Table of Contents

PART I: Managing and Reducing Medical Costs 2

1. Understanding and Collecting Medical Expense Records 3

2. Ways to Maximizing Health Insurance Benefits 4

3. Negotiating Medical Bills and Avoiding Medical Debt 6

4. Ways to Seek Financial Assistance 7

PART II: Preparing Your Tax Filing and Relevant Documents 7

5. How to Decide If You Will Itemize or Not 7

6. How to Calculate if Medical Expenses Are Worth Itemizing 8

7. Why It’s Important to Know the Standard Deduction 9

8. If You Receive SSDI Benefits – Be Aware of Tax Implications 9

9. If You’re Anxious There’s Not Enough Time Before Tax Day This Year – April 15 10

10. Going Forward and Resources 10

PART I:

Managing and Reducing Medical Costs

First, learn how to optimize the ways you spend your healthcare dollars and keep good records. To be efficient and cost-conscious, it takes a clear understanding of what is (and isn't) included in any health insurance plans you may have, what's covered, what's in and out of network, and what is (and is not) reimbursable. To learn the details of what counts as medical expenses and tactics to use before tax season to save on your tax burden related to medical bills in advance, read the guidance outlined below. If you've already organized your documentation and receipts, and have your pile ready to file, jump directly to the tax insights beginning in Step 5.

1. Understanding and Collecting Medical Expense Records

What Counts as a Medical Expense?

Medical expenses encompass more than just the bills from your doctor or hospital visits. They include:

• Doctor and specialist visits.
• Prescription medications.
• Medical tests and procedures.
• Durable medical equipment (like wheelchairs, braces, CPAP machines, and more).
• Travel expenses for medical care.
• Home modifications for accessibility.

What’s Considered an Unreimbursed Medical Expense?

Unreimbursed medical expenses refer to the costs of medical care that are not covered or paid for by insurance or other forms of health care coverage or Medicare/Medicaid. These expenses can be significant if you add them up annually , especially for individuals with chronic illnesses or those who require ongoing maintenance therapies for their medical treatment, off-label prescriptions or compounded drugs, travel, and cash-pay care from specialty concierge-style doctors. These expenses can include the following:

• Deductibles: The amount you pay for covered health care services before your insurance plan starts to pay.
• Co-payments and Coinsurance: These are your share of the costs of a covered healthcare service. Co-payments are typically fixed (for example, $20 for a doctor's visit). In contrast, coinsurance is usually a percentage of the total charge.
• Non-Covered Services: Medical services that your insurance plan does not cover. This can include certain types of therapies, elective procedures, or experimental treatments. Most alternative therapies, including acupuncture or massage are not covered.
• Prescription Medications: Some medications, especially certain brand-name drugs or specialty medications, might not be fully covered by insurance. Tally up these costs too. You can use the online portal from your retail pharmacy to tally the annual expenses for prescriptions if they offer a patient portal. These tools come in handy at tax time because sometimes we don’t realize the financial impact it adds up to be.
• Travel Expenses for Medical Care: Costs for transportation to and from medical appointments, including parking fees, tolls, and mileage (short-distance mileage counts). Sometimes, lodging and meals during long-distance medical treatments can also count. Be sure to get expert tax advice on travel-related deductions.
• Medical Equipment and Supplies: Items like wheelchairs, hearing aids, braces, home care supplies necessary for treatment or surgery recovery, and more that were not fully covered by insurance.
• Dental and Vision Care: Many health insurance plans do not cover dental and vision carefully, especially for adults, leading to out-of-pocket expenses for these services and another area to consider.

Organizing Your Medical Expenses

Effective organization of your documents, payments, bills, and invoices is critical. Start by keeping all receipts and medical bills in one place. Consider using digital tools like smartphone apps designed for expense tracking or a spreadsheet in an application like Microsoft Excel or Google Sheets. If you prefer physical records, maintain a dedicated folder or filing cabinet. Updating these records regularly will make them more accessible during tax season or when you need to refer to these documents for reimbursement or negotiation purposes. Whether your medical expenses are reimbursable or not, it is important to track both. Once you have a system to track your medical expenses, it will be easier to prepare for tax time and understand how to gain the maximum benefits from your health insurance policy.

