Welcome back to The Hip Replacement Podcast. And I got to tell you, it's already been kind of a long day for me or it's been quite a day and it's still pretty early in the morning. I'm just trying to recover is what I'm trying to say here. And not that I got hurt, but I ate too many waffles this morning.
Here's what happened. I got up, I worked out, and then I went and sat in a cold plunge for about 20, 25 minutes. And then I got out and I came back inside and my wife and my daughters were sitting down to breakfast and my wife made waffles.
And my wife makes great waffles. We have a lot of food allergies in my family for some reason. Maybe it is related to my hips, I don't know. But anyway, we have a lot of food allergies.
So, we both, my wife and I both cook at home, and my wife is a great cook, and she makes these great waffles, and I just could not resist eating way too many waffles. So, I feel like I just ate a lot.
And I'm going to try to get through this episode, but I think I need to do this episode and then go for a really long walk just to burn off all these waffles and syrup and butter and everything. And not the healthiest, but it sure was good. And I'll probably do it again soon, too.
So, it was a great morning, but I'm really full from a big breakfast.
Hopefully, you've enjoyed your morning as well, wherever you are in the world. And today we're going to talk about something that is near and dear to my heart.
May sound a little bit weird, maybe not for you, but today we're going to talk about tax accounts and specifically the tax accounts that can help you pay for expenses related to your surgery.
Sounds strange for me to be so geeked out about taxes, but I have a tax background, so it's pretty interesting to me. Hopefully, it's interesting and helpful to you.
Now, just a note here, these tax accounts I'm going to talk about are beneficial tax accounts applicable to the United States. And these may not be applicable in other countries because of the health care systems there, maybe universal health care or standardized medicine.
But it's always a good idea to check with a tax advisor in your country, wherever you are, to see if your hip replacement surgery makes you eligible for certain tax benefits resulting from the expenses you may have had to incur because of your surgery.
But in the US, these types of accounts are a really big deal.
And something to consider here is that it's okay to use these tax benefits. Don't be embarrassed. Don't feel like you don't qualify for these tax benefits or you don't want to use them because a situation where someone is recovering from major surgery may be exactly why the tax benefit was put into place to begin with.
So use it. It's there for you if you qualify.
And think about it like this. You would not walk into a store, see the same product at two different prices, and select the more expensive one, would you? I wouldn't. The discount is there for you to use.
So, if you qualify, use the discount, use the tax benefits, use these tax accounts to your benefit.
Anyway, specifically, I'm talking about health savings accounts known as HSAs and flexible spending accounts known as FSAs.
And why am I qualified to talk about these? Why am I qualified to talk about taxes?
Well, to begin with, I'm an attorney. Coincidentally, I've worked in the tax area for about eight years during my career. I've used these tax benefits and accounts after my hip surgeries and I've done the research.
So, I think I'm somewhat qualified to talk about these tax accounts and how they can be helpful for someone after they've had a hip replacement surgery and maybe even before.
So, generally, what are HSA and FSA accounts?
I shouldn't say accounts after that because the A at the end of each of these stands for accounts, but HSA and FSAs. All right, these are tax preferred accounts that you set up to help you pay for medical expenses.
And the term medical expenses has a very big and fluid definition based on your individual facts. And the facts of you or me have certainly changed because of our hip replacement surgeries.
Now, these two different accounts, the HSA and the FSA, what they help you pay for is about the same, but how they are set up and the requirements are a little bit different.
All right. So, that's what distinguishes these two types of accounts. How they're set up and the requirements for each of these.
But here's basically how they work.
You take money and you put it into one of these two accounts and then you use that money to pay for medical related expenses.
The money that you put in to these accounts is not subject to federal income tax in the United States. So, you're not using pre-tax dollar. You're not using money after it's been taxed to pay for medical related expenses.
So, here's an example. Imagine you make $100,000. I know that sounds like a lot, but just bear with me. I'm trying to make the numbers easy.
Imagine you make $100,000 and you put $5,000 into one of these accounts. Your taxable income is reduced from 100,000 down to 95,000.
So that's good. The end result is that you're paying for medical related expenses with money that was not subject to federal income tax, which is good. So you're taxed on less to begin with.
Okay? And this is the benefit that I was talking about that if you qualify for it, use it. It's there for you.
So, let's go a little bit more into each one of these accounts. Let's do the FSA first. The flexible spending account first.
First off, this must be set up through your employer. All right? You have to be an employee and it's set up through your employer.
And these types of accounts run on a one-year period, meaning the money that you put in for that year must be used for expenses incurred in that year or else the money goes away. You lose it. Use it or lose it.
And when I mean 12 months, it doesn't necessarily have to be a calendar year. It's whatever 12-month period that your employer set up. So, if they use a different 12-month period, then that's what the term of the flexible spending account is.
All right?
