Most People Will Spend Their Bigger Tax Refunds On This
A great number of American taxpayers will spend their 2018 refunds on health care, according to a January study from JP Morgan Chase & Co. Institute.
JP Morgan Chase surveyed more than 1 million checking accounts to analyze consumers’ spending habits after receiving a tax refund and found an overwhelming percentage of consumers used their refunds to go to the doctor. The bank found that out-of-pocket spending increased 60 percent in the week following a tax refund.
Health care spending after a tax refund remained higher for roughly 75 days. One of the more interesting figures is credit card spending for health care costs did not increase, but debit card payments spiked well over 80 percent–a statistic that shows how much a little extra liquidity can help people address their health care needs. What that effectively means is consumers are not kicking the cost of care to later periods (as is the case with credit cards), but immediately using the refund to take of health care needs.
The recently signed GOP tax bill is expected to give middle-income households $61 billion in tax cuts in 2019 alone. The top 1 percent of filers can also expect $61 billion in tax cuts that year. With greater after-tax income, Americans will have even more disposable income to allocate to health care.
Another interesting thing to note about the phenomenon is that it highlights the burdensome costs the current health care system levies on consumers. Effectively, what the survey shows that consumers are forgoing medical treatment or other health care needs until the have more cash to meet the out-of-pocket costs.
Obamacare created a system that forces consumers to put more “skin in the game,” through higher deductibles, co-payments and co-insurance costs. The current system requires many individuals and families to cough up thousands of dollars before their insurance pays a dime.
The cost of care in America is staggering when compared to other nations.
America’s budget for health care in 2016 was roughly the same size as the entire gross domestic product (GDP) of a handful of European nations.
The U.S. spent more than $3.3 trillion on health care in 2016, a roughly 4.3 percent increase from the previous year. The growth was spread out over both private and public health care sectors, and in the medical goods and services industry.
To put the $3.3 trillion figure in context, that is more than the respective 2016 GDPs of the United Kingdom, France, Italy, Canada, Spain and Mexico.
Medicare spending expanded 3.6 percent to $672.1 billion in 2016, but grew at a slower rate than in 2014 and 2015, according to the Center for Medicare and Medicaid Services. Medicaid spending grew $565.5 billion, or 3.9 percent.
Americans’ out-of-pocket spending, which includes payments for premiums, copayments and deductibles, increased by $323.5 billion. Out-of-pocket spending grew at a quicker rate in 2016 than anytime since 2007.
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