Family Health: Budgeting for Healthcare Costs in Kenya

Many parents are constantly under pressure to provide for their families in all aspects of their lives, from school fees to food, to budgeting for medical bills all on a limited budget. This is the epitome of parenting.  

Even though most healthcare costs are unexpected, it is still necessary to budget for them. 

According to a report by the Health Policy Project titled, Catastrophic Health Expenditures and Impoverishment in Kenya, healthcare costs throw millions of Kenyans into poverty every year. 

Catastrophic health spending is defined as healthcare spending that exceeds a household's budget or financial capabilities. These expenditures can be financially devastating, especially for low-income families, and push an additional 1.48 million Kenyans into poverty every year.

You might be wondering how you can budget for your family's health care expenses. This article explores ways to get you started. 

1. Establish Your Whole Healthcare Budget

When budgeting for health care expenses, it's a good idea to break them down into the following categories:

Fixed Premiums: This is the monthly premium you pay for health insurance such as NHIF or a private cover that is typically auto-deducted from your salary. If you are lucky, your employer could be footing this bill for you. 

Routine costs: Even if they may change, routine costs are your regular healthcare costs. A visit to the pharmacy, over-the-counter medications, and other costs that may not be covered by your insurer. They may appear to be insignificant costs, especially because you cannot really anticipate them, but they can pile up.

Unexpected costs: These are costs, such as an unforeseen trip to the theatre room or an urgent medical intervention, that might be difficult to predict.

2. Know Your Cost Shares for Healthcare

Your healthcare insurance plan is critical when it comes to budgeting and keeping your healthcare costs low. 

However, with so many plans available, it can be difficult to find the right coverage for your family. When comparing health insurance policies, keep the following costs in mind:

The premium: the amount you pay to obtain the coverage, and it is usually paid every month. You want to choose a cover that allows you the lowest possible premium with maximum benefits depending on your family’s healthcare needs. 

The deductible: is the amount you pay out of pocket for treatment before your insurance kicks in and covers the majority of your medical expenses.

Copayments: These are usually one-time payments made to a hospital for a visit or service.

Coinsurance: After the deductible is met, the insured must pay a coinsurance amount, which is usually expressed as a percentage. Note that it depends on the insurer and cover type that you have. A coinsurance provision in insurance coverage is similar to a copayment provision, with the exception that co-pays require the insured to pay a specified monetary amount at the time of service.

Network: refers to the healthcare providers and institutions that accept insurance coverage.

Coverage: refers to the type of care provided by the policy. Some services are required by law, while others, such as vision and dental coverage, are optional.

You need to determine whether your plan includes copays, coinsurance, or both, based on the type of care you may require. Some policies include a copay as well as a coinsurance percentage of the bill for specific services.

It's also a good idea to understand what your plan doesn't cover, which is often referred to as exclusions. Note that you will be charged full price for any excluded services.

3. Choose the Best Health Insurance Policy

Here are a few considerations you should make…

Make a list of the necessities.

We don't plan for injuries or illnesses, but when it comes to health care, there are a few things to think about, such as maternity coverage. Keep in mind, as a prospective insured, that this perk is not available in all of the policies.

If there is a history of pre-existing or chronic diseases, having coverage that addresses these issues is critical - note that you are required to disclose this information to the insurer at the time of application. 

Annual limits

This is the maximum amount that the insurer will cover your healthcare costs in a year. In Kenya, most retail inpatient cover limits start at Ksh100,000 and outpatient cover limits start at Ksh25,000. 

Depending on your needs, this should be taken into account to avoid future disappointments. It is critical to remember that the higher the limits, the better the benefits and the higher the premium.

In addition to the overall limit, you should be aware that insurers have specific limits for specific services such as the maternity cover limit, dental care cover limit, eyecare cover limits and so on. 

Before signing the policy documents be well aware of the unique medical needs of your family to ensure the specific limits do not make the cover impractical. 

Consider alternatives

For these comparisons, you can visit various online sites for different insurance plans and conduct your own research on all of the benefits provided by various insurance companies in the market. 

