What is the best way to save on the cost of healthcare? Part 3(of 3) — Long Term Savings

A recent Quora question asked for the best ways to save on healthcare. Below is my response, organized into short, medium and long term activities. Thank you to Deborah for her initial answer, which inspired my own. Part 1 here. Part 2 here.

Long-term savings (>7 years)

1. Save for long-term healthcare costs. Within the next few years most people will have an opportunity to participate in HDHPs and save through HSAs. Particularly for younger workers who have the advantage of time — compounding growth in mutual funds, specifically — maximizing your HSA contributions for a decade or two and allowing that balance to grow can be an excellent hedge against future medical inflation. No one knows what future healthcare costs will look like, but we can see where they are today and examine underlying trends. Keep in mind healthcare expenses are generally considered to be the third largest out of pocket expense for retirees (not every person, not every year). Today’s tax regime makes HSAs the most tax efficient way to save for that portion of your retirement cost. Even if you don’t save in pre-tax accounts, consider that by the time you really need comprehensive (often expensive) healthcare in your older years, you will really want the means to access it. If western country single payer systems are any guide, should the US one day go that route, private options will remain available for those who can afford it. You will pay for the convenience, similar to other consumable goods.

2. Plan for long-term care. In the century before last we lived in communities of families where old age was a responsibility shouldered by the generation or two underneath them. You lived with family until you died. This is no longer the case for most, and while public assistance is available, the government requires you to deplete your savings before they pick up the increasingly expensive tab. Have a plan for what happens to you should you need long term care assistance. Many find peace of mind in long-term care policies, generally cheaper if you purchase them well in advance of needing them (say, in your 50’s). Talk with a financial planner who can walk through the scenarios.

3. End of Life Medical Costs. An uncomfortable topic for sure, end of life discussions may be some of the most important for you and, importantly, your family. As a primer, read Atul Gawande’s, “Being Mortal” (my review here) for an emotional, sobering pitch for better, more personal medical decision making in our final years. Gawande asks we consider quality of life alongside technical solutions offered by specialists whose job it is to “fix.” These life-sustaining, often automatic system responses are not only exceedingly expensive, but also often disconnected from most quality of life goals. Explore options in advanced medical directives (AMDs) and living wills. These can help avoid unnecessary stress and uncertainty with complicated and often unpredictable medical situations.

4. Pass it on. By this point, hopefully, you’ve learned a thing or two about what works in health, as in life. Do your family the favor of sharing bits and pieces along the way. As every parent and grandparent knows, theory is easier than practice. Yet even information transfer is a skill that can be learned, and improved upon. Take your process another step forward and give it scale by sharing.

Of course, and as a disclaimer, none of these recommendations will guarantee a meaningful reduction in your healthcare costs, much less perfect health. But if you are reading this you have already won one of life’s first lotteries, namely access to an education. The suggestions above and contained in Parts 1 and 2 may enable you to press that advantage. And you may find, much as Csikszentmihalyi presents in the behavior theory classic, Flow, working towards goals is the source of most of life’s real happiness anyway.

Good luck and good health.

Download the free HSA Coach app to manage your HSA and watch your wealth grow. Available on iOS and Android.

Below are a few posts on open enrollment:

· “Open Enrollment — How to Save on Healthcare Expenses”

· “Open Enrollment — Additional Workplace Benefits Worth Considering”

· “Open Enrollment — Five Tips in Selecting Your Health Insurance Plan”

· “Open Enrollment — Six Tips in Making Benefit Selections”

· “Open Enrollment — How to Use Your New (and Old) Health Insurance Plan”

Below are a few posts on health:

· “The Future of Healthcare is Now: My Teladoc Story”

· “Why I Questioned My Surgeon’s Advice. And Glad I Did”

· “Healthcare’s New Model: Pandora, Digital Ads, and Consumerism?”