Previously, filing taxes was seen as a pesky annual task that needed to be completed by a set deadline. However, we’re in for a big surprise – most of the money that comes in the tax refund is being used on healthcare costs that have been postponed.
Data of the JPMorgan Chase Institute show healthcare spending rose by 60% the week people got their tax refund and remained consistently high over the next 75 days. Healthcare costs rose by an average of 20% over the rest of the year, and the payments were connected less to credit and more to debit cards.
This is a matter of liquidity according to Fiona Greig, director of consumer research at JPMorgan Chase Institute. In a follow-up report, the Institute found that people who filed ahead of the deadline were more likely to spend more of their refund on delayed healthcare costs, regardless of income.
People who file earlier tend to receive larger refunds, and they are usually in the low-income category. But even despite that, deferred healthcare costs occur across the income spectrum. According to Greig, people’s cash flow dynamics are affecting out-of-pocket healthcare spending even among those in the high-income category. As a result, debit card spending on healthcare increased by 83%. The corresponding increase in non-health spending was 54%.
According to experts, healthcare is a basic necessity, which is based on a non-discretionary spending model. For example, people would be assumed to use their tax refunds to buy a new TV, pay off debt, or simply go out for a drink. Most experts are surprised that they actually spend it on health.