So, flexible spending account, use the money in that year in that 12-month period or you lose it. Okay? It's gone.
Now, the HSA is completely different. The HSA, this is something that does not need to be set up through an employer. You can actually set this up outside of having a job.
But what you do need to have in order to qualify to set up a health savings account is that you need to have a health insurance plan, which is a high deductible health care plan.
So you need to have a health insurance plan that has a high deductible, meaning you have to pay a certain amount of money out of your pocket before the insurance coverage starts or it kicks in. Okay?
Meaning like the definition of high deductible for 2026 is $3,400 for families or $1,700 for individuals. And that means you have to pay that money out before the insurance coverage will start. And that's what's meant by a high deductible.
The IRS sets these limits. The Internal Revenue Service sets these limits.
Now, a couple key things about HSA accounts.
You do not have to use the money in your account for expenses in the year because these accounts do not reset each year.
These accounts are I don't want to call them permanent but until you close the account or you die these accounts keep rolling over every year. So you can grow the money in these accounts and the health savings account is what I would refer to and many tax professionals refer to as the holy grail of tax preferred accounts.
And this is because you put money into the account tax-free. The money inside the account can grow taxree and the money can be taken out of the account tax-free to pay for medical related expenses.
More on that later.
So whether you're using an FSA or an HSA, what kind of expenses can you pay using these accounts?
And by the way, you may be in a situation where you forgot you had one of these accounts.
Now, the FSA, if you don't use it during the year, just goes away. All right? So it expires.
But if you've ever had a job or you've ever set up one of these accounts, a health savings account, the FSA goes away, but the HSA carries on.
So if you may have set one of these up 10, 20, 30 years ago, maybe they don't go back that far. I don't know how far they go back. That's a good question. But they go back many, many years.
If you've set up one of these accounts and maybe you simply forgot about it, you could go back and submit expenses and use that money to pay for expenses now.
All right? So, think about if you've ever set up one of these accounts because I know people who forgot about them. I know people who are afraid to use them. I know people who don't know how to use them.
Think about if you have a health savings account set up that maybe you forgot about because it's been some time.
So, what type of expenses can you pay using either one of these two accounts?
And a short answer is qualifying medical expenses.
Well, what in the world does that mean?
Because of your surgery, because of the hip replacement surgery, the definition of qualifying medical expenses is much bigger for you than for someone else who did not have a hip replacement surgery.
So maybe this is kind of a silver lining of having the surgery. You know, maybe you get a tax benefit because you can use these types of accounts to pay for some of those expenses.
So specifically, what are we talking about here? What could be a medical related expense?
And again, the strange thing about taxes in the United States, and not maybe a strange, maybe a beneficial thing is that it's very fact specific.
What's taxable or not taxable for one person may be completely different for somebody else. And it depends on the facts of every given person.
And the fact that you've had a hip replacement surgery completely changes your facts. Completely changes what is deductible by you or and what we can use a health savings account for. What we can use to pay what type of expenses apply here?
So, there's some things that are no-brainers that easily pass the requirements for you to expense or for you to use one of these accounts for following a hip replacement surgery. Okay, so these are easy ones.
Crutches and other mobility assistance devices like walkers or canes or anything else that helps you get around.
Bandages, medicine, painkillers, prescription medicines, any type of medication that the doctor or surgeon give you that you have to go get filled and pay for that qualifies.
You can use your HSA or FSA to pay for the actual cost of the operation. Any deductible for insurance, physical therapy expenses, raised toilet seats.
I know a lot of people like to get a raised toilet seat because it's easier for them to get up and down after surgery. Absolutely. That qualifies.
Physical therapy items like a roller or percussion massagers. And I talk a lot about these items in a previous episode discussing the tools that I use.
I know a lot of people use ice machines or ice packs. These things help reduce swelling after surgery. Yeah, they qualify. So, you can use your HSA or FSA to pay for these things.
Also, compression boots, heat wraps.
What about a shower chair?
Absolutely.
Compression stockings or socks. Yep.
Shoe inserts or orthotics. I know a lot of folks have leg length discrepancy after hip replacement surgery. And the insert or some type of orthotic can be really helpful to balance out the leg length so that your gate is even and you don't wear your hips or cause other problems in your joints or your muscles.
So, absolutely shoe inserts or orthotics.
So those things and there's many more. I couldn't talk about each one. It would be here all day, but these things seem to be the pretty easy ones.
But what about big ticket items?
Things like durable medical equipment, things that last longer than a few years, maybe like cold plunges, sauna, stationary bike.
Again, your hip replacement changes the scope of what medical necessity means.
And here's a three-step process to keep in mind when considering whether or not something may be available to be purchased through a health savings account or a flexible spending account.
So what is meant by medical necessity? Here's a simple test.
Is the thing used to treat a specific injury or help you recover from a specific surgery?
