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9 Ways to Cut Health-Care Costs

The Motley Fool

by Robert Brokamp

Over the past 25 years, health-care costs have grown more than twice as fast as overall inflation. What's a Fool to do? Here are nine ways to alleviate the health-bill blues:

1. Take care of yourself! Being healthy is not only good for you, but it will keep insurance costs down. You'll save on premiums and reduce the risk of being turned down later for pre-existing conditions.

2. Two-income couples should coordinate their insurance benefits. It might make sense to opt out of one plan and choose the family option on another. On the other hand, maintaining coverage with two providers can make sense, if one will fill the gaps of the other.

3. Do you smoke, overeat, or overdrink? Not only are you endangering your health, but you have some expensive habits.

4. Contribute to a flexible spending account (FSA), which allows you to use pretax money to pay for medical costs not covered by a health plan, such as deductibles, co-payments, and even eyeglasses. This could shave a few hundred dollars off your tax bill, depending on your medical expenses and tax bracket. If you participate in a plan that operates according to the calendar year, you must exhaust your account by Dec. 31, or you lose the money forever. More plans are extending the deadline into March, but check with your benefits department for your actual due date.

5. Choose the right health plan: Most employees are offered a choice of health plans, ranging from options that don't cost as much yet don't allow much flexibility (such as a health maintenance organization, or HMO) to plans with more flexibility but higher costs (such as a preferred provider organization, or PPO). Unless you significantly benefit from more choice, an HMO is the most cost-effective option -- but not always. So learn about your options before you choose.

6. If you incur extraordinary medical expenses in one year, you can deduct from your taxable income the medical costs that exceed 7.5% of your adjusted gross income. This can include out-of-pocket insurance premiums and a host of other expenses. See IRS Publication 502 for the complete list.

7. Take advantage of the free and discounted services offered by your health plan. Many providers subsidize flu shots, gym memberships, nutrition classes, and other preventive care.

8. Check your bills. According to one Consumer Reports survey from a few years back, 5% of patients found serious errors in their hospital bills. Those who paid $2,000 or more out of pocket for their care were twice as likely to find billing boo-boos.

9. If you've covered your deductible for the year and can get an appointment, get a service done before the New Year.

This article has been updated by Dayana Yochim. The Fool has a disclosure policy.