Medical costs resist planning for three structural reasons: the spending distribution is extremely skewed, you generally can't learn the price before agreeing to the service, and the bill arrives weeks or months later in pieces from several different senders. None of that is a personal budgeting failure. It's how the system is built.
The distribution point is the one that explains the most and gets discussed the least. In 2023, the top 5 percent of health spenders accounted for nearly half of all health spending, averaging $72,918 for the year, while the bottom half of the population averaged a few hundred dollars. There's no single number that describes a typical year, which is why budgeting a typical amount doesn't work.
Why can't you just budget an average for medical costs?
Because the average is a figure almost nobody actually experiences. Health spending isn't distributed like groceries or fuel, where most people cluster near the middle. It's concentrated at one extreme, with most people spending very little and a small group spending enormous amounts.
The numbers from the Medical Expenditure Panel Survey make this concrete. Analysis by KFF and the Peterson Center found that in 2023 the top 5 percent of spenders averaged $72,918 for the year and the top 1 percent averaged $150,467. Meanwhile, in the 2022 data, the half of the population below the median accounted for just 3 percent of all health spending, averaging around $374 each. Roughly 13 to 14 percent of people have no personal healthcare expenditures at all in a given year.
Take the national average of those groups and you get a number that describes essentially no one. Budget it and you're wrong in both directions: too much set aside during the years nothing happens, nowhere near enough during the year something does.
This isn't a recent distortion, either. Health Affairs research tracking the concentration across decades found it remarkably stable, with the top 5 percent accounting for roughly half of spending going back to the 1970s. It's a permanent feature of how medical spending works rather than a symptom of current prices.
Here's the part that makes planning genuinely hard rather than merely annoying. You don't get assigned to a group. A person in the bottom half for eight consecutive years can move to the top 5 percent in a single afternoon, and nothing about the previous eight years told them it was coming. Your own history is a weak predictor of your own future, which is exactly the condition under which averages stop being useful.
Why can't you find out the price in advance?
Because in most medical situations you commit to the service before anyone tells you what it costs, and often before anyone could tell you. That sequence is close to unique among things people buy.
Consider what happens elsewhere. You see the price, then you decide. In healthcare you frequently agree to a procedure, receive it, and learn the cost six weeks later, at which point declining is no longer an option.
Several things stack up behind that. A hospital's list price bears little relationship to what anyone actually pays, since insurers negotiate their own rates and those rates differ by plan. The amount your insurer allows differs from what was billed, and your share differs from both. The final number depends on your deductible progress, your coinsurance percentage, and network status, none of which is visible at the point of care.
There is one genuine right worth knowing about. Under the No Surprises Act, uninsured and self-pay patients can request a written Good Faith Estimate of expected charges when scheduling a service, and it has to include everything reasonably expected to be part of the care. If the final bill exceeds that estimate by $400 or more, you can dispute it through a federal process within 120 days of the bill date. Very few people use it.
Why does one visit produce several bills?
Because a single episode of care often involves multiple separately billing entities, each sending its own bill on its own timeline. One emergency room visit can generate a facility charge, a physician charge, and separate bills from radiology, pathology, and anesthesia.
That fragmentation is the reason people so often think a bill is settled and then receive another one. You pay what arrives, assume it's finished, and six weeks later something else shows up from a practice you've never heard of that was involved in your care without your ever meeting them.
It also used to produce a nastier problem, where an in-network hospital employed out-of-network specialists and patients got balance billed for the difference. The No Surprises Act addressed much of that for emergency care and for out-of-network providers at in-network facilities, which is a real improvement worth knowing about.
Why does the timing make everything harder?
Four separate timing problems compound each other, and any one of them would be enough to break a monthly budget.
The plan year resets
An injury on January 8 and the identical injury on November 8 can cost dramatically different amounts, purely because of where you sit against your deductible. Nothing about the medical event differs. The calendar does the work.
This also means that if you've already met your deductible in a given year, additional care that year is substantially cheaper, which is worth factoring into elective procedures you've been postponing.
Coinsurance keeps going after the deductible
Hitting your deductible doesn't mean you're finished paying. If your plan covers 80 percent afterward, you still owe 20 percent of everything until you reach your out-of-pocket maximum. A lot of people budget the deductible and are surprised by what comes after it.
The bill lags the service
Charges arrive weeks or months later, which means the expense lands in a month with no relationship to the month you received care. A budget organized around months struggles with an expense that deliberately ignores them.
Claims get denied, and denials get reversed
A denied claim can shift thousands of dollars onto you, and appeals are frequently successful, which means the amount you owe can change after you've already been told what it is. Living with a number that isn't final is its own planning problem.
So how do you actually plan for this?
Stop budgeting an average and start budgeting the boundaries. Your deductible is a reasonable target for a normal year, and your out-of-pocket maximum is the ceiling for a bad one. Both numbers are in your plan documents, so this is the rare financial target you don't have to estimate.
Think of it as two separate jobs.
The first job is covering the likely. Divide your deductible by twelve and treat that as a recurring transfer into a dedicated medical fund. If your deductible is $2,400, that's $200 a month, and in a quiet year you finish with money you didn't need, which is the correct outcome rather than a waste.
