CFPB Report Says Experts Say Medical Credit Card Debt Is a ‘Symptom’ of U.S. Healthcare


As US health care costs continue to reach enormous levels, many Americans have turned to medical credit cards as a way to pay for their medical bills.

But a new report from the Consumer Financial Protection Bureau (CFPB) warns of high fees and costs associated with these cards.

“The increasing prevalence and use of medical cards and installment loans increases the financial burden on patients, who may end up paying more than usual, potentially compromising medical outcomes,” the report said. ing. “Studies show that if people cannot pay their medical bills, they may not get the care they need in the future. , will have knock-on effects on broader healthcare spending, consumer well-being and the economy.”

Reign Carolyn completes eviction and medical bill paperwork at her home in Alexandria, Virginia, March 15, 2023. Photo by Stephanie Reynolds/AFP

Reign Carolyn completes eviction and medical bill paperwork at her home in Alexandria, Virginia, March 15, 2023. Photo by Stephanie Reynolds/AFP

An estimated 41% of Americans suffer from some form of medical debt. Medical credit cards typically offer an interest postpayment period for many of these charges. But between 2018 and 2020, people paid $1 billion in these toll payments, on top of a total of $23 billion, according to CFPB findings.

The total fees also depend on your credit score. For example, people with credit scores below 619 are accruing interest on about 34% of their healthcare purchases, and the CFPB report notes that people with lower credit scores are less likely to accrue interest due to shorter tenors. I have pointed out that there is a high possibility that before deferred interest is charged.

“These cards are a sign of the growing affordability problem facing people with health care plans that don’t provide the financial protection they need to get timely medical care. ”said Sarah Collins, vice president, Health Insurance and Access. Commonwealth Foundation told Yahoo Finance. “Medical credit cards are clearly not the solution to rising health care costs, and many poor and middle-class people will end up paying interest on top of their medical bills, which can take years, even if they can pay them off. You can have a hard time.”

Why People ‘Probably Have a Better Life’ Without Them

Experts blame the growing reliance on medical credit cards for the larger problem of US health care costs, which will reach $4.26 trillion in 2021.

A CFPB spokesperson told Yahoo Finance, “The use of medical credit cards and other deferred interest products has evolved over time from treatments and procedures that are not typically covered by insurance to services that are typically covered by insurance. We are making a big move,” he said. “Today, these products are used to cover a variety of medical expenses, such as co-payments and costs associated with emergency care. As a result, Medicare, ACA Marketplace plans, or employer-based insurance Even people targeted by

Out-of-pocket costs continue to rise, averaging $1,315 per person in 2021. For those with employer-provided insurance, the average personal out-of-pocket expense has increased by more than 57% since 2013, and the average family out-of-pocket expense has increased by more than 55%. %.

Eva Stahl, vice president of public policy at RIP Medical Debt, told Yahoo Finance, “In moments of distress and anxiety, people want quick solutions to their medical bills, and opportunities for lower or deferred interest rates are emerging. I might sign up for a medical credit card that provides .

The Average Annual Percentage Rate (APR), defined by the CFPB as “the annual percentage cost of borrowing money, including fees,” is 23.84% for general purpose credit cards. For medical credit cards, it’s about 27%.

According to the latest Commonwealth Fund biennial health insurance survey, in 2022, 39% of individuals who reported having trouble paying their medical bills or paying off their debts said they were in debt with their credit cards. I answered. The survey didn’t specify credit card types, but Collins said it shows “how many people are paying off medical loans at high interest rates.”

“These products often replace cheaper forms of credit, such as low-value loans provided by health care providers themselves, or are used by some patients to receive the financial assistance many hospitals are mandated to provide. often interfere with the rights of others,” said a CFPB spokesperson.

Collins and Stahl both stressed that people should consider talking to their health care provider before using a medical credit card. Some providers offer interest-free and fee-free payment plans.

“People are better off not having these cards, as the report shows, because they may be eligible for financial assistance programs through their health care providers, and there was an error in the bill.” In that case, it puts you in a more difficult situation to challenge, “because they’re dealing with third parties now,” Collins said.

Medical Debt is an “Inevitable Debt”

Last year, the National Credit Bureau announced that medical debts under $500 would be wiped from people’s credit reports, a welcome move for many whose credit scores have been affected by medical costs. It was good news.

But Stahl said people could be stripped of that benefit if medical debt turns into credit card debt.

“This is problematic for many reasons,” she says. “First, these debts are ‘converted’ into another kind of debt, so to speak, which prevents policy makers from truly understanding the seriousness of the healthcare debt crisis. The same thing happens when you borrow money from friends and family to pay your medical debt. ”

This is because credit bureaus have no way of distinguishing what specifically drives credit card debt, and the number of people with medical debt due to underreporting may be even higher. means.

“The whole medical financing system is collapsing,” Stahl said. “This is not a single problem. I completely lose my motivation.”

According to a 2022 survey by the Kaiser Family Foundation, 43% of U.S. adults said they or someone in their family had put off or postponed necessary medical care because of costs. Separately, 47% of adults with medical debt had been contacted by collection agencies, 35% said their debt had a negative impact on their credit score, and 3% said they had been forced to declare bankruptcy.

“Health care systems need to do more to make charity care, or financial assistance, easier for patients to access if they qualify, and debt collection laws related to health care debt need to be reassessed. ‘ said Stahl. “Medical debt is not a debt of choice. It is a debt of necessity.”

Adriana Belmonte is a political and health policy reporter and editor at Yahoo Finance. You can follow her on her Twitter @adrianambells Please contact adriana@yahoofinance.com.

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