Anyone who has taken their car to the mechanic or had a medical emergency knows how easy it can be to walk out owing $1,500 or more. And a new report shows how that debt can turn into a real strain for many American families — not just in their wallets but on their physical and emotional health as well.
A recent report from the JPMorgan Chase Institute set out to examine the root cause of many economic fears: the lack of sufficient savings to adequately cover necessary but out-of-the-ordinary expenses. The report examined data from about 250,000 Chase checking account customers (weighted for age and income to reflect national averages) from Jan. 2013 to Dec. 2015 and found that nearly four out of 10 American families paid $1,500 out-of-pocket to cover extraordinary medical, auto repair or tax bills annually — and it took them nearly a year to recover financially.
In addition, there appears to be a direct connection between financial health and physical health. The report showed “extraordinary medical payments” were common during tax season and when families had $900 more in liquid assets prior to making the medical payment. And for those who did not recover a full year after making the payment, savings diminished for almost half of the families, and credit card debt was high for almost a third. Older Americans were especially susceptible to these “extraordinary payments,” with 44 percent of those 65 and older making at least one payment of roughly $1,500 for medical, auto repair or tax bills.
The timing of major medical bills coinciding with a rise in income suggests it “was linked to ability to pay,” according to the report. It also cited a 2015 study from the American Psychological Association, which found 12 percent of adults reported skipping a visit to the doctor when they needed health care because of financial concerns.
“Families with lower levels of savings saw a greater increase in savings prior to major medical payments,” according to Diana Farrell, president and CEO of JPMorgan Chase, by email. “This suggests they may have been more constrained and had to delay health care utilization or payment of their medical bill until they had sufficient funds to cover the payment.”
As Forbes reported, the fact that it takes families a year or more to recover from a $1,500 setback is cause for concern — trying to dig out of that financial hole keeps Americans from taking on longer-term goals, such as investing, buying a home, enrolling in school or starting a new business.