2. Ways to Maximize Health Insurance Benefits

The second key task is to research and know your health insurance policy and any in-network or out-of-network benefits and coverage levels. Many people do not realize they can request reimbursement for some out-of-pocket expenses. Warning: That process can be anywhere from a red tape nightmare or just a small hassle, but often is well worth it. It's important to know what services are covered and to what extent to keep up with when you reach your out-of-pocket maximum, where you are no longer responsible for any medical bill payments for the insurer's term (usually the end of the calendar year). Yes, it’s when health care is free – to you for just a while. Enjoy! Yet, be sure to understand coverage limitations, for instance, some policies do not cover physical therapy or alternative treatments like acupuncture. Often filing for these reimbursements can make a big difference if you’re like many of us who rely on these alternative modalities for pain management.

Another key method is to maximize your opportunities to save before you’re taxed. Did you know you can save for disabled children under 26 years-old with the US government-sponsored ABLE account? Learn more at Disability Savings Account | ABLE Account | Eligibility Quiz & News | ABLEnow. Additionally, pay attention to the savings benefits of having a Health Savings Account (HSA) or Flexible Spending Account (FSA), if available to you, where you can save funds on a pre-tax basis and reimburse yourself. This is another often overlooked tactic to reduce medical costs and could be utilized if your employer offers these plans. Ask your Human Resources representative about HSAs and FSAs.

Keep in mind the maximum contribution limits to a Health Savings Account (HSA) for the years 2023 and 2024 are as follows:

• For 2023:
  • Individual: $3,850
  • Family: $7,750
• For 2024:
  • Individual: $4,150
  • Family: $8,300

Additionally, individuals aged 55 and older are allowed a catch-up contribution of an additional $1,000, which is the same for single and family coverage.

Innovative Ways to Manage Prescription Costs

Prescriptions often constitute a large portion of chronic illness medical expenses. Here are some tips to manage these costs moving forward:

• Ask your doctor about generic medication alternatives if they are safe for you.
• Look into mail-order pharmacies, which can be more cost-effective.
• Explore prescription discount programs and apps (see our suggested list at the end).

Leveraging Community Support and Online Resources

Joining support groups, either in-person or online, can be an invaluable resource. These communities often share tips and insights on managing the financial aspects of chronic illnesses. Websites like PatientsLikeMe or HealthUnlocked provide platforms for such peer-to-peer interactions.

Planning for the Long Term

With chronic illnesses, it’s essential to think long-term. This means if you can manage, try to…

• Establishing an emergency fund for unexpected medical expenses as best you can.
• Investigate buying insurance products like long-term care insurance can provide additional coverage in the event of prolonged illness.
• If still employed, evaluate the company's Short-Term Disability (STD) and Long-Term Disability (LTD) potential private insurer policy options and costs. These funds can help if you need a leave of absence or can no longer work due to disability due to your illness. For more on how to navigate this complexity, see the guide, “Win Your EDS Disability Claim: A Zebra’s Step-by-Step Basic Training Bootcamp.”
• Determine if life insurance is an option – it’s usually not an option for people diagnosed with complex or chronic illnesses such as EDS, but it never hurts to ask. Or consider doubling your partner’s policy benefit if you can.
• Other tax credits and deductions might be applicable besides medical expense deductions. For instance, the Earned Income Tax Credit (EITC) or the Child and Dependent Care Credit can provide additional financial relief for eligible taxpayers.

