Estimating Your Medical Costs (4/24/2007)
Estimating Your Medical Costs
This was first posted by us on www.HealthCentral.com. Before you can decide which health insurance plan is best for you, you’ll need to determine how much you’ll probably spend on medical care in the future. There are two ways to find that number: starting from scratch by estimating how much you expect to spend, or looking at your Explanation of Benefits (EOBs) from last year to see what medical coverage you required.
If you’re starting from scratch to figure out how much medical care you expect to need, first list all your potential doctor visits, any hospital visits such as out-patient surgery, all prescription drugs, all laboratory tests, immunizations, x-rays, and any other medical services you may seek. Then, for each individual visit or service, assign a value and multiply that value times the number of visits or services in each category like this:
- Doctor visit co-pays- $30 x number of visits
- Prescription Drug Co-Pays- $10 (generic) or $40 (name brand) x number of prescriptions
- Prescription Drug out of pocket- $40 x of prescriptions
- X-rays, CT Scans or MRIs- $300 x number of procedures
- Laboratory tests- $85 x number of tests
- Hospitalizations- $5,000 plus x number of hospitalizations
- Out-Patient Surgeries- $1,000 x number of surgeries
While these values are broad and general, they’ll provide an estimate of what you might expect to spend in a generic health insurance plan.
If you’ve been enrolled in a health insurance plan, the second, and more accurate, way to estimate your medical costs is to examine the explanation of benefits (“EOBs”) you received the previous year for medical services you used. EOBs contain five critical pieces of information that will help you determine a fairly accurate estimate of future expenses.
1. The negotiated amount This is a column on each EOB that informs you what amount a health insurer has agreed to pay your medical provider for the medical service that was rendered. This is the discounted price for the service the provider will accept for the service. This is exactly what will be paid for the service and is the most accurate value you can use to determine your future estimate of medical expenses. Multiply the negotiated amount by the number of visits or services in each category and you will have a more accurate estimate than using the suggested values we provided you above.
2. The deductible status Every EOB has a column that gives you the status of your deductible. By looking at your previous EOBs you can determine whether you used all or a portion of your deductible the previous year. This will help you to determine what your deductible should be for the coming year.
3. Co-pay The EOB will have a column that indicates what the co-pay is for each medical service you receive. This may be important if you need prescription drugs for chronic conditions or diagnostic testing services that might have a higher co-pay.
4. Co-insurance The EOB will have a column that tells you if co-insurance has been applied to a medical service you have received. You need to know what services have co-insurance (many x-rays, CT scans, MRIs, and out-patient procedures have co-insurance) to determine your future estimate. If co-insurance applies to a particular medical service you will be able to determine that amount when doing your estimate.
5. Total Patient Responsibility The EOB will contain a column or category that states all the costs for medical services not paid for by the health insurer. This is the amount you must pay out-of-pocket for the medical services. If you add your co-pay to the amount listed in the total patient responsibility column on your EOB you can determine exactly what you paid for that service and use that amount for your future out of pocket expense estimate.
By knowing your estimated expenses you will be able to find a co-pay, deductible, and co-insurance that fits the most cost effective premium for you and the health insurance that best fits your needs. We will show you how to do this in the next posting.
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