M edical costs are rising so fast that many people are postponing treatments or tapping their retirement savings to pay the bills. Last year, half of all personal bankruptcies were due to serious illness -- and most of those people had health insurance when they became ill.

Good ways to save thousands of dollars a year on health care...

1. Choose the right health insurance plan. Don't make the mistake of focusing only on keeping monthly premiums down. Try to realistically factor in deductibles and co-payments. Many employers offer a choice of health insurance plans. Here's a snapshot...

HMO. A health maintenance organization is best if you and your family generally don't have complex medical issues and mostly use general practitioners... you are satisfied with the selection of doctors in the plan's network -- going outside the network might mean loss of coverage... and/or you need a lot of routine care, such as checkups for young children.

PPO. A preferred provider organization is best if you have a medical problem that requires you to see specialists... and/or your favorite doctors are out of network. PPOs cover non-network doctors, although co-payments and deductibles are higher than with HMOs.

POS. A point of service plan, which combines features of HMOs and PPOs, is best if you and your family are healthy and need routine care but want the flexibility of going out of network. With a POS, you can see any doctor you want. Your share of the cost usually is a percentage of the total bill.

Resource: Planforyourhealth.com provides tools to help you "guesstimate" your future health-care spending and choose the insurance plan that fits you best. www.planforyourhealth.com

2. Consider a health savings account (HSA). By next year, most large companies will offer HSAs, which combine a high-deductible ($1,050/year or more), low-premium health insurance plan for large hospital bills with a tax-free savings account for smaller medical costs, such as doctor visits.

HSA holders can contribute up to $2,700 a year ($5,450 for families) in 2006. You can put in an extra $700 if you are between 55 and 65 years old. Unused money can be carried over from year to year and invested where it can grow without being taxed.

An HSA is especially good for older workers who want to accumulate money for postretirement health-care costs or for long-term-care insurance premiums. Self-employed people can write off health insurance premiums and HSA contributions as business expenses. For more information, see IRS publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available from the IRS (800-TAX-FORM, www.irs.gov/publications).

For more information and a list of banks, brokerages and insurance companies that offer HSAs, go to HSA Insider, www.hsainsider.com.

3. Get more out of your flexible spending account (FSA). In this employer-sponsored plan, you can choose to have pretax dollars deducted from your paycheck to reimburse you for out-of-pocket medical costs. Under new rules, your company can grant you two and a half months beyond the end of the year to use the money you set aside. (Previously the deadline was year-end.) Unused balances cannot be carried over beyond that date -- the money is forfeited.

Many people know that they can use FSAs for prescription drugs, but few realize all that it covers, including health insurance deductibles and co-payments... acupuncture... eyeglasses... contact lenses... flu shots... laser eye surgery... over-the-counter drugs, such as allergy medication... air conditioners/air purifiers (if prescribed by a doctor)... crutches... bandages... and certain cosmetic surgeries, such as breast reconstruction. Important: Your plan may not cover all expenses that the IRS permits.

4. Boost the odds that your insurance claims will be paid. An appeal can take two months or longer and disrupt your budgeting because you must pay out-of-pocket while you wait. Many patients don't bother fighting a denial if, say, only $350 of a $400 claim is reimbursed, but these costs add up. My suggestions...

Use in-network providers as often as possible. It's difficult to predict how much your insurer will cover for a visit to an outside provider. Many plans say that 80% of such charges are covered -- but, in fact, insurers pay 80% of what they consider "reasonable and customary." Most consumers don't have access to what insurers will pay, but you can request the figures from your insurer.

If you go out of network, have your doctor's visit precertified by your insurer. Ask your doctor's office manager for the billing code for your particular examination, test and/or treatment. With this code, your insurer can better estimate how much it will reimburse. Or ask your doctor to agree to treat you on an AWIP (accept what insurance pays) basis.

Review your doctor's invoice as soon as you get it. Make sure you actually received each treatment/test.

5. Keep track of medical expenses for a possible tax deduction. You can deduct only those medical costs that exceed 7.5% of your adjusted gross income. This may seem to be an unreachable amount, but the list of allowable itemized medical deductions has expanded. They include transportation costs to and from medical facilities (for automobiles, the rate in 2006 is 18 cents per mile)... home-improvement projects for medical purposes, such as lowering counters, adjusting electrical outlets, installing grab bars in bathrooms and grading exterior landscaping for easier access to the house... doctor-advised weight-loss programs for obesity or hypertension... costs of alcohol- or drug-abuse treatment programs... and vasectomies.

For a complete list of deductible expenses, see IRS Publication 502, Medical and Dental Expenses (Including the Health Coverage Tax Credit).

6. Watch out for hospital billing errors. In my experience, the vast majority of hospital bills contain errors. Self-defense...

Ask a family member to keep a log of your medications, procedures and specialists' appointments, including dates.

Before leaving the hospital, request an itemized bill. Ask for explanations of vague terms such as "lab fees" or "miscellaneous fees." Compare the bill to your log and the explanation of benefits (EOB) from your insurance company. If the hospital billing department doesn't correct discrepancies, speak to the patient ombudsman.

Hire a professional medical claims advocate if your bill is very high and complex. You can find one in your area by contacting Medical Billing Advocates of America, 304-645-6389, www.billadvocates.com... or Alliance of Claims Assistance Professionals, www.claims.org. Typical cost: $30 or more an hour.