Asking for Assistance

It can be challenging, but asking for help in your self-advocacy is essential. Be sure to request financial assistance from providers, hospital billing departments, insurance claims representatives, and any social workers or patient advocates working directly for the provider community. There are also many nonprofits who can help with various types of bills or different diagnoses. Just remember who they are working for, and it's not usually the patients. Yet, sometimes, you might learn about programs and grants you must know about.

3. Negotiating Medical Bills and Avoiding Medical Debt

Many people are not aware that medical bills can often be negotiated. Are there any other services Americans buy without researching and knowing the upfront costs? That sweet spot is secure for healthcare, unlike car, couch or even paper towel purchases. There are suggestions to combat high medical bills by enlisting outsourced help for hire outlined in this list, including outsourcing it to an expert patient advocate specializing in billing to help negotiate on your behalf.

Here are some general tips to reduce or negotiate medical bills (the process is not always in this order):

• Always review your bills carefully for accuracy and make note of any errors, discrepancies, or clarifications needed before you pay. If there are errors, contact the provider's billing department directly to discuss your bill and request corrections if necessary. Keep track of and document all interactions, communicate respectfully with providers, ask questions, and consider appealing claim denials.
• If you have medical insurance, wait until you receive your health carrier’s Explanation of Benefits (EOB) that states what was covered and any remaining balances for covered services. If you pay the first doctor bill that might arrive before the EOB, you could pay for non-covered services without realizing it. Cross-check against the EOB and the invoice to determine if you owe any unpaid balances. It might mean a time delay for your payment so you decide if it’s worth it to you. Again, call to ask questions if necessary because this varies greatly depending on what is considered in-network coverage on your specific health policy, so do your homework.

• If your bills are mounting up and becoming unmanageable, consider hiring a patient advocate billing expert to negotiate on your behalf by searching on AdvoConnection directory. This directory is a resource where anyone can search for and find independent health and patient advocates to assist them, usually for an hourly rate. Also, ask your health insurance company for a case manager or ask for a hospital coordinator who can be helpful. Ensure you understand who they are working for upfront because it's not the patient unless you hire an independent health advocate.
• If you are denied a medical health insurance claim you believe you should be covered for various reasons, you can consider a professional bill review and medical claims assistance from the Alliance of Claims Assistance Professionals (ACAP) at www.claims.org. Or get legal advice.

• If you’re having trouble paying your bills on time, contact your provider’s billing department before the unpaid bills are sent to a collections agency. Ask for more time or inquire about other options for help, such as if you could pay a portion, negotiate a payment plan, or if they will accept a lower lump sum payment. Always inquire about alternatives for longer-term payment plans or any available financial assistance. In addition, see our other financial resources later, where we share a few more ideas. Today, many options exist to raise funds, including crowdfunding on sites like GoFundMe and GiveForward, where loved ones can contribute to your piggy bank. There's also charity financial assistance from sites like Dollar For, which helps eliminate hospital bills in some circumstances. Be certain you understand how the terms, conditions and any disclosures might impact you and any other financial services or benefits you receive, like Social Security Disability Income (SSDI). Resources like the National Patient Advocate Foundation can provide free 1:1 counseling on approaching these situations.
• Know how to avoid medical debt and bankruptcy if possible. Unfortunately, medical debt is genuine in the chronic illness community due to unforeseen expenses, usually affecting 4 in every ten individuals in the US, according to TriageCancer.org. They believe the number of people currently in medical debt in the US tallies up to an astonishing 100 million people. Speak to a financial advisor and a lawyer with expertise in this area to learn how to potentially spare your household from crisis and any future need to file bankruptcy.

4. Ways to Seek Financial Assistance

There are several avenues for financial assistance related to medical bills to investigate, including:

• Pharmaceutical assistance programs can help cover medication costs. The drug manufacturer usually provides these, so check out their websites.
• Several non-profit organizations often offer grants to help with specific medical expenses. See our article with tips for financial assistance for EDS patients, called Bend, But Don’t Break the Bank: Financial Resources for EDS Patients.
• Find programs near you at the Administration for Children and Families government resource locator. Many federal, state, and local government programs can provide additional support and the list is a rich resource.

