American families often defer healthcare treatment until after they receive their tax refund, and dentistry benefits from this increased spending more than any other medical field, reports the JPMorgan Chase Institute in its latest study, “Deferred Care: How Tax Refunds Enable Healthcare Spending.”
Healthcare spending is 60% higher in the week after receiving a tax refund payment than in a typical week over the 100 days before. Out-of-pocket healthcare spending on debit cards also increased by 83% in the week after receiving a tax refund, while there was no offsetting change to credit card spending, suggesting the cash infusion was a major factor in spending behavior.
Plus, 62% of the additional healthcare spending triggered by the tax refund was paid in person at healthcare providers. According to the JPMorgan Chase Institute, this means that cash flow dynamics influenced not just when consumers paid for healthcare, but also when they received it.
The change in spending was even more pronounced among families with a low cash buffer. Those with more than $3500 in their checking account balance only increased healthcare spending 11% after a refund, while those with less than $536 increased healthcare spending 220% after the refund, a spending reaction nearly 20 times larger in magnitude.
“We already knew that many families don’t have enough of a cash buffer to cover the cost of a major medical emergency. Now we also see that a significant number of Americans put off going to the doctor and other routine health services until they actually have cash in their account,” said Diana Farrell, president and CEO of the JPMorgan Chase Institute.
Consumers who spent more one they had their refund spend those funds disproportionately on in-person healthcare services that likely were deferred from the period before the refund arrived, the company said. Also, dentist and doctor visits accounted for 55% of the deferred care that would have been received earlier if the refund had come earlier. The remaining funds went to other providers such as nursing services, medical laboratories, and hospitals.
Specifically, dentists received 32% of the refund-triggered additional spending, which the JPMorgan Chase Institute called a disproportionate share. By contrast, during the period prior to the refund, 27% of in-person payments to service payments went to dentists.
The report used data on daily healthcare spending for 1.2 million checking account holders age 18 to 64 years in the JPMorgan Chase Institute Healthcare Out-of-Pocket Spending Panel who received a tax refund in each year from 2014 to 2016. While spending in many categories increases after a refund, the company said, healthcare is special because there could be consequences to delaying it.
“In addition to being a major personal finance issue, this link between healthcare and cash flow could have significant consequences for public health,” Farrell said. “We need to better understand the connection between financial health and physical health, including evaluating the consequences of deferring care while waiting for cash to arrive.”