The second job is covering the tail, and savings alone can't do it. The gap between your deductible and your out-of-pocket maximum is what your emergency fund and your insurance exist for. Trying to save your way to full coverage of a catastrophic year is how people end up permanently feeling behind, because the target isn't reachable on ordinary income.
That division matters more than any specific dollar amount. Savings handles the likely and moderately expensive. Insurance handles the unlikely and catastrophic. Matching the right tool to the right risk is what makes this planning rather than worrying, and our guide to starting an emergency fund when you're already behind covers building the first tier when the budget looks like it has no room.
If your income varies, fund by percentage rather than a fixed amount. Committing 4 percent of each payment that arrives scales naturally with your actual earnings and never demands a number you can't produce in a lean month. Our approach to budgeting on an irregular income covers setting those amounts against your leanest recent period.
How do you track something this irregular?
Look at the annual number, not the monthly one, and give medical costs enough category detail that you can tell the routine from the exceptional.
Monthly views are actively misleading here. Eight months of $40 followed by one month of $3,100 tells you nothing useful on a month-by-month basis, and it tells you a great deal across twelve months. Lucky Friday's monthly and annual toggle is the relevant tool, and being able to select any past year lets you compare across the multi-year timescale that medical spending actually operates on.
The category structure matters too. Most budgeting apps offer a single preset "Health" line, which collapses a $12 generic refill and a $2,400 hospital bill into one number that answers no question you'd actually ask. Lucky Friday lets you create unlimited custom categories and subcategories with your own icons and colors, so you can separate premiums, routine visits, prescriptions, dental and vision, and the sinking fund itself. All of that sits on the permanently free tier, with no category limits and no credit card required.
Two more practical notes. Manual transaction entry is included free, which matters because HSA and FSA card charges, payment plans, and provider portals often don't sync cleanly. And transaction filtering by date range lets you reconstruct a full year of medical spending when you need it for a financial assistance application, an appeal, or a tax deduction.
After two or three years of this you'll have the thing that makes the next decision easier: your own history. Not the national average, not a number from an article, but what your household actually spends across good years and bad ones. That's the only figure that meaningfully informs a plan choice at open enrollment.
One honest closing thought. Tracking won't make medical costs predictable, because nothing available to you makes them predictable. What it does is tell you where you stand against your deductible, whether your sinking fund amount is realistic, and what a bad year actually looked like the last time you had one. That's a considerably better position than guessing, and it's roughly the best position available.
Common Questions About Planning for Medical Costs
Why is it so hard to budget for healthcare?
Health spending is extremely concentrated, so the average doesn't describe a typical year for anyone. MEPS data shows the top 5 percent of spenders averaged $72,918 in 2023 while the bottom half of the population averaged a few hundred dollars. Add that you usually can't learn the price before the service, and you're budgeting for something both unknowable and wildly variable.
How much should I budget for medical expenses each year?
Use your own plan documents rather than a national figure. Your deductible is a reasonable target for a normal year and your out-of-pocket maximum is the ceiling for a bad one. Divide the deductible by twelve for a monthly transfer, and treat the gap between deductible and out-of-pocket maximum as a job for your emergency fund and your insurance.
Why do I get multiple bills for one medical visit?
Because a single episode often involves several separately billing entities. One emergency room visit can generate a facility charge, a physician charge, and separate bills from radiology, pathology, and anesthesia, each arriving on its own timeline. That's why a bill you thought was settled is sometimes followed by another one weeks later.
Can I find out what a medical procedure will cost beforehand?
Sometimes, and it takes asking specifically. Under the No Surprises Act, uninsured and self-pay patients can request a written Good Faith Estimate when scheduling, covering all expected charges including facility fees and anesthesia. If the final bill exceeds that estimate by $400 or more, you can dispute it federally within 120 days of the bill date.
Does it matter what time of year I have a procedure?
It can matter a great deal. Your deductible resets each plan year, so the same procedure costs substantially more in January, before you've met it, than in November if you've already met it. If you've been postponing something elective and have already hit your deductible, finishing it before the year resets is worth considering.
Sources
KFF and Peterson Center on Healthcare. "How do health expenditures vary across the population?" Analysis of 2023 Medical Expenditure Panel Survey data. https://www.healthsystemtracker.org/chart-collection/health-expenditures-vary-across-population/
KFF. "How Do Health Expenditures Vary Across the Population?" March 2026. https://www.kff.org/health-costs/how-health-expenditures-vary-across-the-population-slideshow/
KFF. "Health Policy 101: Health Care Costs and Affordability." https://www.kff.org/health-costs/health-policy-101-health-care-costs-and-affordability/
Agency for Healthcare Research and Quality. "Concentration of Healthcare Expenditures and Selected Characteristics of High Spenders," Medical Expenditure Panel Survey Statistical Brief. https://meps.ahrq.gov/data_files/publications/st533/stat533.pdf
Berk, Marc L., and Alan C. Monheit. "The Concentration of Health Care Expenditures, Revisited." Health Affairs, vol. 20, no. 2, 2001. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.20.2.9
Centers for Medicare and Medicaid Services. "Understanding the Good Faith Estimate and Patient-Provider Dispute Resolution Process."