• Read the in-depth report shared on Dysautonomia International's website, "In Pain and Agonizing Over the Bills." This resource directory is outdated, yet still full of ideas for financial support from federal programs, legal aid, living expenses, service and faith-based organizations, and other patient assistance programs (written originally for Complex Regional Pain Syndrome (CRPS) patients but applies equally.)
• Explore charity organization resources like HelpHopeLive.org or BenefitsCheckUp.org for assistance tailored to your needs.

PART II:

5. Preparing Your Tax Filing and Relevant Documents

How to Decide If You Will Itemize or Not

Come tax time in the US, usually on April 15 every year, and you may be able to deduct unreimbursed medical expenses from your adjusted gross income. Only unreimbursed expenses. These can sometimes be deducted from your federal income tax return if they exceed a certain percentage of your adjusted gross income (AGI). However, this requires itemizing deductions, which may only benefit some taxpayers. As of the last update in April 2023, the IRS allows individuals to deduct unreimbursed medical expenses that exceed 7.5% of their adjusted gross income.

The deduction for unreimbursed medical expenses is based on a taxpayer's Adjusted Gross Income (AGI). It can be claimed by either an individual or a household that files jointly. The 7.5% AGI threshold applies to the total of your medical expenses that are not reimbursed by insurance or other means. Here's how it works:

• If you file as an individual, you can deduct the total unreimbursed medical expenses that exceed 7.5% of your AGI.
• The 7.5% threshold applies to your combined AGI if you're married and file jointly. So, you and your spouse's unreimbursed medical expenses are added together, and you can deduct the amount that exceeds 7.5% of your joint AGI.

For example, suppose a married couple has a combined AGI of $100,000. In that case, they can deduct unreimbursed medical expenses that exceed $7,500 (which is 7.5% of their AGI). If their total unreimbursed medical expenses are $10,000, they can claim a deduction of $2,500 ($10,000 - $7,500).

6. How to Calculate if Medical Expenses Are Worth Itemizing

To calculate your deductible unreimbursed medical expenses, you can follow these steps:

1. Calculate your Adjusted Gross Income (AGI): This is the total income you report, subject to income tax—such as wages, salaries, or interest—minus specific deductions.
2. Determine Total Unreimbursed Medical Expenses: Add up all the medical expenses not reimbursed by insurance or other sources. This is where detailed tracking of your medical expenses comes in.
3. Apply the 7.5% Threshold: Multiply your AGI by 7.5% (0.075).
4. Subtract the Threshold from Your Total Medical Expenses: The amount exceeding 7.5% of your AGI is deductible. Suppose it does not exceed 7.5% of your AGI. In that case, none of the unreimbursed medical expenses are deductible, and you're better off taking the standard deduction outlined later.

Here’s an example calculation:

Suppose your AGI is $50,000. Multiply $50,000 by 7.5%, which equals $3,750. This is your threshold. Now, if your total unreimbursed medical expenses for the year are $8,000, you would calculate your deduction as follows:

1. $50,000 AGI x 7.5% = $3,750
2. $8,000 (total expenses) − $3,750 (threshold) = $4,250

In this example, $4,250 (the difference) of your medical expenses could be deducted from your taxable income, assuming you itemize deductions on your tax return. Remember, you must itemize your deductions to take advantage of this, which means you cannot take the standard deduction. You should only itemize if your total itemized deductions, including medical expenses, exceed the standard deduction for your filing status.

7. Why It’s Important to Know the Standard Deduction

For the tax year 2023 (for taxes due in April 2024), the standard deduction amounts are as follows per the IRS.gov website:

• For single taxpayers and those married filing separately, the standard deduction is $13,850.
• For married couples filing jointly, the standard deduction is $27,700.
• The standard deduction for those filing as head of household is $20,800.
• Additionally, taxpayers 65 or older or blind can claim an additional standard deduction of $1,500 per person or $1,850 if unmarried and not a surviving spouse. If someone is both 65 or older and blind, the additional deduction amount is a total of $3,000 for 2023.

