The basic formula for the computation of total annual out of pocket costs given plan information and estimated healthcare cost is as follows :
- total premiums = 12 * monthly premium
- total deductible = MIN(estimated healthcare cost, deductible)
- total cost share = cost share * MAX(0, estimated healthcare cost - total deductible)
- total HSA dollars = (1 - federal tax rate) * MIN(total deductible + total cost share, HSA dollars)
- total annual out of pocket = total premium + MIN(total deductible + total cost share + total HSA dollars, max annual out of pocket) - MAX(0,estimated healthcare cost - gross income * tax deduction percentage) * federal tax rate
Part of the Obama administration's attempt to make the healthcare system more accountable was to release Medicare charges for 100 inpatient and 30 outpatient procedures for providers across the country. While the same procedure may result in medical bills of varying sizes depending on insurer, this Medicare data gives a general idea of what different procedures cost across the country. You can find this data at CMS.gov. The calculator uses this dataset in conjunction with the input zip code to decorate the chart with the Medicare cost of these procedures to give the user an idea of what the out of pocket costs may be.
To generate average medical costs by age and gender, the calculator relies on statistics generated in a 2004 study of National Health Expenditures, found here at CMS.gov. This data can be further analyzed by state, but not by zip code. The calculator does not use this data as prices vary widely between zip codes in the same state (Buffalo vs. Manhattan, New York, for example). This dataset has historical expenditures, from which a historical rate of increase in healthcare can be derived, about 5.6% annually. This figure is used to scale any historical cost data into today's dollars.
To handle tax treatment, 2014 tax rates by income are used to apply simple deductions on healthcare expenses and HSA dollars. Generally healthcare costs in excess of 10% of income (more if self employed) can be deducted. See IRS Topic 502.
The data show on this site is an estimate only. This site is not responsible for discrepancies with actual costs that may be incurred.