Americans only get health care when there's money in the bank

Americans only get health care when there's money in the bank
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You don’t have to be an economist to know that health care costs are unaffordable for millions of Americans. But too many of our discussions about health care policy focus only on issues related to health care providers and insurers, and don’t spend enough time dealing with how American families interact with health care in their daily lives.

Upfront, out-of-pocket health care costs can come at the expense of paying for rent and groceries. It’s a painful choice families make all the time. Even for those with full coverage, this choice may still ring true if they are attempting to manage lower monthly premiums with high deductible plans, where they wind up paying significantly higher upfront costs when it’s time to fix a chipped tooth or make a trip to the emergency room for a broken arm.

New research from the JPMorgan Chase Institute set out to show the ways families are managing out-of-pocket health care payments, as well as the relationship between physical and financial health. By reviewing the anonymized financial transactions of 2.3 million Chase account holders, we found that a medical bill of just a couple hundred dollars is still enough to create real financial problems for America’s families.

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To a lot of Americans, that’s not news. For the first time, we have new data to illustrate it. From 2013 to 2016, out-of-pocket spending steadily increased from an average of $629 to $714, while spending as a share of take-home income remained constant at 1.6 percent. Some may be surprised at how low the spend burden appears, but these averages mask the very high cost burdens that certain Americans bear.

One of the institute’s most pronounced findings is that families in the United States make the largest health care payments in the months and years they have access to increased income and liquid assets. In other words, we see the most significant spikes in March and April, the months when nearly 80 percent of tax filers receive their tax refunds.

This could mean Americans are either delaying medical procedures until they have more cash or they’re delaying medical payments for months after they receive a procedure, holding on to a credit balance longer than they should. Neither is a recipe for financial or physical health. Across demographics, out-of-pocket spending was highest for older, lower-income and female account holders. The highest-earning families spent just 1 percent of their take-home pay on out-of-pocket costs, while the lowest-earning families spent nearly triple that at 2.8 percent.

The top 10 percent of health care spenders accounted for 49 percent of total spending in 2016, spending nearly $3,500, or 8.5 percent of take-home income. And high-spend families tend to remain high-spend families, suggesting that long-lasting conditions or chronic diseases still equate to long-lasting financial burdens. More simply, those who are already most vulnerable to any measure of income volatility are increasingly vulnerable to the unexpected expense created by health care costs.

Further complicating the issue is the wide variation in health care spending across states. For example, families in Colorado spend the most in real dollar figures at an average of $916 per year on health care payments, while families in Louisiana and Oklahoma spend the most as a percentage of income at 1.7 percent. California families paid the least, both in real dollar figures at $596 and as a percentage of income at 1.1 percent.

This variation among states underscores the complexity of policy solutions for how we access and pay for health care. The institute’s data show that variations in cost in states is not tied to demographics, but rather, is the result of numerous factors, including access to public health plans like Medicaid, competition among insurers in any given market, competition among hospitals and doctors, and even the types of health plans provided by large employers.

As much as an individual might want to plan for their health care spending needs, it can be very difficult to do so because most households simply don’t have enough cash reserves to withstand a medical payment of a few hundred dollars. We know financial health is linked to physical health. What we don’t always remember is that families aren’t just making year-to-year decisions about what kind of plans they can afford, but also month-to-month decisions about their out of pocket spending.

As policymakers continue evaluating ways to improve our health care system, it’s important to remember American families are still making important health care decisions based on how much money they have in the bank, rather than whether they genuinely need to see a doctor.

Diana Farrell is president and CEO of the JPMorgan Chase Institute.