This means deciding whether to itemize your medical expenses boils down to…which number is higher -- your unreimbursed medical expenditures, or the standard deduction? The higher of the two is the option suggested for most taxpayers.

8. If You Receive SSDI Benefits – Be Aware of Tax Implications

When it comes to claiming Social Security Disability Insurance (SSDI) on your taxes, here's what you should know:

1. Reporting SSDI Benefits: SSDI benefits are reported on your federal income tax return by you and the Social Security Administration (SSA), so do not leave that income off your tax earnings. You will typically receive Form SSA-1099 from the SSA in the mail around February every year, showing the total amount of the benefits paid to you during the year.
2. Taxable Amount: This can get tricky depending on whether you choose to have taxes withheld from disability or not. If you decide not to have deductions automatically withheld, remember that the taxation of SSDI benefits depends on your income level. Suppose your total income, including half of your SSDI benefits and any other nontaxable interest, exceeds $25,000 for an individual or $32,000 for a married couple filing jointly. In that case, you may have to pay taxes on a portion of your benefits.
   • Suppose the combined income is between $25,000 and $34,000 for an individual or between $32,000 and $44,000 for a married couple filing jointly. In that case, you may have to pay income tax on up to 50% of your benefits.
   • If it is more than $34,000 for an individual or $44,000 for a married couple, up to 85% of your benefits may be taxable.

3. Tax Rates: The tax rate applied to your SSDI benefits is the same as your regular income tax rate. The actual rate depends on the total amount of your taxable income and your filing status.
4. Withholding Taxes: Whether or not you should have taxes withheld from your SSDI benefits upfront can depend on several factors:
   • Suppose you have substantial other income (such as wages, self-employment, interest, dividends, and other taxable income that must be reported on your tax return) besides your SSDI benefits. In that case, you should have federal taxes withheld from your benefits.
   • Suppose your SSDI is your only source of income, or you have little other income. In that case, you may not need to have taxes withheld because your total income may be below the taxable threshold.
   • Get professional advice, knowing that withholding can prevent you from paying a large tax bill when you file your return and can help you avoid underpayment penalties. That means no huge tax bill in April if you plan carefully.

5. Voluntary Withholding: If you choose to, you can request tax withholding on your SSDI benefits by filling out IRS Form W-4V and submitting it to the SSA. You can choose to have 7%, 10%, 12%, or 22% of your monthly benefit withheld for taxes. Then your taxes are deducted from each check, as opposed to one lump sum due at tax time, so it feels less painful to your wallet.

Deciding whether to withhold taxes from your SSDI benefits upfront is a personal decision that should consider your overall financial situation, your other sources of income, and your anticipated tax liability as guided by your tax advisor. Check out the National Disability Institute for free tax preparation guidance if you‘re disabled.

If You’re Anxious There’s Not Enough Time Before Tax Day This Year – April 15

You can ask for more time. Filing for a tax extension can benefit individuals with substantial medical expenses. An extension provides additional time to gather comprehensive documentation of medical expenses, ensuring that you get all potential deductions. To file a tax extension, you must submit Form 4868 to the IRS by the original filing deadline of your return (usually April 15). This form is straightforward and can be filed online or by mail. It's important to note that while an extension grants extra time to file your tax return, it doesn't extend the time to pay any taxes owed or reduce your taxes. Therefore, estimate and pay that amount by the original deadline to avoid potential penalties and interest if you expect to owe taxes. By leveraging a tax extension, you can alleviate some of the stress associated with tax season and ensure a thorough accounting of your medical expenses for optimal tax benefits.

