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Markets and Economy

Deferred Care: How Tax Refunds Enable Healthcare Spending

January 16, 2018

A new report from the JPMorgan Chase Institute provides an in-depth look at how cash infusions—specifically tax refunds—influence consumers on when they receive and pay for healthcare.

Healthcare represents a large and growing fraction of the US economy. Many policy strategies to control the rising cost of healthcare have involved giving consumers more "skin in the game." The reasoning behind many of these strategies is that if consumers have a more direct impact on their out-of-pocket spending, they would have more incentive to seek value for money, which would reduce costs for everyone. But what if cash flow constraints prevent consumers from taking on higher out-of-pocket costs in the short run, even when doing so would be better in the long run?

New research from the JPMorgan Chase Institute analyzes how a specific and important cash infusion—a tax refund—drives the timing of out-of-pocket healthcare expenditures. These cash flow dynamics may shed light on ways insurers, healthcare providers and financial intermediaries could help consumers receive care when they need it rather than when they have cash on hand to pay for it.

Here are a few of the key findings:

  • Consumers immediately increased their out-of-pocket healthcare spending by 60 percent in the week after receiving a tax refund payment
  • In-person payments to healthcare service providers represented 62 percent of tax refund-triggered additional healthcare spending, indicating that the timing of a cash infusion affected when consumers received healthcare, not just when they made a healthcare payment
  • The tax refund enabled consumers to make visits to dentist and doctor offices and pay outstanding hospital bills they had likely deferred from the period prior to the refund payment

Access the full report for more findings.




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