Medical loans and credit cards – New York Times reports on the downside

Several weeks ago I wrote a blog post on medical loans, explaining how they can help to fill financing gaps for self-pay patients. I noted that ‘Having to borrow money to pay for needed care probably isn’t the first option most self-pay patients would chose, which is why some of the other alternate financing arrangements like a health care sharing ministry or critical illness policy might make more sense for many people.”

Today I read an article in the New York Times, ‘Patient’s Mired in Costly Credit from Doctors’ that explores some of the downsides of medical loans, particularly the way they are sometimes marketed. The article provides additional background and information on medical loans and medical credit cards that self-pay patients should probably keep in mind. Here are a few excerpts from the story that stood out:

The dentist set to work, tapping and probing, then put down his tools and delivered the news. His patient, Patricia Gannon, needed a partial denture. The cost: more than $5,700. 

Ms. Gannon, 78, was staggered. She said she could not afford it… But she was barely out of the chair, her mouth still sore, when her dentist’s office held out a solution: a special line of credit to help cover her bill. Before she knew it, Ms. Gannon recalled, the office manager was taking down her financial details.

But what seemed like the perfect answer… has turned into a quagmire. Her new loan ensured that the dentist, Dr. Dan A. Knellinger, would be paid in full upfront. But for Ms. Gannon, the price was steep: an annual interest rate of about 23 percent, with a 33 percent penalty rate kicking in if she missed a payment. 

She said that Dr. Knellinger’s office subsequently suggested another form of financing, a medical credit card, to pay for more work. Now, her minimum monthly dental bill, roughly $214 all told, is eating up a third of her Social Security check. If she is late, she faces a penalty of about $50.

“I am worried that I will be paying for this until I die,” says Ms. Gannon…

A review by The New York Times of dozens of customer contracts for medical cards and lines of credit, as well as of hundreds of court filings in connection with civil lawsuits brought by state authorities and others, shows how perilous such financial arrangements can be for patients — and how advantageous they can be for health care providers…

The New York attorney general’s office found that health care providers had pressured patients into getting credit cards from one company, CareCredit, a unit of General Electric, which gave some providers discounts based on the volume of transactions. Patients, the investigation found, were misled about the terms of the credit cards, and in some instances, duped into believing that they were agreeing to a payment plan with dental offices when, in fact, they were being pushed into high-cost credit…

Russell A. Salton, the chief executive of Access One MedCard, a credit card company in Charlotte, N.C., said demand for specialized cards — the MedCard has an annual interest rate of 9.25 percent — is driven by providers interested in removing an “obstacle to providing valuable care.” The company says the number of hospitals offering its credit cards has grown about 25 percent a year in recent years.…

Overall the article probably paints too negative a picture of the entire medical loan and credit card industry – the 9.25 percent interest rate charged by Access One MedCard hardly seems outrageous, especially when compared to the higher interest rates typically charged by normal credit cards (and is well in line with the rates offered by the companies I noted in my earlier post). And some of the stories likely reflect the sorts of unhappiness and confusion that some customers experience in just about any line of business.

But self-pay patients should read the full story to at least get a better sense of some concerns that have been raised over medical loans and credit cards. Signing up at the doctor’s office while you’re still in pain or have just been told you need care seems like a bad idea, and in the event a self-pay patient needs to borrow in order to pay for needed care they would be well advised to consider all their options, not just the first one put in front of them at their doctor’s or dentist’s office.

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