RSSFinancial institutions are issuing medical installment loans and credit cards to patients with exorbitant interest rates, according to a May 4 Consumer Financial Protection Bureau report.
Medical credit cards are usually offered to patients in medical providers’ offices. Financial firms reportedly market their products with incentives including promised cost savings, payments within a few days and minimal financial risks. However, such products are reportedly more expensive than other forms of payment, the bureau said, including conventional credit cards, with interest rates of up to 27 percent.
“Fintechs and other lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,” said CFPB Director Rohit Chopra. “These new forms of medical debt can create financial ruin for individuals who get sick.”
Patients used speciality medical credit cards or loans with deferred interest periods to pay for nearly $23 billion in health care expenses — such as emergency room visits, medications and lab work — from 2018-20. They also paid $1 billion in deferred interest. According to an investigation from KFF Health News and NPR, profit margins in the patient financing industry top 29 percent, seven times what is considered a strong profit margin at a hospital.
An estimated 100 million Americans have medical debt. One of the most prominent medical credit card companies is Synchrony Bank’s CareCredit, which has more than 12.7 million cardholders and 250,000 providers. “The growing promotion and use of high interest medical cards and installment loans can create a significant financial burden for patients, and deter them from seeking needed health care in the future,” the CFPB stated.
Congress has also scrutinized medical credit cards. In early January, Elizabeth Warren and Ed Markey, both Senate Democrats from Massachusetts, criticized the medical financing industry in letters to Stamford, Conn.-based Synchrony Bank and San Francisco-based Wells Fargo.
“The current structure of our health care system often requires that patients enter into medical debt in order to access services they need,” Warren and Markey wrote. “Within that context, patients — often under duress because of concerns about their medical care — are being pushed into and then locked into medical credit cards despite the availability of alternative payment options that might be more beneficial and offer lower interest rates.”
