Paying Medical Bills is a Herculean Task
Medical bills are leaving “a lasting imprint on families’ balance sheets,” JP Morgan Chase concludes from its recent analysis of the anonymous checking and credit card account activity of some 250,000 bank customers.
With little available cash on hand, 53 percent of these families prepare to pay large, one-time medical expenses by waiting for an uptick in their income. Nevertheless, a year after the bill is paid, they are still struggling to patch the hole blown in their household budgets, according to the report, “Coping with Costs: Big Data on Expense Volatility and Medical Payments.”
The 2013-2015 account data show that family incomes tend to be 4 percent higher, on average, in the month a medical bill is paid. This doesn’t mean that people suddenly become Uber drivers or work more overtime hours. What is probably going on, the bank said, is that people “have delayed either receipt of medical treatment or payment of their medical bill until they were able to pay” – when the extra income arrives.
Tax refunds are one clear source of this income for paying large one-time medical bills. These payments were the most frequent around tax time, JP Morgan’s customer data show. But the $163 average increase in monthly income, mostly from tax returns, was small relative to the average $2,000 medical bill.
The damage done to family finances was apparent even a year after such bills were paid. Credit card balances, which had been reduced prior to paying the medical bill, rose for at least a year following a payment. Meanwhile, spending on non-medical purchases, as well as the amount of cash on hand, decline in the aftermath as the families struggle to repair their household finances.
This dry but compelling report is a window into the Herculean feat of paying medical bills for some families. It helps to explain why two out of three Republicans and Democrats in a Kaiser Family Foundation poll said that lowering their health care costs should be a top priority for any reform.
To read the full J.P. Morgan report, click here.
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We should immediately liberalize the rules on Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). Eliminate the rule that all expenses must first go toward the deductible. Right now, if your medical plan allows you to see a doctor for a co-pay only, that alone disqualifies you from an HSA even if your deductible is high enough. Also eliminate the "family aggregate" deductible rule for HSAs. Then eliminate the "use it or lose it" rule for FSAs. While not addressing other sources of shock to the family budget, these changes could help many with more reliable savings for health care expenses.
Unless you are a member of a "single payer" health plan - like a government employee or a Medicare recipient - it is easily possible for just one significant medical event to wreak havoc with your personal finances, as this article underscores. High deductible insurance plans -- for which people are paying more and more and getting less and less -- are making this apparent even to those with supposedly good employer health benefits. All Congress has done (and is doing) is to manipulate how bills are paid; they are doing nothing to address the underlying cause of why health care in this country is so expensive. Our so-called "market-based" system is a disaster, since it is opaque and essentially rigged. Highly recommended reading: "An American Sickness" by Elisabeth Rosenthal.