JPMorgan Chase & Co., April 10, 2018
Today the JPMorgan Chase Institute released the first analysis since the 1980s of American’s tax refunds by income and other demographic characteristics. The research, Who Files Early and Who Defers Healthcare: Insights from 1.2 Million Tax Refunds, also includes a first-ever analysis of the impact of tax refunds on healthcare spending for different income and other demographic groups. The research finds Americans in all income groups who were owed larger refunds filed their taxes earlier, and those who filed their taxes earlier also spent more of their annual tax refund on healthcare services they had been deferring.
The earliest filers, those who received refunds in February, responded more sharply to the tax refund with a 38 percent increase in healthcare spending over 76 days, compared to a 22 percent increase for those who received refunds in March and an 11 percent increase for those who received refunds in April or May. Among the earliest filers, 64 percent of their healthcare spending response to the refund went to deferred healthcare services (spending represented by payments that were made in-person at healthcare providers), compared with just over 55 percent for accounts held by the latest filers. Almost all of the remaining healthcare spending response in all groups went to paying deferred medical bills; only a tiny fraction went to paying for healthcare goods that could be stockpiled.
“It’s increasingly clear that families are using their tax refunds as a zero-interest savings vehicle. If consumers have a health need at some other time of the year, they might have to delay treatment until cash arrives during tax time,” said Diana Farrell, President and CEO, JPMorgan Chase Institute. “These consumers would benefit from alternative savings vehicles or a more flexible refund system so they can access savings for healthcare whenever they need it.”
In January 2018, the JPMorgan Chase Institute released new findings identifying a 60 percent increase in deferred healthcare spending during the week a tax refund arrives in checking accounts.
The report found the overall level of healthcare spending is 60 percent higher in the week after receiving a tax refund payment than in a typical week over the 100 days before. In the week after receiving a tax refund, out-of-pocket healthcare spending on debit cards increased by 83 percent, while there was no offsetting change to credit card spending—suggesting the cash infusion provided by the tax refund was a major determining factor driving changes in healthcare spending behavior. Moreover, 62 percent of the additional healthcare spending triggered by the tax refund was paid in person at healthcare providers. This means that cash flow dynamics influenced not just when consumers paid for healthcare but also when they received it.
The reports leverage data on daily healthcare spending for 1.2 million checking account holders in the JPMorgan Chase Institute Healthcare Out-of-Pocket Spending Panel (JPMCI HOSP) who received a tax refund in 2016. The HOSP data asset was first constructed in September 2017. The asset follows a sample of 2.3 million de-identified regular Chase customers aged 18 to 64 from January 2013 until December 2016. The Institute defined out-of-pocket healthcare spending as any observed payments to healthcare providers and drugstores, including co-payments, co-insurance, deductibles and other point-of-service medical, dental, or drug spending.
Filing Taxes Early, Getting Healthcare Late: Insights from 1.2 Million Households
By Don McCanne, M.D.
Directly related to our dysfunctional health care financing system, this study shows that many people depend on their income tax refund to determine not only the timing of their payment for health care but also the timing of when they receive their health care – often deferred because of waiting for the tax refund.
Although some care can be deferred without untoward outcomes, deferral can be hazardous because conditions can deteriorate, not to mention that symptoms may be prolonged unnecessarily.
The JPMorgan Chase report suggests that alternate methods of cash management be considered rather than having to wait for tax season to receive the cash infusion needed for health care. Obviously those who do not receive a tax refund and do not have cash reserves may be out of luck and not receive the deferred care that they should have.
There is a far better way. A well designed single payer national health program without deductibles, copayments, or coinsurance removes financial barriers to health care access so there is no need to defer care. Also there is no concern about needing a tax refund to pay prior medical bills since health care has already been prepaid painlessly through equitable taxes.
Prepaid health care is one of the more important improvements in an Improved Medicare for All. What are we waiting for?
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