Nearly Forty Percent of Families Face an Extraordinary Medical, Auto or Tax Payment Annually, New JPMorgan Chase Institute Da...
February 09 2017 - 6:00AM
Business Wire
Major Medical Payments Coincide With Income
Increases Like Tax Refunds, Yet Families Don’t Recover Financially
Within One Year
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.
Coping with Costs: 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 report found 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 year-to-year.
- 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 income.
- 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 resilient.”
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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version on businesswire.com: http://www.businesswire.com/news/home/20170209005430/en/
Media:JPMorgan Chase & Co.Nicole Kennedy,
215-864-5732nicole.kennedy@chase.com
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