More than a quarter of Americans say that someone in their household is struggling to pay medical debt, according to a report from the Kauffman Family Foundation last year. Low-income and other uninsured people tend to be in this situation at higher rates. Many dealing with the crushing weight of medical debt aren’t those suffering from continuing, chronic illness—they’re people who have had a sudden or one-time illness.
Given the state of most Americans’ finances, this isn’t surprising. Most people are ill-prepared to sustain any type of financial shock, be it job loss, a car breaking down, or a sudden illness. And financial surprises—though they are, of course, surprises—occur all the time.
In a new report, the J.P. Morgan Chase Institute takes a look at how medical costs factor into household financial volatility. Researchers honed in on about 250,000 J.P Morgan checking accounts where they could categorize at least 80 percent of expenditures. They found that for median-income households—that is those who make around $57,000 a year—expenses fluctuated by an average of 29 percent, or $1,300 from month-to-month.
The study’s authors took a look at what they considered extraordinary medical expenses, defined as those expenses that were both large (more than $400 and more than 1 percent of annual income) and unusual (falling more than two standard deviations outside of a household’s normal monthly spending). According to the report, about 40 percent of middle-class and older families faced an extraordinary expense of $1,500 or more due to a medical expense, taxes, or a car problem during a 12-month period. Around 16 percent of middle-income households had one large medical expense during a year-long period, and around 39 percent experienced a medical expense during a three year period. And these expenses tended to show up at the same time that households saw an uptick in income.