We know medical expenses – particularly unexpected ones – can be a shock to anyone’s budget.
A new report complicates that fact, finding that the financial distress brought on by exorbitant medical costs isn’t gender neutral, and hurts women disproportionately. The JPMorgan Chase Institute compared the financial outcomes of accounts held by its women and men customers and examined the changes that resulted from a big medical payment.
“Families’ financial outcomes worsen as a result of the extraordinary medical payment and do not fully recover even a year after,” the report said. “This is especially true for women. The gender gap in financial outcomes widens after an extraordinary medical payment.”
And given the current congressional moves to repeal the Affordable Care Act – including allowing states to get a waiver on requiring insurers to cover 10 essential health benefits – these gender differences are particularly concerning.
The harsh toll of medical bills
In its Report on the Economic Well-Being of US Households in 2015, the Federal Reserve found that 22% of respondents “experienced a major unexpected medical expense that they had to pay out of pocket in the prior year, and 46% of those who say they had a major medical expense report that they currently owe debt from that expense.”
In a poll done last year by NPR, the Robert Wood Johnson Foundation and Harvard, 26% of people said health care expenses took a serious toll on family finances and 42% said they spent all or most of their savings to pay the expense. Even people who have insurance struggle to pay medical bills. And no wonder: health care costs have risen faster than inflation in the last 30 years. In 2014, consumers spent 8% of total spending on healthcare, compared with 4.8% in 1984, according to the Bureau of Labor Statistics.
The study found that, while most primary account holders were men (54%), low-income primary account holders were more likely to be women. There was also a gender gap in financial outcomes: women had about 20% lower levels of income, spending and liquid assets, and slightly higher credit car debt burden than men.
Women are less able to afford big medical expenses
When it came to “extraordinary medical payments,” defined if the monthly expense was at least $400, women had less ability to absorb the expense given their monthly income – even though the average payment was lower in dollar terms for women that it was for men ($1,744 for women, compared to $2,099).
In other words, “women are just as likely as men to have made an extraordinary medical payment but had a lower ability to absorb the medical payment with their monthly income alone,” according to the JPMorgan Chase report.
And time often makes the situation worse. The report found that families were worse off financially 12 months after the medical payment. JPMorgan Chase found that the gender gap in credit card debt increased as a result of the cardholder’s medical payment. A year after the expense, women ended up with a revolving credit card balance 9% higher than men.
The report also noted important links between financial and physical health. It found evidence that medical payments were more likely to occur when families had higher income and more liquid assets. In other words, families, and women in particular, either delayed medical treatment until they were able to pay or delayed payment payment until they could afford to pay. The former can have a negative impact on one’s physical health, while the latter can be bad for one’s financial health.
Implications for healthcare reform
The report demonstrates the importance of having short-term emergency savings to manage unexpected costs that the typical family experiences. What’s more, though, is the disproportionately high burden that women shoulder when it comes to medical expenses.
The study’s authors note that out-of-pocket costs need to be a consideration for policymakers in the debate on healthcare reform. Under the ACA, health insurers that sell plans on the exchanges are required to cover “essential benefits,” which include basic services – such as pregnancy and maternity care, emergency services and prescription drugs – many of which are critical to women. The most recent GOP plan to repeal and replace Obamacare, which is on its way to the Senate, as of now lets states to waive this coverage requirement which means policies might be cheaper but wouldn’t cover as much.
If out-of-pocket health costs rise because of changing tax credits or the elimination of essential benefits, “women may have to shoulder more of the economic burden of receiving care.”
“It is critical for lawmakers to take into consideration the economic consequences that changes in healthcare policy can have for household finances,” says Diana Farrell, CEO of the JPMorgan Chase Institute and co-author of the report. “We know that women stand on weaker financial footing than men to begin with. If healthcare reform efforts were to increase out-of-pocket healthcare expenses for women, this would only widen the gender gap in financial outcomes.”