Expensive medical credit cards and loans can put patients at risk

How are you coping with the rising cost of health care? The answer for more and more Americans: Pay with plastic.

Medical credit cards, once limited to esoteric procedures not covered by insurance, have grown in popularity over the past decade as health care costs continue to rise and Americans spend more out-of-pocket even for routine procedures.

But these products can cause problems for patients, as many end up overpaying for specialized medical financial products, signing contracts they don’t understand, or, in the worst case scenario, racking up debt they can’t get rid of. to a recent report from Consumer Financial Protection Bureau.

“These new forms of medical debt could spell financial ruin for people who are sick,” CFPB Director Rohit Chopra said in a statement.

More intermediaries

Millions of patients benefit from this type of financing. CareCredit, a subsidiary of Synchrony Financial and one of the three major health cards reviewed in the report, has 11.7 million cardholders this year, triple the number a decade ago, the CFPB found.

Medical credit card or installment loan companies offer their services to doctors, promising to save them time and money. Hospitals are attracted to such plans because banks receive advances for their services, Crain’s Chicago reported last September.

“Lenders, for their part, see an opportunity to capitalize on the growing gap between the cost of health care and what many Americans can afford,” the publication writes.

PrimaHealth Credit, one of the loan providers singled out by the CFPB, promises just that site to “generate up to 20% more revenue” for healthcare professionals. “We take care of processing payments, resolving delinquent accounts and handling all credit reporting so you don’t have to,” the company claims.

PrimaHealth founder and CEO Brendan Kensel said most patients use the financing for dental and orthodontic work, while the company also offers financing for procedures such as outpatient surgery, LASIK, cosmetic surgery and hair replacement services. According to the site, the APR for this loan can go as high as 24.99% for those with poor credit.

According to the website and the CFPB, PrimaHealth has two classes of patients. For people with good credit, PrimaHealth pays the health care provider in advance, minus the fee. But for patients with worse credit, the provider only gets paid when the patient pays the bill.

Because “the provider bears the risk that the patient will not pay the full bill,” the CFPB wrote, registering with PrimaHealth could cause providers to avoid patients they consider to be credit risks, such as “people with limited English proficiency, older Americans, and people with lower revenues,” the agency writes.

Kensel did not dispute the CFPB’s analysis, saying the service expands access to those who cannot pay for health care upfront. “The high cost of health care is truly a crisis in the United States,” he told CBS MoneyWatch. “Historically, only people with good credit get approved for financing. In my view, unequal access to finance leads to inequality.”

Kensel, who ran a dental practice before starting PrimaHealth, blamed inadequate health insurance for the cost crisis. When asked whether doctors should consider paying less, Kensel demurred, saying most medical expenses are “predictable” but health plans are often skimpy on dental and orthodontic work, which is often considered “elective.”

“Most people don’t have an extra $5,000 and being able to access a monthly payment plan is the difference between being able to access care for their children and not,” he said.

Bad decisions

The CFPB questions whether specialized health financing actually expands access to the underinsured. Instead, the Bureau wrote, formal financial services such as health credit cards or installment plans have been replaced by informal, often interest-free payment plans offered directly by health care providers.

This added convenience for doctors can come at a high price for patients. Patients who are often offered these financial products in the midst of making medical decisions often miss important financial details, such as the loan’s interest rate or specific payment terms, the CFPB found. And doctors are not penalized if they offer a less-than-ideal financial product because they are not bound by the same laws as bankers, as some legal experts are noted.

“Medical office workers are selling a product they know little about without fully disclosing the terms to their patients,” one patient complained to the CFPB.

Another patient said his dental office took out a CareCredit card that recognized it as an interest-free payment plan for less than $100 a month, and two years later he was charged $1,400. And one consumer told the CFPB that his family was signed up for a credit card without any notice.

“I’m an elderly man and I went to my local dentist’s office for a routine checkup on my wife’s teeth. They only took two x-rays, but I ended up with a bill for $14,000 for services she didn’t receive, or we agreed Dentist’s office opened a credit card in my name to pay for these services without my consent,” the person wrote, adding that they “speak poor English”.

“I never received any receipts or copies of anything until I received a bill in the mail from the credit card company,” the person wrote, according to the CFPB.

$1 billion in interest payments

Patients who use specialized medical cards pay much more in interest than they would in other circumstances – even when paying with a regular credit card. Many cards, for example, offer an interest-free period during which interest for the procedure accumulates, but the patient is not charged. If a person does not pay off all of their debt during this time, they may be forced to pay a large amount of interest all at once.

“Our research shows that many patients – particularly those unable to pay off a deferred interest product during the promotional period – may end up paying significantly more than they would have otherwise,” the CFPB noted. “Interest rates on health financing products are typically higher than interest rates on other products, such as general purpose credit cards,” the report said.

In the three years from 2018 to 2020, people who used health cards or installment plans received $1 billion in deferred interest, the CFPB found.

Because health financing offers are largely nonselective, according to the report, patients on the receiving end of such offers should do their own research, the CFPB advised. For example, they should not assume that a financial medical procedure will not be covered by insurance.

Hospital patients should also learn about cost reductions charitable guardianship — discounts for low-income patients that nonprofit hospitals are required to offer as a condition of their tax exemption.