Patients are increasingly being offered special financing for medical treatment, which consumer advocates say can be more expensive than using traditional credit cards.
These financing options include medical credit cards, which have been around for years and work like traditional credit cards but are used exclusively for medical treatments. A number of financial technology companies have also recently begun offering a dizzying array of medical installment loans, according to a new report from the Consumer Financial Protection Bureau.
While medical debt has long been a problem for Americans, the growth in medical funding “can result in financial ruin for individuals who become ill,” the bureau’s director Rohit Chopra said in a statement earlier this month. “Fintechs and other lending institutions are developing costly lending products to sell to patients trying to make ends meet on their medical bills.”
The cards and financing services offer hospitals and doctors the ability to get paid quickly and avoid the hassle and expense of sending out statements and collecting payments. The loan is usually offered to patients in a doctor’s office or hospital and administered by financial companies.
The Consumer Agency said it continues to review how medical credit cards and loans to doctors and hospitals are marketed and how the loans affect patients’ finances and health.
There is a market for alternative financing as even those with health insurance can struggle to pay for their care. According to nonprofit health research group KFF, the average annual deductible — the amount patients must pay before insurance pays — for a person with occupational health insurance is nearly $1,800.
According to the KFF, an estimated 9 percent of adults, or about 23 million people, have more than $250 in healthcare expenses, and about half of those with significant medical debt have more than $2,000.
Medical financing was once primarily an option for treatments not covered by insurance, such as: B. Dental or hearing treatments. Today, she’s available for a variety of treatments, including checkups and emergency room visits, according to the Consumer Bureau. However, the details vary widely. Some of the cards and financing options can only be used for specific treatments, such as cosmetic surgery or infertility treatments, while others leave this at the provider’s discretion. Some limit loans to a few thousand dollars, while others are as high as $50,000. Because funding is usually provided through the hospital or doctor’s office, patients may be inclined to think of the loans as a good deal.
The loans can be cheap, especially for patients with smaller assets that can be paid off relatively quickly. Some lenders offer small loans at zero percent interest if the loan is repaid over a period of several weeks, similar to the “buy now, pay later” financing offered by online retailers.
But other loans can also be associated with double-digit interest rates. The annual percentage of a typical medical credit card is 27 percent, the bureau found. According to federal data, the average interest rate for general-purpose credit cards was about 20 percent as of March 2023. Some lenders named in the bureau’s report charge interest rates of up to 36 percent.
“It’s really alarming,” said Wesley Yin, an associate professor of public policy and management at the University of California, Los Angeles, who studies medical debt.
Of particular concern is that some loans use “deferred” interest rate subsidies, a feature that has waned in most purchase categories except for medical supplies, the bureau said. Patients can receive zero percent interest for a few weeks or months, but if they fail to pay the debt in full on time, they will be charged interest retroactively to the start of the loan.
“It works — if you can pay it off before interest accrues,” said Caitlin Donovan, spokeswoman for the Patient Advocate Foundation. But many low-income people can’t.
Patient advocates worry that specialty financing could replace the free or low-cost installment plans traditionally offered by medical providers. They said patients should consider other, less expensive financing options, including loans from a local credit union. “Just because a medical provider offers financing doesn’t mean it’s best for you when you need it,” said April Kuehnhoff, senior attorney at the National Consumer Law Center.
Ms Donovan, of the Patient Advocate Foundation, said patients should first make sure their insurance is properly covering the treatment. If your insurer denies a claim but you feel the care should be covered, you should consider filing an appeal, she said. “The appeal process to persuade insurers to take over care services is drastically underused.”
If you still cannot afford to pay a bill after your insurer has paid you, ask the doctor or hospital if a patient assistance program is available to cover all or part of the balance. Nonprofit hospitals are required to provide some level of charitable care to financially challenged patients, and some states have similar requirements for nonprofit hospitals as well. While there is an income limit for such assistance, Ms. Donovan said it is often higher than one might think. If they don’t offer a program, ask if they can recommend one for you. Or you can search the foundation’s website for programs near you.
You should also ask the provider directly to arrange an informal payment plan. You can even try to negotiate a lower amount, Ms Donovan said, if you agree to pay in full. “Ultimately,” Ms. Donovan said, “hospitals want to get paid.”
Here are some medical debt questions and answers:
Can Medical Debt Affect My Credit?
It can. Doctors and hospitals don’t typically report their payment history directly to the major credit bureaus, but they may refer overdue bills to outside collection agencies, who may then report them to the major credit bureaus like Equifax, Experian, and TransUnion. According to the Consumer Agency, nearly one in five households has reported some form of overdue medical debt.
Have the credit bureaus changed the way medical debt is reported on credit reports?
Yes. The big three bureaus announced last year that they would remove from consumer credit reports all records of medical debts already paid and all medical debts less than a year old. They’re also now giving patients a year to pay off their medical debt — up from the previous six months — before unpaid bills are listed on a credit report.
And as of April 11, credit bureaus no longer include medical collection payments for amounts under $500 in their credit reports. (According to the Consumer Agency, this means that about half of all people whose credit reports contain medical debt will have it removed.)
How can I tell if my debt has been removed from my credit report?
To see if your credit report lists medical collection debts that shouldn’t, check your report on www.annualcreditreport.com, a dedicated credit reporting website. You can view the reports weekly for free, at least until the end of this year. Note, however, that the changes won’t apply to credit card debt in collections — even if you used your credit card to pay for a medical bill under $500, for example, according to the Consumer Financial Protection Bureau.