What are the Medical Costs of Having a Baby?

There are so many exciting milestones when it comes to having a baby. Paying the inevitable medical bills is not one of them. 

The American healthcare system has lots of room for improvement, to say the least. One major complaint is the lack of cost transparency. In addition to the lack of clarity around what your medical provider will charge, insurance policies make it even more confusing to predict or anticipate what that care will cost you. 

Without knowing what your medical bills will cost it is particularly challenging to proactively prepare for them.

Cost of Childbirth without Medical Insurance

According to a report from the Health Costs Institute, in 2020 the national average cost for childbirth was $13,393. This is the amount billed to insurance companies, or the amount billed to the patient if they are uninsured. However, there is considerable variation in cost depending on your location. California, with an average cost of $19,230, is the most expensive state for childbirth, with Alaska and New York following close behind. Mississippi was at the bottom of the list, with an average childbirth cost of $7,639.

Unsurprisingly, birth costs in high-cost-of-living areas tend to be some of the highest. The San Francisco Bay Area topped the list of select metro areas, with an average cost of $27,173. 

Cost of Childbirth WITH Medical Insurance

Assuming you do have medical insurance, the bigger question is what is childbirth going to cost YOU? 

According to the Health System Tracker, which is run by the Kaiser Family Foundation & the Peterson Center on Healthcare, the average pregnant person, who has traditional employer-sponsored health insurance, has $18,865 in total medical costs (that includes the birth, prenatal checkups, postpartum care, and other medical expenses that may or may not be directly related to the pregnancy). Insurance then pays $16,011 of those total expenses, leaving insured patients with an average of $2,854 in out-of-pocket expenses. However, your actual out-of-pocket expenses may look very different, depending on the specifics of your insurance policy. 

While the cost of medical services in your local area can have an impact on the total out-of-pocket cost for you, the biggest factor is your specific medical insurance policy. 

Understanding your Medical Insurance Policy

If you’ve never looked at your health insurance policy’s Summary of Benefits and Coverage document, now is the time to do so. This document spells out how much your deductible and out-of-pocket maximum limits are. It also outlines what types of services are covered for common medical events (like pregnancy), and what the difference in cost is if the care is in-network or out-of-network. 

Your Summary of Benefits and Coverage will also have examples that break down the typical costs (and insurance coverage) of common medical events, like pregnancy and childbirth. This gives you an idea of what a best-case scenario would cost. Here is an example of a hypothetical policy breakdown. 

Under many insurance plans, your routine prenatal appointments may be covered (at no direct cost to you) as preventative care. There are usually some additional routine services, like bloodwork or ultrasounds, that you will have to pay for (or at least pay a portion of). Also, if you need additional appointments to address potential complications, there is likely going to be a cost (or at least a co-pay or co-insurance). 

If the cost for pregnancy & childbirth, according to your Summary of Benefits and Coverage document is equal to your out-of-pocket limit, you can feel relatively confident that this is the maximum amount you will pay, assuming all of your care is considered in-network. 

If the cost for pregnancy & childbirth, according to your Summary of Benefits and Coverage document is less than your out-of-pocket limit, anticipate that you will pay somewhere between that projected amount and your out-of-pocket limit. If you have pregnancy complications that require additional appointments, hospital stays, a c-section, or other non-pregnancy medical expenses (visiting your dermatologist, GP, regular prescriptions, etc), that increases the likelihood you will be hitting your out-of-pocket limit for the year.

One major caveat to highlight is that most plans run on an annual calendar basis. When January 1 hits, your deductible and out-of-pocket limits reset. So if your baby is born on January 7th, 2024, the costs accrued for the pre-natal appointments in 2023, unfortunately, don’t apply to the 2024 deductible or out-of-pocket limit. If your pregnancy spans two calendar years, you could, in theory, hit your annual deductible or out-of-pocket limit twice.

Homebirths and Birth Centers

The actual cost for homebirths or birth center births is much lower than the amount billed for hospital births. The national average for homebirths, according to a report by the National Library of Medicine is $4,650 (compared to the national hospital birth rate of $13,393). The cost is of course higher in higher cost-of-living areas, like San Francisco where costs range from $5,000 - $8,500 for a home birth. If you don’t have insurance, a homebirth or birth center is going to cost you significantly less than a hospital birth. 

However, if you do have medical insurance, a homebirth or birth center is often be considered out-of-network. Depending on the specifics of your policy, and the cost of your specific provider, a homebirth may actually cost you more. 

While the majority of homebirths are successfully managed at home without any significant complications, it’s important to highlight that for a small percentage, they are transferred to a hospital for emergency care. So if you are planning for, and budgeting for, a home birth, it is good to keep in mind that it is feasible that you may end up with both homebirth and hospital expenses. 

Baby’s Medical Expenses

Your baby will be covered under the mom’s insurance policy for the first 30 days. Medical expenses within those first 30 days will apply to the mom’s deductible or out-of-pocket limit. So if the mom has already hit her out-of-pocket limit for the year, there aren’t any additional costs for the baby’s in-network medical care during those first 30 days. 

Soon after the baby is born, you’ll need to add the baby to your insurance plan (or your partner’s). Any medical expenses that occur after 30 days will apply to the baby’s policy, which will have its own deductible and out-of-pocket limit.  

Paying the Bills

After a hospital birth, expect to receive multiple different bills. You will likely get separate bills from the OB/GYN, the hospital, the anesthesiologist, and any other specialist who may have been involved. It’s not uncommon to see the first bill and think “OK that's not as bad as I was expecting” only to get 2 more sizable bills over the next 2-3 months. 

If you are not able to fully pay the bills when they come in, you may have some options. Many hospitals, especially non-profits, have a financial aid policy. If you (or your household) earn under a certain threshold they will waive or reduce your bill. Hospitals don’t generally advertise this policy, but it’s worth googling your hospital and “financial aid” or “charity care” to see if they have such a policy and if you may qualify. Keep in mind, this is only relevant to the bill coming from the hospital (for services like room and board, postpartum care, etc), and may not apply to your OB/GYN or other specialist bills.

If you aren’t able to afford your bill (after looking into potential financial aid assistance), call the providers and ask if you can set up a payment plan. Most hospitals and doctors are willing to set up a plan where you pay smaller installments over a period of time. As long as you are consistently paying some amount, the medical providers are usually fairly accommodating. However, if you let a medical bill go completely unpaid for over 90 days, there is a good chance they will send it to a collection agency. 

While it may be tempting to put your medical bills on a credit card, if you are unable to pay the balance in full right away, this may cost you a lot of money in interest fees. It is generally much cheaper to work out a payment plan with the provider. 

Creating a Plan

The first step in preparing for medical costs is anticipating what the costs will likely be. Next, you’ll want to create a plan for HOW you will actually pay for them. 

Setting up a Savings Bucket, where you set aside money on a regular basis, is a great way to ensure that you have the funds to cover anticipated medical expenses. If you have access to an FSA (or HSA) and your open enrollment period is approaching, this may be a good time open one or increase your contribution if you already have one. FSAs and HSAs are essentially tax deductible Savings Buckets. 

If you are interested in one-on-one support as you prepare for the financial impact of having a baby, schedule a call with Sarah to learn more.