5 Ways Older Adults Can Save Money on Health Care

Worried about staying healthy as you get older without breaking the bank? Money Girl reviews five ways to reduce the cost of health care and improve your physical and financial fitness.

Laura Adams, MBA
4-minute read

Taking care of your health is important to feel good, look good, and live the life you want. But you might be concerned that it also means breaking the bank. The good news is that there are easy ways older adults can save money and adopt a healthier lifestyle.

Here are five ways to cut the cost of health care and improve your physical and financial fitness.

1. Pay for health care using a medical savings account

Health care can take a bite out of your budget, especially if you don’t have health insurance or if your plan has a high medical and/or prescription drug deductible. According to a UnitedHealthcare survey, 86% of older adults are worried about illness, such as losing their mobility and cognitive health. Almost half (46%) of the respondents said they also worry about not having enough money as they age.

Fortunately, there are tax-advantaged accounts that make out-of-pocket medical and dental expenses more affordable.

A health savings account (HSA) allows you (or anyone else, such as an employer) to make pre-tax contributions to spend on current or future medical expenses, such as doctor co-pays, prescriptions, dental care and prescription eyeglasses.

To qualify, you must be enrolled in a high-deductible health plan you get through an employer or on your own. Funds in an HSA roll over from year to year with no spending deadline. However, if you spend amounts on non-qualified expenses, you must pay income tax plus a 20% penalty.

If you enroll in Medicare, you can no longer make HSA contributions; however, you can continue withdrawing funds to pay for qualified medical expenses—such as doctor copays, visits to a specialist, dental care and prescription eyeglasses—on a tax-free basis.

A flexible spending account (FSA) is similar to an HSA but is offered only by employers. It allows you or your employer to make contributions on a pre-tax basis, usually through payroll deductions. If you spend FSA funds on qualified medical and childcare expenses, they are never taxed. But unlike an HSA, you generally must empty an FSA each year.

2. Claim a tax deduction for qualifying medical expenses

In addition to tax breaks offered by medical savings accounts, the IRS gives you more relief by making out-of-pocket medical and dental expenses partly tax-deductible.

In addition to tax breaks offered by medical savings accounts, the IRS gives you more relief by making out-of-pocket medical and dental expenses partly tax-deductible.

To claim the medical deduction, you must itemize deductions on Schedule A when you file income taxes, instead of claiming the standard deduction. Itemizing cuts your taxes when it exceeds the standard deduction for your tax filing status. 

For 2019, you can deduct most unreimbursed medical and dental expenses that exceed 10% of your adjusted gross income (taxable income minus adjustments, such as tax deductions and retirement contributions). Qualifying expenses include health care costs paid for you, a spouse and dependents.

For example, if your adjusted gross income is $50,000, you could deduct medical expenses that exceed $5,000 ($50,000 x 10%). If you have $6,000 of qualifying medical expenses, your allowable deduction would be $1,000 ($6,000 - $5,000).

There are a wide variety of qualifying expenses, including:

  • Preventive medical care, including chiropractic and acupuncture
  • Medical treatment and surgeries
  • Treatment for drug addiction
  • Dental care and false teeth
  • Vision care, prescription eyeglasses, and contact lenses
  • Psychological or psychiatric care
  • Transportation to receive health care
  • Prescription drugs and insulin

Allowable deductions don’t include expenses meant to promote your general well-being or appearance, such as a gym membership. Check out IRS Publication 502 for a long list of tax-deductible medical, dental and vision expenses.

3. Take advantage of preventive health services

The UnitedHealthcare survey found that 65 percent of older adults have made a health-related change to their lifestyle in the past five years. If you’re enrolled in Medicare, taking advantage of preventive tests and services at no charge is a smart way to stay healthy and reduce your out-of-pocket medical costs.

Qualified health plans under the Affordable Care Act, including Medicare plans, cover most preventive care at no cost, even if you haven’t met your annual deductible. There are many preventive services including annual checkups and screening for high cholesterol, cancer and depression.

4. Use workplace wellness programs

Many employers understand that healthy workers are good for their company's bottom line. It's not uncommon for large organizations to offer financial incentives for losing weight, walking a certain number of miles, completing online health counseling, getting annual biometric screenings, or using an in-house gym.

As America’s Baby Boom generation ages, there are more older adults in the workforce. Having support, such as in-person health coaching, is particularly effective for helping older workers stay fit, according to the American Society on Aging.

Typical rewards include gift cards, additional employer contributions to your HSA, or even extra vacation time. Find out what wellness perks your employer may offer and be sure to take advantage of them.

5. Max out your health plan benefits

Health plan benefits, such as free preventative checkups and deductibles, are tied to an annual schedule. That means you need to pay attention to the calendar in order to max out your benefits.

Once you pay your full deductible and have more medical expenses on the horizon, schedule your treatment before the end of the year. The idea is to have your insurer pay as much of your medical expenses as possible. If you wait until the following year, you could end up paying more.

Don’t forget that the cost of medical procedures and services can vary considerably depending on your coverage and the provider you choose. Any amount of research you can do ahead of time to shop prices can save money and help you make the best health care decisions.

While health care costs can add up quickly, there are ways older adults can save money. First, take good care of yourself so you’re less likely to need treatment. When you do seek care, get the most out of your health or Medicare plan, compare prices, and pay out-of-pocket expenses using a medical savings account, when possible.

Senior Woman Jogging image courtesy of Shutterstock

Disclosure: UnitedHealthcare is one of my business partners. Regardless, I only mention information, products, or services that I believe are good for my readers and all opinions are my own.

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. 

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