We're pregnant! What the hell do we do now?
Mazeltov. You may commence your descent into existential financial dread now. When considering the word “schadenfreude,” please remember the expression on the faces of your parents and your offspring-producing friends when they heard the news.
You'll survive. You'll be rich in personal fulfilment. You'll be poorer in all the ways that matter to the Crisis Button.
Rock-a-bye wallet, on the tree top
First thing: Call your insurance company immediately. You need to know what's going to be covered and what you're going to have to negotiate. Some insurers set a flat deductible, others a percentage of costs up to a cap. Will every prenatal visit require a separate co-pay? Ultrasound? Folic acid vitamins? Lab tests? How many days in the hospital? Will they pay for alternative (read: less expensive) options?
Prenatal care usually costs about $2,000, most of which should be covered by insurance, assuming you're not on a terrible individual plan or one with very high deductables.
(A note: You will not be able to get insurance to cover your maternity costs if you're already pregnant. Period.)
That said, health costs present one of the largest and least predictable costs of having a baby, even with insurance.
“In our survey, 39 percent of moms paid $1,000 or more for medical bills related to childbirth, and 9 percent of those were on the hook for $5,000 or more,” reports Johnson & Johnson's new parents website, Babycenter.com.
The rapid, poorly understood increase in Caesarean births in the U.S. may be contributing to these costs. A Caesarean delivery results in an average of about $6,000 in additional charges to insurers, government data suggests. If you're paying a percentage of that in deductibles, that's money out of your pocket as well. Roughly 1in 3 deliveries now are Caesarean in the U.S.
Studies suggest that the services of a doula — a birthing coach — can reduce the need for C-sections by 50 percent. Costs vary from $250 to $1,000, and might be covered by insurance. Do the math — 1 chance in 3 of a $6,000 cost is a $2,000 risk, or a $500 risk to you if you're carrying a 25 percent insurance deductable. If a doula cuts that risk in half, then $250 is a justifyible cost before considering the other benefits of the help. And if you're uninsured ... then that's half of a $2,000 risk, and a grand looks like a good deal.
Similarly, delivering in a birthing center or at home if you have a low-risk preganacy may cut your costs in half. Birthing centers use midwives and nurses with fewer medical interventions, and a home birth doesn't require a hospital stay. (Don't try it if you think you'll need an epidural or don't live less than 20 minutes from a hospital.) If you feel up to it, you should consider limiting your hospital time to the fewest number of days you can.
Memphis is ground-zero for baby-making in America — it has the highest birth rate per capita in the U.S. A doctor there may charge an insurer $2,800 for the general prenatal package of visits, including a traditional delivery and $3,500 for a Caesarian birth, said Jenni Bohatch, office manager for Memphis obstetrician Kristin Miller. But the cost to the patient varies widely depending on their insurance plan, from $100 to as much as $2,000. And these costs do not include an ultrasound — typically $200 — or laboratory tests, which vary widely.
If you're uninsured … well, you're paying more. You'll probably be able to negotiate a lower rate for your birth costs from the doctor — Miller's practice offers a 20 percent discount — but it's all coming out of pocket.
In any case, step two is to open a health savings account. At the very least, you can pay for all of this using tax-advantaged dollars. Notably, medical expenses greater than 7.5 percent of your income are tax deductable.
When the bank breaks, the cradle will fall
In the first year, expect to pay about $10,000, according to a survey from Babycenter. The Babycenter site has an excellent cost calculator to get you started on estimates.
The USDA in 1960 began offering an estimate of the cost of raising a child from birth through age 17. Its current annual estimate of average cost ranges between $12,290 and $14,320 for a child in a two-child, married-couple family in the middle-income group.
Notably, that cost doesn't include the indirect cost of not working, said Mark Lino, author of the FDA's 2011 report.
“We don't look at foregone earnings,” he said. “One parent often reduces time in the labor force. Studies that have examined that have seen that there's as much impact of that as the direct cost of having the child.”
The agency noted a wide variation in expense by household income level. Naturally, rich parents typically spend more on their kids than poor parents — two or three times more. Much of the difference can be attributed to housing — about 30 to 32 percent of the total cost. People move from their bohemian apartment in the cool part of town into suburban three-bedroom subdivisions with good schools and rapacious homeowners associations.