Major Medical Payments Coincide With Income Increases Like Tax
Refunds, Yet Families Don’t Recover Financially Within One Year
WASHINGTON--(BUSINESS WIRE)--Feb. 9, 2017--
New JPMorgan Chase Institute data on the financial health of U.S.
households show that in any given year almost four in ten families make
an extraordinary payment related to medical services, auto repair, or
taxes of roughly $1,500, and it’s taking them over a year to recover
from major medical expenses. Middle-income households also experienced a
nearly $1,300 swing in monthly expenses, which is the equivalent of one
month’s rent or mortgage payment.
Big Data on Expense Volatility and Medical Payments
builds on anonymized account data of roughly 250,000 core Chase
checking account customers from January 2013 to December 2015. It is the
third in a series of Institute reports evaluating household finances,
including its inaugural report, Weathering
Volatility: Big Data on the Financial Ups and Downs of US Individuals
and its report on income volatility, Paychecks,
Paydays and the Online Platform Economy: Big Data on Income Volatility.
This new reportfound that extraordinary medical payments
were most common during tax season and coincided with a 4 percent
increase in total income. Families acquired over $900 more in liquid
assets before making a major medical payment, yet many families did not
recover financially within a year after making a major medical payment.
Twelve months after the payment, savings remained depleted for almost
half of families (48%) and credit card debt remained elevated for almost
a third of families (33%).
“This could be the most granular look at families’ financial volatility
we have ever seen,” said Diana Farrell, President and CEO, JPMorgan
Chase Institute. “Even with more money in their pocket from tax refunds,
the strain of major and unexpected medical costs are hitting families
hard and making it difficult for them to recover.”
Following are the key findings for this most recent look at the state of
expense volatility for US households.
Key Findings: Coping with Costs: Big Data on
Expense Volatility and Medical Payments
Finding One: Expenses fluctuate by nearly $1,300 or 29% on a
month-to-month basis for median-income households, or $7,391
Discretionary expenses are more volatile than non-discretionary
expenses in percentage terms. Month-to-month discretionary
expenses fluctuate by 56 percent or $514 while non-discretionary
expenses fluctuate by 28 percent or $735.
Finding Two: Expense volatility was high across the income and age
spectrum. While older families typically had less volatile incomes,
they exhibited a larger range of income and expense volatility.
Older families maintain similar, if not higher, levels of expense
volatility even after significant decreases in income volatility
after age 60.
Finding Three: Almost four in ten families per year—particularly
middle-income and older families—made an extraordinary payment over
$1,500 related to medical services, auto repair, or taxes.
One in ten families made more than
one extraordinary payment in a given year.
One in six families (16%) made at least one major medical payment
in a given year, including 3% who made two or more.
Older Americans had the highest incidence of extraordinary
payments across all three types. Forty-four percent of families 65
and older made at least one extraordinary payment compared to that
of 22 percent of adults under 25.
Finding Four: Extraordinary medical payments were more likely to
occur in months with higher income and specifically during tax season.
Extraordinary medical payments were most common in March and April
and coincided with a 4 percent increase in total income increases.
The income increase stemmed mostly from tax refunds and not labor
Finding Five: Prior to a major medical payment, families garnered
significant liquid assets but did not recover financially within 12
months after the payment.
Families acquired over $900 more in liquid assets before a major
medical payment; this represented a 5 percent increase.
The increase in liquid assets is more pronounced for families in
the bottom percentile of liquid assets indicating they face a
stronger liquidity constraint.
Fifty-three percent of families increased their liquid assets one
month prior to the medical payment, many of whom immediately spent
them down in the month with a medical payment.
Many families did not recover financially within a year after a
major medical payment. In aggregate, comparing 12 months after the
medical payment to the baseline period, income was 3 percent
lower, non-medical expenses was 1 percent lower, liquid assets
were 2 percent lower, and revolving balance was 9 percent higher.
“Our integrated, high-frequency data on income, expenses, assets, and
liabilities shed new light on the connection between physical health and
financial health and the reality that families are not fully insured
against the economic consequences of major health events,” added
Farrell. “This indicates a need for better products and solutions to
help families manage expense volatility and become more financially
View the full report Coping
with Costs: Big Data on Expense Volatility and Medical Payments.
The JPMorgan Chase Institute is a global think tank dedicated to
delivering data-rich analyses and expert insights for the public good.
Its aim is to help decision makers – policymakers, businesses, and
nonprofit leaders – appreciate the scale, granularity, diversity, and
interconnectedness of the global economic system and use better facts,
timely data, and thoughtful analysis to make smarter decisions to
advance global prosperity. Drawing on JPMorgan Chase & Co.’s unique
proprietary data, expertise, and market access, the Institute develops
analyses and insights on the inner workings of the global economy,
frames critical problems, and convenes stakeholders and leading
thinkers. For more information visit: jpmorganchaseinstitute.com.
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Source: JPMorgan Chase Institute
JPMorgan Chase & Co.
Nicole Kennedy, 215-864-5732