Deferred Care: How Tax Refunds Enable Healthcare Spending
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’ choices had a more direct impact on their own out-of-pocket spending, they would have more incentive to seek value for money, which in turn would reduce costs for everyone. But what if consumers’ cash flow constraints prevent them from taking on higher out-of-pocket costs in the short run, even when doing so would be better in the long run both for them and for the healthcare system overall?
In this JPMorgan Chase Institute report, we draw on the Institute’s Healthcare Out-of-Pocket Spending Panel (JPMCI HOSP) to investigate how a specific and important cash infusion—a tax refund payment—drives the timing of out-of-pocket expenditures on healthcare. We analyze average out-of-pocket healthcare expenditure on over a dozen categories of healthcare goods and services for each day in the 100 days before and after a tax refund payment, for 1.2 million checking account holders. This represents the first ever daily event study documenting how families’ out-of-pocket healthcare spending responds to the arrival of this significant cash infusion.