Could borrowing for healthcare be good for financial wellbeing?

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Medicine and money

By Professor Adele Atkinson, Professor of Practice in Financial Literacy and Wellbeing (CHASM)
Department of Social Policy, Sociology and Criminology, University of Birmingham

Recent reports of people turning to buy now, pay later (BNPL) solutions to pay for private healthcare raise some interesting issues from the perspective of financial wellbeing.

The Money and Pensions Service (MaPS) say that financial wellbeing is about ‘feeling secure and in control. It’s about making the most of your money from day to day, dealing with the unexpected, and being on track for a healthy financial future.’ Health problems are amongst the more common ‘unexpected’ issues that we are likely to face, and unfortunately, they often leave people feeling less secure financially.

For those of us in work, accidents and poor health can lead to us working fewer hours or stopping work completely. Health issues can also lead to higher outgoings. Some people need to pay for additional childcare, housework, gardening, or personal care as well as the cost of medicines and equipment. The resulting loss of earnings and increased costs can create problems such as falling behind with essential bills. There is also evidence that time out of the workplace can have a negative impact on future earning power.

The NHS provides free support to help us to regain health and independence after an accident or illness. However, analysis by the British Medical Association (BMA) showed that in June 2023 over 3 million patients had been waiting for more than 18 weeks. To put this into context in terms of financial wellbeing, just 65 percent of households with savings could cover their expenses for 3 months or more if they lost their main income.

In the absence of a free solution within an acceptable time frame, paying for private care may make financial sense if it can help to get us back into work and reduce related expenses. This is consistent with my recent work with colleagues in Estonia which shows that many people associate investment with health.

Like other forms of investments there are risks involved. The amount of money needed to solve a medical issue may not be known before embarking on private healthcare. The cost of a prescription written by private doctors can be higher than the NHS charges, and initial tests do not always provide an answer, possibly leading to further expensive consultations. Although the NHS allows us to return to them for treatment at any time, we know that people have a tendency to continue to put more money into a problem once they have started paying in the hope of a better outcome, which could lead to ever increasing bills without any certainty.

Such an investment is uncertain enough when made with personal savings, but those who borrow to foot the bill face other risks. Borrowing to pay for healthcare will put an additional strain on household budgets and reduce the flexibility to deal with other financial demands. The repayments will have a negative effect on their current standard of living; something that is particularly pertinent with the current high cost of living. Credit commitments also incur additional costs if payments are missed, leading to spiralling debt and lowering credit scores.

For many people, the possibility of accessing private healthcare now and paying later may seem like the ideal middle ground, allowing for instant care and manageable instalments without the need to worry about rising interest rates. Unfortunately, the reality is not so simple. The only way in which a service can be provided without immediate payment is if someone is providing credit. In this case, the credit appears to be free to the user, but the costs are covered by a combination of fees paid by the healthcare provider and punitive charges for missed payments. BNPL is a form of borrowing, and all the issues I have mentioned above are still relevant. However, there is more. This form of credit is not regulated by the Financial Conduct Authority, and so users do not benefit from the new Consumer Duty or the Consumer Credit Act. In addition, there is evidence that having access to BNPL increases the amount people spend, which will lead to higher repayments and increased risk.

So, what should we do if our health takes a turn for the worse and the NHS cannot help? As with most things in life, it depends, but if we want to be financially healthy tomorrow, we need to take care of our budget as well as our health today. We need to weigh-up the financial and health implications of waiting or spending money on a speedier solution, and we need to make sure that any financial services that we use are properly regulated, and designed to offer us the best possible chance of a positive outcome. Furthermore, if we are currently in good health, we should look at ways of building emergency savings or accessing insurance to avoid some of the financial challenges that may otherwise come our way in the future. Our future selves will thank us.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham.

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