Going Forward and Resources

Yes, this can be incredibly confusing, and we are not experts or tax advisors, but fellow patients just like you trying to manage our health and out-of-control expenses. Managing medical costs as a chronic illness patient is an ongoing process that requires diligence, organization, and a proactive approach – not to mention attention to detail in those spreadsheets. Hopefully, some insights can help you prepare to file this year better optimized - or start off right for next year with a new system to track it all. Imagine what you could spend the potential extra money on to motivate you to trouble with the tracking – like a beachside vacation! While it can seem overwhelming at first, developing a system that works for you and utilizing available resources can make a significant difference in your financial well-being in the long run, saving you tax payments on services dedicated to your care. Plus, it relieves some severe stress, too! Remember, you are not alone in this journey. Leverage the support of healthcare professionals, financial advisors, and fellow patients to navigate this path more effectively.

Resources

IRS Help

For more on filing taxes in the US, see the IRS medical and dental expenses information on www.IRS.gov and check out their tools, including:

• • IRS Interactive Tax Assistant (ITA): The ITA is an online tool that answers tax law questions, including whether you can deduct your medical and dental expenses.
  • IRS Free File: If your income is below a certain threshold, you may qualify for free, guided tax preparation through the new IRS Free File program started for the 2023 tax year.
  • IRS Taxpayer Assistance Centers (TACs): For personal tax help, you can make an appointment at a local TAC.

IRS Commonly Used Medical-Related Tax Forms

• Forms 1040 and 1040-SR are the standard IRS forms for individual tax returns. Medical expenses are reported on Schedule A (Itemized Deductions) of Form 1040.
• Schedule A (Form 1040): This schedule is used for itemizing deductions, including medical and dental expenses. It's attached to your Form 1040.
• Publication 502 (Medical and Dental Expenses): This publication provides detailed information on what medical expenses are deductible, how to calculate your deductions, and what records you need to keep.
• Form 8889 (Health Savings Accounts (HSAs)): If you have a Health Savings Account, this form reports contributions to and distributions from HSAs.
• Form 8853 (Archer MSAs and Long-Term Care Insurance Contracts): This is used for reporting contributions and distributions related to Medical Savings Accounts (MSAs) and long-term care insurance contracts.

Expense Tracking Tools

For tracking medical expenses online, there are several free templates available that can be of great help:

• TemplateRoller offers a free medical expenses template specifically designed for medical expenses.
• TriageCancer.org offers a free medical bill tracker that’s a downloadable Excel template.
• World of Printables provides a free printable paper version of their Medical Expenses Tracker​​.
• If you like log-style booklets, here's a couple on Amazon for consideration: Medical Expenses Logbook or a Travel Expenses Medical Expense Tracker.

In addition to the templates for tracking medical expenses, there are other tools and online resources that can be useful for patients managing chronic illnesses and their associated costs:

The information provided in this article is intended for educational and informational purposes only and does not constitute professional financial or tax advice. While we strive to provide accurate and up-to-date information, the content may not apply to your specific situation or may be outdated at the time of reading. We are not financial advisors, tax professionals, or legal experts. Therefore, it's important to consult with a qualified professional for personalized advice before making any financial or tax-related decisions. The content is provided "as is" without any representations or warranties, express or implied. The nonprofit organization and its affiliates will not be liable for any errors or omissions in this information nor for the availability of this information. Neither will they be liable for any losses, injuries, or damages from the display or use of this information.

Disclaimer:
The information provided in this article is intended for educational and informational purposes only and does not constitute professional financial or tax advice. While we strive to provide accurate and up-to-date information, the content may not apply to your specific situation or may be outdated at the time of reading. We are not financial advisors, tax professionals, or legal experts. Therefore, it's important to consult with a qualified professional for personalized advice before making any financial or tax-related decisions. The content is provided "as is" without any representations or warranties, express or implied. The nonprofit organization and its affiliates will not be liable for any errors or omissions in this information nor for the availability of this information. Neither will they be liable for any losses, injuries, or damages from the display or use of this information.