Rising medical expenses. An increase in chronic conditions. New government legislation. It’s probably safe to describe the current health care climate as unstable. And you can’t count on Medicare and Medicaid to cover all your expenses.

These steps may help you reduce your overall health care costs

 1. Take steps to improve your health

The criteria for a healthy lifestyle, according to a study recently published by the Mayo Clinic, include moderate exercise, good diet, maintaining the recommended body fat percentage and not smoking.¹

Making even a modest investment in your health now can pay off —financially, physically and emotionally—in your retirement years.

 2. Calculate your health care costs

Factoring health care needs into your financial planning up front can ease the impact of future health-related events. Begin by estimating the current and future costs of existing health care conditions, then build in a reasonable cushion for the unexpected. And remember that Medicare does not typically cover dental, vision and long-term care.

For help in calculating future expenses, visit your insurance company’s website for helpful online tools.

 3. Manage deductibles

The higher your deductible, the lower your premiums. Go with the highest deductible plan you feel comfortable with. You’ll still be covered for catastrophic care, but if you are able to limit your doctor visits to preventive care, you’ll minimize your out-of-pocket expenses.

 4. Keep prescription drug costs in mind

Medications are often one of the biggest out-of-pocket health care expenses for retirees.

Medicare Part D offers prescription drug coverage from Medicare provided through private insurers. Each insurer provides coverage for its own list of medications, called a formulary. The medications you need may not be on every insurer’s formulary, and most policies offer tiered coverage — the lowest co-pays for generic drugs and the highest for new, brand-name medications. There is some good news about Part D coverage. By 2020, the so-called donut hole, the coverage gap that kicks in after you and your insurer pay a certain amount for medicine, will be closed. As a result, Medicare recipients’ out-of-pocket expenses, on average, will be reduced significantly, according to the Employee Benefit Research Institute (EBRI).

 5. Plan for the unexpected 

Long-term care often accounts for the lion’s share of health care costs for retirees and the national median cost of a private room in a nursing home can run $92,376 per year². Unfortunately, long-term or extended care costs, including home health care costs, assisted living and nursing home, are not covered by Medicare. Acquiring long-term care insurance can help to minimize these potential costs.

The years prior to retirement are also crucial for disability insurance. If you suddenly find yourself disabled and unable to generate income, your retirement plans could take a big hit.

 6. Max out your HSA

If you’re one of the millions Americans with a health savings account (HSA), you may be surprised to learn how much cash it can generate.

Here’s how a health savings account (HSA) works. In 2017, you enroll in a qualified health insurance plan with a deductible of at least $1,300 for single coverage and $2,600 for family coverage. With this high-deductible plan, you’ll pay for non-preventive care doctor visits, tests and other treatments out-of-pocket until your deductible is met. In exchange, you’re allowed to set up an HSA to use pre-tax dollars to pay for qualified medical expenses.

In 2017, the maximum contribution to an HSA is $3,400 for individuals and $6,750 for families. (People age 55 and older may deposit an additional $1,000 over these limits.) Earnings on the account are tax-free, and no taxes are paid on withdrawals used for qualified medical expenses. Any money you don’t use for health care rolls over from year to year, and your account also goes with you from job to job. That’s why contributing to an HSA can be a bit of a secret retirement account. All of the funds you don’t use for health care when you’re younger accumulate and grow tax-free, hopefully giving you a little cushion when you’re older and need the funds more.

Optimize your health savings account (HSA)