Healthcare Budgeting 101: The 4 Costs to Plan For
Budgeting for health care can feel hard because there are so many kinds of costs. But almost all of them fit into four buckets. Plan for these four, and you'll be ready for most of what your year brings.
Bucket 1: Premiums
Your premium is what you pay to have insurance. It's the easiest cost to plan for because it's the same every month. If you get insurance through work, it usually comes out of your paycheck. Just remember to count it as part of your health costs.
Bucket 2: Routine care
This is care you know you'll get each year:
Checkups (often free with preventive care)
Dentist cleanings
Eye exams and glasses or contacts
Regular visits for things like therapy
Look at what you did last year. It's a good guide for this year.
Bucket 3: Prescriptions and ongoing care
Do you take medicine every month? Do you see a doctor regularly for a condition like asthma, diabetes or high blood pressure? These costs repeat, so they're easy to plan for. Check your plan's drug list to see what each medicine costs, pre and post deductible.
Bucket 4: Surprises
This is the hardest bucket. A broken bone. A trip to urgent care. A new diagnosis. You can't predict these, but you can prepare.
A good goal is to save enough to cover your deductible. For extra safety, work toward your out-of-pocket maximum. That's the most you'd pay for covered care in a really bad year.
Meet Ana
Here's how Ana filled her four buckets for the year:
Premiums
What's in it: $120 a month from her paycheck
Yearly cost: $1,440
Routine care
What's in it: 2 dental cleanings, an eye exam, new glasses
Yearly cost: $350
Prescriptions
What's in it: Allergy medicine, $15 a month
Yearly cost: $180
Surprises
What's in it: Saving toward her $2,000 deductible
Yearly cost: $2,000
Total
Yearly cost: $3,970
Her premiums come out of her paycheck automatically. For the other buckets, she saves about $210 a month in her HSA. If no surprise happens, the money stays in her HSA for next year. (Her routine costs also count toward her deductible, so this budget gives her a little extra cushion.)
Don't forget
Big life events, like a baby or surgery, belong in their own plan.
Your family's costs count too. Add up each person's buckets.
Things change. Look at your buckets again each year.
Key takeaways
Most health costs fit into four buckets: premiums, routine care, prescriptions and surprises.
Use last year's costs to plan for routine care and medicine.
For surprises, aim to save at least your deductible.
Use your budgeting tool and Rhythm in your Financial Health Wallet to stay on track!