Some insurance plans offer appealing benefits, but there is a cost-sharing requirement, and others appear to be "affordable" but end up being costly due to exclusions.

Be aware of your share of the costs

The amount you should pay for medical insurance should be specified. After you have seen your premium, there should be a clear workout on the premium payment plan that has been provided. 

Some policies include a co-pay, which should be clearly displayed so that you know how much you will be expected to pay each time you use the services.

Co-payments, co-insurance costs, limits and exclusions can be a reason to choose one insurance policy over another. You want to choose a policy that has the lowest of these costs while having a higher limit and fewer exclusions, if possible. 

Examine the list of service providers

If you have a personal family doctor or specialist, make sure they are on the insurer’s list of service providers. Otherwise, you will still have to continue paying out-of-pocket for services at your preferred healthcare provider. 

When weighing your options, it's always a good idea to request a list of preferred health care providers - which will typically be provided with your policy documents. 

Dependents 

For a family medical cover, it is especially important to make sure your loved ones can use the cover at no additional cost. 

You will need to discuss this with the insurer prior to signing the policy to know what limits apply to your dependents, the age limit for a child to be a dependent, the maximum number of dependents under the cover, and the implications on the amount of monthly premiums.  

3. Keep an Eye on Your Medical Expenses at all Times.

Have you ever read your medical invoices? No? Here’s the deal, medical bills aren't particularly enjoyable to read, but paying attention to them can help you budget more effectively and save money on healthcare. 

It is estimated that between 30% and 80% of medical bills are inaccurate, with hospital bills and more complicated medical procedures having the highest rate of error.

By carefully reviewing those bills, you may find inaccuracies that, if corrected, will leave you owing less money. For example, you could be charged for general anaesthesia when what was used on you was just local anaesthesia for a procedure.

There could be a significant cost difference there, so it's critical to go over your medical bills.

4. Rainy Day Savings Protect your Budget

Remember those unforeseen medical costs that are difficult to budget for?

Carolyn McClanahan, MD, certified financial planner and founder of Life Planning Partners, Inc. says, "You never know when an unexpected medical condition will arise, so having money set aside to cover those expenditures is critical."

An emergency fund is a savings account set up to assist in the event of a financial or medical emergency, such as an operation or medication that your health insurance does not fully cover.

Experts advise setting aside three to six months' worth of monthly expenses in your emergency fund to cover unforeseen expenses without going into debt or raiding other savings accounts. 

As we've discussed in previous articles, having an emergency fund is essential for sticking to your family's budget. It's a good idea to put money aside in an emergency fund to cover the cost of an unplanned trip to the emergency room, elective surgery, or unexpected expenses, and the good thing is, your emergency fund will always be there whether you lose your job or not.

5. Practically Build Your Annual Family Healthcare Budget

Now that you know what to budget for, let's look at how to budget practically. 

You have several options for controlling the cost of your healthcare. Calculate how much you need to save each month to contribute to the above-mentioned healthcare costs, including your premium and other recurring costs, as well as how much you need to set aside for an emergency fund for unforeseen needs, just as you would for food, rent, clothes, or a holiday.

Then consider how your needs may change in the future. Do you think you're ready to start a family if you don't have any children yet? Do you have any unresolved health issues that you've been putting off but now want to address? Do you intend to quit your job and start your own business?

Divide your average yearly healthcare cost, plus any additional expenses you anticipate, by 12 to arrive at a monthly budget amount. If it appears to be excessive, you may need to make other cuts or look into ways to supplement your income in order to avoid overspending.

Remember that if you can save enough money to cover your out-of-pocket maximum, you should be fine.

WRAPPING UP

When it comes to medical bills, a little forethought can go a long way toward ensuring a more financially secure future for you and your loved ones. 

If you have a healthcare budget in place, you will better be able to make informed decisions that are good for your health, family, and wallet.

Using these and other strategies to protect your family's budget from rising medical bills is well worth the effort.

To a happy family and a happy you!