Clinics often offer special medical credit cards as a solution for paying large medical bills. However, patients may end up paying much more on their bills if they have to pay interest in the future.
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The Biden administration on Thursday warned Americans about rising risks for medical credit cards and other medical loans, with a new report saying high interest rates could deepen patient debt and threaten financial security. warned.
The Consumer Financial Protection Bureau estimates in its new report that Americans paid $1 billion in deferred interest on medical credit cards and other medical funds in just three years, from 2018 to 2020. doing.
Interest payments can drive up health care costs by almost 25%, a body that analyzed financial data submitted to regulators by financial institutions found.
Rohit Chopra, director of the CFPB, the federal consumer watchdog, said: “These new forms of medical debt can spell financial ruin for sick individuals.”
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Nationwide, nearly 100 million people, including 41% of adults, have some form of health debt, a study conducted by KFF Health News in partnership with NPR found, examining the scale and impact of the country’s health debt crisis Did.
KFF Health News and NPR are in big trouble with the multi-billion dollar patient lending business that private equity and big banks are looking to profit from when patients and their families can’t afford treatment made it clear. According to research firm IBISWorld, the patient finance industry’s profit margin is above his 29%, seven times what is considered a solid hospital profit margin.
Millions of patients have signed up for credit cards such as CareCredit, powered by Synchrony Bank. These cards are often sold in doctor’s and dental office waiting rooms to help people with their bills.
Cards typically offer interest-free promotional periods for patients, but according to the CFPB, patients can face interest rates as high as 27% if they miss payments or fail to pay off their loans during the promotional period. there is. .
Patients are also increasingly being referred by hospitals and other providers to loans administered by financial firms such as AccessOne. These loans often replace interest-free installment plans once commonly offered by hospitals, and can add hundreds or thousands of dollars in interest to a patient’s debt.
A KFF Health News analysis of the public records of UNC Health, North Carolina’s public university health system, found that 9% of bills paid interest after AccessOne began managing payment plans for the system’s patients. to 46%.
Hospital and financial industry officials say they are taking care to educate patients about the risks of taking out loans with interest rates.
But federal regulators have found that many patients remain confused about the terms of their loans. ordered the creation of a $34.1 million reimbursement fund for consumers claimed by the agency.
The new CFPB report does not recommend new sanctions against lenders. But regulators warn that the system still traps many patients and undermines funding arrangements. It can sometimes result in a credibility you can’t afford,” the agency said.
The risks are particularly high for low-income borrowers and borrowers with poor creditworthiness.
For example, regulators have found that about a quarter of people with poor credit scores who applied for deferred interest medical loans failed to pay them off before interest rates spiked. In contrast, only 10% of borrowers with excellent credit quality were unable to avoid high interest rates.
The CFPB warns that the growth of patient financial products poses new risks for low-income patients, saying patients should be provided financial support for significant medical costs, but instead said interest is being directed toward piling up credit cards and loans. I can not afford to.
“Consumer complaints about CFPB indicate that these products can actually cause confusion and difficulty, rather than benefit consumers, as claimed by the companies offering these products. “Many people would be better off without these products.”
KFF Health Newsformerly known as Kaiser Health News (KHN), is a national newsroom that produces in-depth journalism on health issues. KFFMore — An independent source of health policy research, polls and journalism.
Copyright 2023 Kaiser Health News. For more information, see Kaiser Health News.