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Budgeting for Health Expenses

Updated: Jan 7

Updated post: 4/26/23

Original post: 8/21/22


How to Budget When Your Spouse Won't: Part 5 of our 10 part budgeting series


If you feel like each year you're being squeezed by the rising cost of health and medical services, what you're feeling is probably what many others are feeling as well.


Budgeting for Health Expenses

It's clear that budgeting for health and medical expenses is essential. Here is what you need to know to plan for upcoming health care and medical costs.


What is the most I would be responsible for paying in a year in overall medical expenses? (1)


In many cases, the most you would be responsible annually for paying in overall medical experiences is the total cost of your premiums plus up to the out of pocket maximum.


The out-of-pocket maximum is the most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance for in-network care and services, your health plan pays 100% of the costs of covered benefits, including copayments.


The out-of-pocket limit does not include:

  • Your monthly premiums

  • Anything you spend for services your plan doesn't cover

  • Out-of-network care and services

  • Costs above the allowed amount for a service that a provider may charge


What do I know that I will need to set aside monthly in overall medical expenses?


The Peterson-KFF Health System Tracker calculates what Americans spend on average annually in medical expenses. The variables you can use to narrow down the averages to folks in a similar position as you are insurance types, family size, income, and health status. Click on the graphic below to use the interactive.


Budgeting for Health Expenses

What are the tax benefits of various health insurance products?


The tax benefits for Health Savings Accounts (HSA) are significant.


  • Dollars saved toward an HSA are not taxed, even payroll taxes are avoided.

  • Dollars in the account can grow tax free if they are invested.

  • Money used from the HSA to pay for qualifying medical expenses are not taxed when withdrawn.

Review IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans for tax related details regarding an HSA and any of these health plans:


According to the IRS (2), if you itemize your deductions for a taxable year on Schedule A (Form 1040), Itemized Deductions, you may be able to deduct expenses you paid that year for medical and dental care for yourself, your spouse, and your dependents. You may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income.


There is a long list of tax deductible medical expenses.


The healthcare world is full of terms. You can use the Healthcare.gov/glossary to search for terms you see and don’t understand in your own health care paperwork.


 

When you plan a budget with your spouse, you are not budgeting with Excel or other tools such as our Budget Template for Couples. You are using these tools. You are budgeting with someone you love and share your life with.


Our free Budget Template for Couples is designed specifically for couples. Each category includes linked graphic-centric short videos to help couples in the budgeting process, providing essential prompts to consider budgeting each categorically appropriately.


This 10-part series is dedicated to helping you work with a spouse to budget together and provide the information you need to make educated decisions with your dollars.


Learn More


Couples who learn more, save more, and spend more on what is important to them.


For engaged and recently married couples who want to manage money and the home as a team.


Self paced online courses for couples designed by national financial therapy and financial planning experts


Winning ideas from experts to manage money and the home as a team. 2023 Plutus Award Finalist: Best Couples or Family Content


🔔 Click here to listen and subscribe to the Modern Husbands Podcast on Apple.

🔔 Click here to listen and subscribe to the Modern Husbands Podcast on Spotify.


Winning ideas to manage money and the home as a team delivered to your inbox every two weeks. You'll even receive a few free gifts!


 

Citations




Perry, Mark J. “Chart of the Day…. or Century? | American Enterprise Institute - AEI.” Chart of the Day…. or Century?, American Enterprise Institute, 17 Jan. 2021, https://www.aei.org/carpe-diem/chart-of-the-day-or-century-5/.

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