Special loans are increasingly being offered to patients to cover treatment costs, which can be more expensive than using traditional credit cards, according to consumer advocacy groups.
These funding options include medical credit cards that have been around for years and work like traditional credit cards but are used for medical treatment only. Recently, according to new information, report Following a request from the Consumer Protection Agency, financial technology companies have also started offering a dizzying array of installment loans for medical care.
Health care debt has long been a problem for Americans, but expanding medical financing “could bring financial ruin to sick individuals,” said the agency’s director Rohit Chopra. statement Early this month. “Fintechs and other financial institutions are designing expensive loan products to sell to patients who want to manage their medical bills.”
Cards and loan services are advertised to hospitals and doctors as a way to receive payments immediately and avoid the hassle and expense of mailing statements and collecting payments. This credit is typically provided to patients in clinics and hospitals and is serviced by financial companies.
The Department of Consumer Affairs said it continues to investigate how medical credit cards and loans are marketed to doctors and hospitals, and how loans affect patients’ finances and health. .
Even people with health insurance can find it difficult to pay medical bills, so there is a market for alternative financing. The average annual deductible (the amount a patient pays before insurance pays) is: almost $1,800 According to the nonprofit health care research group KFF, individuals with job-based health insurance are eligible.
Estimate nine percent According to the KFF, about 23 million adults have medical bills of $250 or more, and about half of those with significant medical debt pay $2,000 or more.
Medical loans, once an option that was primarily available for uninsured treatments such as dental and hearing services, are now available for a variety of treatments, including checkups and emergency departments, according to the Department of Consumer Affairs. there is However, the details are very different. Some cards and financing options can only be used for certain treatments, such as cosmetic surgery or fertility treatments, while others are at the provider’s discretion. Some loans are capped at thousands of dollars, while others reach as high as $50,000. Since loans are usually provided through hospitals and clinics, patients may tend to think that loans are a good deal.
This loan may be convenient, especially for patients with small balances who can repay relatively quickly. Some lenders are making microloans available at zero percent interest if the loan is paid off over a period of weeks, similar to online retailers’ “buy now, pay later” loans.
However, other loans may have double-digit interest rates. The annual rate for a typical medical credit card is 27%, according to the agency. As of March 2023, the average general-purpose credit card interest rate was about 20%, according to federal data. Some lenders named in the department’s report charge interest rates of up to 36%.
“This is really alarming,” said Wesley Ying, an associate professor of public policy and management at the University of California, Los Angeles who studies health care debt.
Of particular concern is the use of “deferred” interest promotions on some loans, but this feature has faded in most purchase categories except medical, the agency said. Patients can receive zero percent interest for weeks or months, but interest is charged retroactively to the beginning of the loan if the debt is not paid in full on time.
“If you can pay it off before it accrues interest, you’ll be fine,” said Caitlin Donovan, a spokesperson for the Patient Advocacy Foundation. But many low-income people can’t do that.
Patient advocates say they fear that specialty loans will replace free or low-cost installment plans traditionally offered by health care providers. They said patients should consider other more affordable financing options, such as loans from local credit unions. “Just because a health care provider offers a loan doesn’t mean it’s best for you if you need it,” said April Kuenhoff, a senior attorney at the National Center for Consumer Law. rice field.
Ms. Donovan of the Patient Advocacy Foundation said patients should first make sure their insurance plans adequately cover the treatment. If the insurance company denies the claim but you think the treatment should be covered, consider appealing, she said. “The appeals process to get insurance companies to reimburse you for medical costs is largely underutilized,” she said.
If you still can’t afford to pay your bills after your insurance company pays, ask your doctor or hospital if there are patient assistance programs available to cover all or part of your balance. Nonprofit hospitals are required to provide a level of charity care to financially disadvantaged patients, and some states have similar requirements for for-profit hospitals. There may be an income limit for such aid, but it’s often higher than you think, Donovan said. If you don’t offer a program, ask for a referral.or the Foundation’s website For programs in your area, visit
You should also contact the provider directly to arrange an informal payment plan. Donovan said he could try to negotiate a lower price if he agreed to pay the full amount. “At the end of the day, hospitals want to get paid,” Donovan said.
Here are some questions and answers about medical debt:
Could medical debt negatively affect my credit rating?
Maybe so. Doctors and hospitals typically don’t report their payment history directly to major credit bureaus, but they send overdue accounts to an outside collection agency, which collects data from major credit bureaus such as his Equifax, Experian, and TransUnion. may be reported to a credit bureau. Nearly one in five households report having some form of delinquent medical debt, according to the Department of Consumer Affairs.
Have credit bureaus changed the way medical debt is reported on your credit report?
yes. Last year, the three major bureaus announced that they would remove records of paid medical debts and medical debts paid within one year from consumer credit reports. It also now gives patients six months to up to a year to settle their medical debt before an unpaid bill appears on their credit report.
Also, as of April 11, credit bureaus no longer include medical collections in amounts less than $500 on credit reports. (this means about half According to the Department of Consumer Affairs, one person who has a medical debt on their credit report is eligible for the medical debt to be removed. )
How can I check if my debt has been removed from my credit report?
To find out if your credit report shows medical debt recovery that shouldn’t exist, check your report at: www.annualcreditreport.com, Special websites run by credit bureaus. At least until the end of this year, you can check the report every week for free. Note, however, that the change doesn’t apply to credit card debt being collected, even if you used your credit card to pay for medical bills under $500, for example, the Consumer Financial Protection Agency said. .
