Unmanageable medical bills are one of the main reasons for personal bankruptcy. A smart saving strategy can help ensure a healthier, happier future.

People plan their vacations, their doctor visits, even when they are going to work out.

But when it comes to planning ahead for future health costs, many Americans don't look beyond tomorrow.

"People tend to think, ‘Oh, I feel good now and I'm going to feel good forever.' But in most cases, it's just not true," explains Pamela Armstrong, vice president of benefits administration for Eos Airlines and author of Surviving Healthcare. "The body is not made to last forever. As most of us get older, it's more likely our health problems and medical costs will increase — the pattern is very clear."

Planning for Next Year
More than ever these days, Americans need to sock away savings, not just for retirement and the inevitable health needs of aging, but also for immediate medical expenses. Many health plans are requiring people to pay more out of pocket, and in many cases, a simple broken bone or bout of low-back pain can lead to thousands of dollars in unexpected health care bills.

So that a broken arm doesn't break the bank:

• Take a look at your health benefits booklet. If you or a family member ends up in the hospital or needs countless follow-up doctor visits, what is the maximum you'd have to pay in one year? If a baby is on the way, you'll need prenatal care and well-baby visits. If a child needs his tonsils removed, plan for surgery and follow-up care.
• Plan ahead. If you put one-twelfth of the most you could owe into your savings each month, within a year you'll have a cushion of protection. If you put less in, it will take longer. When budgeting, take into account any:
  • COPAYMENTS — usually a fixed amount you must pay for each purchase of prescription medications or for each office visit (for example, $20 a visit).
  • COINSURANCE — the portion you must pay for most covered expenses. For example, you may have to pay 20 percent while the plan covers 80 percent.
  • DEDUCTIBLES — the initial portion of covered expenses you're responsible for in a given year. For example, with a $1,500 deductible, you must pay the first $1,500 of covered health costs before your insurance will pay anything.
  • OUT-OF-POCKET MAXIMUM — the most you'll be required to pay in a calendar year for covered medical and surgical expenses.
• Fund a health savings account. If you're one of the growing number of Americans enrolled in an eligible high-deductible health plan — one in which out-of-pocket expenses can run several thousand dollars a year — be sure to take advantage of your ability to open an accompanying health savings account — a savings account that lets you set aside funds toward paying off that high deductible. As long as those funds go toward eligible health expenses, they won't be taxed. The account becomes a retirement account at age 65.

And for the Years to Come
"One of the major reasons people should be putting money aside for retirement is because of health care costs," Armstrong insists. The financial hardship caused by medical bills is one of the main reasons for personal bankruptcy, and most people who file for medical-related bankruptcy actually had health insurance at the start of their illnesses, according to a recent study by researchers at Harvard University. ,p>This means that even if you're insured, poor planning may jeopardize even your smallest hopes for your golden years, such as the ability to remain healthy and independent with enough money set aside to cover everyday needs.

Other factors that make saving for the future important:

• Health care costs are continuing to rise much faster than the rate of overall inflation.
• Chances are, no one will be funding private health insurance for you after retirement.

  Medicare will cover part but not all of your health costs and preventive care; assume you will have to pay for any supplemental insurance or gaps in coverage.

• By 2020, 12 million older Americans are expected to require long-term care — either care in a nursing home, or at home with assistance from family members or professional caregivers. Talk with your insurance broker to see if long-term care insurance makes sense for you.

Your Best Investment
While saving now for future needs, be sure to invest in the most valuable savings plan of all: prevention.

For example, quit smoking, engage in regular physical activity, eat a healthful diet and schedule all recommended health screenings and doctor visits.

"This is the most important thing a consumer should know and do," Armstrong says. "About 50 percent of people's health status, on average, is due to their own behaviors. Your lifestyle habits translate directly into the amount of health care you're likely to need over time."

Who Has Higher Costs?
Injury or illness can happen to anyone; thus, everyone, young and old alike, needs to plan for future medical costs. However, those most at risk for higher health care costs include:

Polly Turner spoke with Pamela Armstrong, vice president of benefits administration for Eos Airlines and author of Surviving Healthcare: How to Take Charge and Get the Best From Your Doctor, Your Hospital, and Your Health Insurance, Chestnut Ridge Books, 2004, $19.95.

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