After 18 years at Premier Dermatology and Cosmetic Surgery, Nicole Drolet knows that patients schedule elective surgery when their cash flow is solid. Now a new national study backs that up: Consumers immediately increase their use of health services after they receive large infusions of cash.
A new study from JP Morgan Chase Institute shows Drolet’s experience led her to a major trend that researchers are just picking up on. The study shows consumers’ facing higher out-of-pocket costs for health care often do not make appointments until they have cash in hand.
“When they have the money, they’re going to do it. They’ll say, ‘I’ve been talking about this for years, and I’m going to do it. When there is more cash flow available — be it from the lottery, an inheritance, the sale of a house, a divorce settlement, a tax refund or just the kids are gone and the bills are down, they will have the procedure,” said Drolet, director of marketing for the practice.
The study said health-care policy has veered toward controlling the rising cost of health care by making certain consumers have ‘more skin in the game’ by making them responsible for larger deductibles and co-pays. But the study found that strategy can result in fewer medical procedures. “What if consumers’ cash flow constraints prevent them from taking on higher out-of-pocket costs in the short run, even when doing so would be better in the long run both for them and for the health-care system overall?” the researchers asked.
The study found consumers immediately increased their health-care spending by 60 percent in the week after receiving a tax refund. That spending remained elevated for about 75 days, with consumers spending 20 percent more out of pocket on health care than before the tax refund.
Consumers also spent 83 percent more on health care on debit cards in the week after a tax refund and their electronic payments on health care increased by 56 percent, but there was no change in credit card spending on health care. The study said that suggests the liquidity from the tax refund enabled the health-care spending.
Drolet said her experience is patients will spend money when they have it: “When you go into the room and you show them a quote sheet for a procedure, they’ll ask questions, and then most people will say, ‘Well, I have the money right now, so I’ll do it.’ Who wants any outstanding bills?”
Sharon Newton, office manager at Delaware Back Pain and Sport Rehabilitation, said more patients schedule visits at year’s end when their insurance deductibles are met and in the spring when tax refunds start arriving.
“We do see it’s a little busier at those times,” Newton said.
The bank foundation’s analysis showed the same thing — consumers who got tax refunds immediately visited dentists and doctors and also paid outstanding hospital bills.
Although wealthy patients sometimes schedule elective surgery year-round, the study showed out-of-pocket costs often prevent consumers with smaller bank balances from accessing health care when there is a clinical need. Cash flow dynamics are a significant driver for healthcare, the researchers found.
Drolet said Premier Dermatology, like other businesses, targets marketing to the tax refund season, but the estheticians and plastic surgeons are busy all year because there are additional seasonal factors in that business. For instance, winter is a good time to have a procedure because patients have more time to sit out from social occasions. As Drolet put it, “You’re not out and about. You have time for healing and recovery.”
And some decisions are driven by timely events, such as looking your best for a dream vacation or a child’s wedding.
Even then, Drolet said, females, in particular, are sometimes concerned about spending for surgery: “These patients come in here for other things and what’s nice is you grow a rapport with them. You talk to potential clients and they say, ‘I feel like I’m vain. I’m spending all this money on myself.’ But I say, ‘You can’t take
it with you.’ I think women need to feel not ashamed to do this for themselves.”