Families are waiting for tax refunds to pay health bills, new report finds

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Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a senior reporter and certified personal finance counselor at Policygenius, where he covers insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Many families delay paying their healthcare bills, often waiting to spend until their tax refunds arrive, a report released Tuesday said.

Out-of-pocket healthcare spending is a bigger burden for older people, people with lower incomes and women, according to wide-ranging report by JPMorgan Chase Institute. People making less than $24,000 spent 2.8% of their incomes on out-of-pocket healthcare costs. Spending spikes in March and April, when income also rises, likely from tax refunds.

“The reality is that many American families don’t have the cash buffer to withstand the volatility created by out-of-pocket healthcare payments, and we need to better understand the correlation between financial health and physical health,” said Diana Farrell, president and CEO of JPMorgan Chase Institute.

A close look at healthcare spending

The institute looked at the accounts of 2.3 million Chase customers, ages 18 to 64, between January 2013 and December 2016. Identifying information was removed from the accounts.

The institute kept track of payments to healthcare providers and drugstores, including co-payments, co-insurance, deductibles and other out-of-pocket medical, dental or drug spending. The report yielded data from 23 states with Chase retail branches.

The report found women spend more on healthcare, not only in dollar amounts but as a share of their income. Over the four years, spending grew fastest for women and lower-income people.

Spending was highly concentrated among a few families, the report said. Nearly half of the out-of-pocket spending in 2016 came from 10% of families, who spent an average of $3,482 that year.

Falling behind on medical bills

These families spent 8.5% of their take-home pay on healthcare — about as much as what a typical family spends on utilities. Families with high health spending burdens tended to keep those burdens. Half of the families in the top 10% in 2016 were in the top 10% in 2015, too. It’s possible the biggest healthcare spenders were saddled with long-lasting health conditions that keep them shelling out year after year.

The report found many families don’t have the money to keep up with healthcare costs year-round. Spending spikes during tax refund time and also in December, when families might be trying to spend leftover money in health savings accounts or using Christmas bonuses.

It’s a sign of many families having to wait before spending on healthcare. The report found families may delay paying for healthcare for months.

State-by-state healthcare spending

The report gathered data from 23 states with Chase retail branches and found spending varies widely from state to state. The average Coloradan spent $916 on out-of-pocket healthcare in 2016, while a Californian spent $596.

So what are the implications of this data? Chase’s report said any healthcare reform effort should take into account how it impacts finances financially.

Any policy that raises out-of-pocket costs will likely impact older people, lower-income people and women the most.

Chase also said healthcare consumers may benefit from easier-to-understand billing and more flexible payment options, especially as high-deductible plans and health savings accounts become more common.

How to reduce & avoid out-of-pocket spending

But what can people do to avoid healthcare costs now? Remember that it’s possible to negotiate large medical bills.

You can get in touch with your healthcare provider or insurer and ask if they’re willing to lower the payment or agree to a payment plan. It often helps to offer to pay a portion of the debt up front.

Medical bills can have long-term consequences on your finances. Unpaid debts can end up being sold to third-party collectors, who make it their business to hound debtors until they pay.

If medical debts linger long enough (usually 180 days), they can end up on your credit report, which can hamper your ability to get credit for a house or car.

To help avoid big bills in the first place, make sure you know all the details of your health plan, including what it covers and what you’ll have to pay. You can use our primer on shopping for health insurance if you’re not sure your plan covers you as much as you need.

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