More options for paying for health care, but some can be expensive (2023)

Patients are increasingly being offered special financing to cover medical treatments that consumer advocates say can cost more than conventional credit cards.

These financing options include medical credit cards, which have been around for years and function like traditional credit cards but are only used for medical treatment. More recently, according to a newreportfrom the Consumer Financial Protection Bureau, a crop of fintechs has also started offering a dizzying array of installment loans for health plans.

Whilemedical debthas been an issue for Americans, the growth in medical funding "can create financial ruin for people who fall ill," department director Rohit Chopra said in aa declarationearlier this month. “Fintechs and other loan teams are designing expensive loan products to sell to patients looking to make ends meet on their medical bills.”

Financing cards and services are marketed to hospitals and physicians as a way to get paid quickly and avoid the hassle and expense of sending billing statements and collecting payments. Credit is usually offered to patients at a doctor's office or hospital and is serviced by finance companies.

The consumer bureau said it is continuing 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 because even people with health insurance can have trouble paying for care. The average annual deductible, the amount patients are responsible for before insurance payments, isalmost $1,800for a person with work-based health insurance, according to the nonprofit health research group KFF.

An estimate9 percentof adults, or about 23 million people, owe more than $250 in health care costs, according to KFF, and about half of those with significant medical debt owe more than $2,000.

Once an option primarily for uninsured care, such as dental or hearing services, medical financing is now available for a variety of treatments, including exams and emergency room care. , found out the consumer office. However, the details vary greatly. Some of the cards and financing options can only be used for specific treatments, such as plastic surgery or infertility treatment, while others are left to the discretion of the provider. Some limit loans to a few thousand dollars, while others go as high as $50,000. As financing is usually provided by the hospital or doctor's office, patients may be inclined to think that loans are a good deal.

Loans can be convenient, particularly for patients with smaller balances that can be paid off relatively quickly. Some lenders offer small loans at zero percent interest if the loan is paid off over a period of weeks, similar to "buy now, pay later" financing at online retailers.

But other loans can carry double-digit interest rates. The APR on a typical medical credit card is 27%, the department found. The average rate for general purpose credit cards in March 2023 was around 20%, according to federal data. Some lenders named in the agency's report charge fees of up to 36%.

“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.

Particularly problematic is that some loans use "deferred" interest promotions, a feature that has declined in most purchasing categories except health, the office said. Patients may receive a zero percent rate for a few weeks or months, but if they don't pay the debt in full by the due date, they will be charged retroactive interest at the beginning of the loan.

"It works if you can pay it off before the interest accrues," said Caitlin Donovan, a spokeswoman for the Patient Advocate Foundation. But many low-income people cannot.

Patient advocates say they are concerned that specialized financing could replace the free or low-cost installment plans traditionally offered by healthcare providers. Patients, they said, should consider other, more affordable financing options, including borrowing from a local credit union. "Just because a medical provider offers financing doesn't mean it's in your best interest should you need it," said April Kuehnhoff, senior attorney at the National Center for Consumer Law.

Donovan of the Patient Advocate Foundation said patients should first make sure their insurance plan has adequately covered the treatment. If your insurer denies a claim but you think the care should be covered, consider filing an appeal, he said. “The appeals process for insurers to cover care is drastically underused.”

If you are still unable to pay a bill after paying the insurance company, ask your doctor or hospital if there is a patient assistance program available to cover all or part of the balance. Nonprofit hospitals are required to provide a certain level of charitable assistance to financially challenged patients, and some states also have similar requirements for for-profit hospitals. There may be an income cap on this help, but it's usually higher than you think, Donovan said. If they don't offer a program, ask if they can recommend one. Or you can search the foundationsite webfor programs in your area.

You should also inquire about arranging an informal payment plan directly with the provider. You can even try to negotiate a lower amount, Donovan said, if you agree to pay in full. "Ultimately," Donovan said, "hospitals want to get paid."

Here are some questions and answers about medical debt:

Can Medical Debt Hurt My Credit Rating?

He can. Doctors and hospitals generally do not report their payment history directly to major credit bureaus, but they may submit overdue bills to outside collection agencies, which can report them to major credit bureaus such as Equifax, Experian, and TransUnion. Nearly one in five households reported having some type of overdue medical debt, according to the Department of Consumer Affairs.

Have credit bureaus changed the way medical debt is reported on credit reports?

Yes. The Big Three agencies announced last year that they would remove from consumer credit reports any records of medical bills that have been paid and any medical bills that are less than a year old. They're also now giving patients a year to settle their medical debt, instead of six months before unpaid bills show up on a credit report.

And, as of April 11, credit bureaus no longer include medical bills under $500 on credit reports. (This meansnearly halfof all people with medical debt on their credit reports will remove it, according to the consumer bureau).

How do I know if my debt has been removed from my credit report?

To see if you have medical billing debt on your credit report that shouldn't be there, check your report atwww.annualcreditreport.com, a special website maintained by the credit bureaus. You can consult the reports weekly, free of charge, at least until the end of this year. But keep in mind that the changes don't apply to charged credit card debt, even if, for example, you used your credit card to pay a medical bill of less than $500, the Department of Financial Protection said. of the Consumer.