Again, the fact that you've had hip replacement surgery changes your facts and brings a lot more things into the universe of yes, this will help me recover from a specific injury or help me recover from a specific surgery.
First thing.
Second thing to keep in mind is that you can get a doctor's recommendation or prescription.
This is basically a letter of medical necessity from a surgeon or a doctor stating that duty of the hip replacement, a certain piece of equipment is prescribed or recommended for treatment.
This is completely normal. I have several of these. Doctors and surgeons will write these for you.
Talk to your doctor or surgeon about a specific piece of equipment or something that you would use to help you recover from a hip replacement surgery.
And recovery just doesn't mean a few first few weeks, months, or a shorter time frame. It could be years.
And remember to keep receipts and a letter of medical necessity from the doctor in case anyone ever asks you later about it. In case the HSA account asks you for confirmation from a doctor or something showing that it was a medical necessity.
Just keep good documentation.
Now the timelines are also important to remember.
You must have had an FSA or an HSA already set up before incurring an expense for which you want reimbursed.
Okay? So, if you have the surgery in year one and you buy a bunch of things in year one to help you recover from the surgery and then you do not set up the FSA or the HSA until year two, none of those expenses will be reimburseable or you cannot use those accounts to pay for those expenses because you already incurred.
But if you switched it, if you set up the FSA or the HSA in year one, and then in year two, you had the surgery and the expenses, you could use those accounts.
But again, remember that FSA is only good for one year. So use the money in that FSA before it expires.
All right. The FSA expense must be incurred in the years of that FSA term. Remember that because the money is gone each year and again this doesn't need to be a calendar year.
Whatever the 12 months of the plan year the employer set up. Again remember the FSA has to be set up through your employer.
With an HSA, much more flexible.
There is no time restriction on getting reimbursed. The only requirement is that you need to have the HSA set up before you incur the expense.
So you could have a surgery in year one and decide you want to get reimbursed years later, say year five.
Incredibly flexible. As long as the account is set up prior to the expense being incurred and you have the money in the account at the time you're seeking reimbursement, you can get reimbursed.
So things to keep in mind about generally these types of accounts.
Number one, use the accounts if you have them. An FSA or an HSA. If you have the money in those accounts, use it.
Number two, if you have an HSA set up, but you haven't used it to pay for your expenses, there's no requirement that your HSA has to be funded or money being in that account when the expense was incurred.
So, think about that.
You can request reimbursement years later after you put money in the account as long as the HSA account was already set up at the time of the expenses.
I know this can get complicated. I'm trying to keep it as surface level as possible, but get with your tax advisor if you have one and explain your specific situation, including your surgery, because that is the key piece of information to determine if a specific expense would be eligible for you to use an HSA or an FSA account.
Now remember when I said earlier that with an HSA, the health savings account, that money goes in taxfree, it grows taxfree and can be taken out taxree to pay for medical related expenses and that this can be considered the holy grail of investment accounts or retirement accounts.
It's the reason why an HSA I think is one of the greatest investment vehicles in the United States because you can invest and grow the money inside an HSA and use it years later when you need the money for health care or medical care.
And let me give you an example. My family, we have several HSAs, okay?
We use one solely for medical expenses like this year if we needed to, such as doctor visits, eye care, we go get glasses or contacts or eye exams, the dentist, anything I need or anything I need to take care of my hips.
But then we have another HSA and this is where the magic happens.
We have another HSA to invest and make it grow.
And that one is invested in a private growth stage technology company. We took our HSA. There's some subtle things you have to do to it first.
We took that HSA and used it to invest in a private company to make it grow along with that company.
We invested in private company stock, but you can invest it in other things like real estate or in almost any other investment you can think of.
And again, the money goes into an HSA taxree, meaning reduces your tax burden, your tax base. It grows taxree in that account and you can take it out whenever you want tax-free to pay for medical related expenses later in life.
And this discussion about using your HSA to make investments is beyond the scope of this episode. All right, I'm not going to go into too much investing here. It's too much. It's too deep for this.
But if you want to learn more about this, just send me a message and I will send you back some information and I'll give you details of exactly where to go look to find information about that because the HSA is a very incredible and powerful tool for investment and growing wealth.
Also using it to pay for medical expenses and your medical expenses can be very big surrounding a hip replacement surgery.
But these tax preferred accounts, the FSA and the HSA, if you have them, if you're in the US and you have them, use them if you are able to.
You might have to go do some research and figure out if you open one of these years ago and it's just sitting there.
If you're in a different part of the world, a different country who maybe doesn't have accounts that specifically are similar to this or exactly like this, you can still talk to a tax advisor and see if there's some type of account, some type of tax beneficial account that you can use to help you pay for these types of medical expenses.
I hope this was helpful.
Thanks so much for tuning in to The Hip Replacement Podcast and until next time, I wish you the best recovery possible.
Take care.
