exercising, eating nutritiously, getting high-quality sleep, and reducing stress can help to keep health concerns at bay, leading to lower costs in the long run. “If you invest in your health now, that will pay dividends,” Sharma says. In addition to potentially reducing medical expenses, you’ll likely have more energy to dedicate to those you care about most, such as your family. “You can only fully give to others if you are good to yourself,” says Sharma.