Medical Credit Cards: Pro or Con?
The most frequent settings for medical credit cards have been dentist’s offices, cosmetic surgery, veterinarians, hearing services, vision services and primary care.
However, the cards are increasingly offered to cover surgeries and emergency services provided at hospitals and doctors’ offices. (Some of the newer lenders are owned by private equity, which to me is automatically a call for concern.)
The business appeal of these cards is that providers don’t have to be in the financing or debt collection business. They receive full payment quickly. Some products advertise to providers that they’ll be paid in two business days, while others advertise they will be paid in full instantly.
Providers can avoid managing accounts receivable, mailing statements, and negotiating billing disputes.
The patient is also less likely to delay or defer treatment if they can get immediate credit. This includes patients who do not have insurance or otherwise could not pay in full out-of-pocket.
The Good Part of Medical Credit Cards
The patient actually gets the care, and promptly.
This is tremendously valuable – just ask anyone in England or Canada who is on a waiting list.
The medical credit cards: pro-or-con debate is is whether an increase in patient debt is worth it. It is true that a humane health system would never charge any interest to patients, monthly or deferred. However, people need care today– and we cannot wait forever for Single Payer. In the short run, some level of medical debt may be inevitable.
The National Consumer Law Center (NCLC) has done stalwart work in all aspects of medical billing for years. The NCLC raises the following cautions over medical credit cards:
You receive care quickly, but you might be prescribed more expensive treatment than you would be otherwise.
You might receive insufficient information on the financial product to make an informed decision. This is especially true with “deferred interest” cards.
You pay no interest so long as all you pay the debt in full….but if you are late, the entire balance is recapitalized at over 20 per cent and added to your debt.
You may be eligible for financial assistance, and not need to even use a credit card. This is especially true in a hospital setting.. If you prematurely sign up for a medical financing product, it might be harder for you to receive the financial assistance for which you qualify.
Your health insurance plan might actually cover the medical care. You could be pressured into credit card debt before the claim has a chance to pay out. There have been ugly cases where persons on Medicaid were enrolled in a credit card program.
If you have a bad credit rating, you might be offered a high-interest loan instead of a credit card.
This might be the largest problem. Someone with a $7,000 hospital bill, for example, who enrolls in a five-year loan at 13% interest will pay at least $2,500 more to settle that debt.
Many hospitals used to offer installment plans to uninsured and/or low-income patients at zero or low interest rates as an accommodation.
But recently, providers have begun to offer more structured loan arrangements. Such installment plans or loans provided in partnership with private equity tend to charge market-level or higher interest rates.
The new loans have lower monthly payments than medical credit cards, but of course this is deceptive in terms of long-run financial damages.
At Atrium Health in North Carolina, as many as half of patients enrolled in an AccessOne loan were in one of the company’s highest-interest plans, according to 2021 billing records analyzed by Kaiser Health Network..
At AU Health, Georgia’s main public university hospital system, billing records obtained by Kaiser show that two-thirds of patients on an AccessOne plan were paying the highest interest rate as of January.2023.
Such loans are a classic example of what Terese Cottom MacMillan calls “negative social insurance.” Unlike actual social insurance programs, negative social insurance doesn’t actually make us more secure. It only makes our collective insecurity profitable.”
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