Medical credit cards have become a popular way for Americans to finance their medical bills as healthcare costs in the US continue to rise. These cards often offer deferred interest payment periods, which means that patients don't have to pay interest on their medical bills for a set period of time, typically ranging from 6 to 18 months. However, a new report from the CFPB warns about the high fees and costs associated with medical credit cards, which can place a significant financial burden on patients.
The report states that the promotion and use of medical credit cards and installment loans can increase the financial burden on patients who may end up paying more than they otherwise would and may compromise medical outcomes. This is particularly concerning as medical debt is a debt of necessity, meaning that people often have to seek medical care regardless of their financial situation. When people are unable to pay their medical bills, this can deter them from seeking needed healthcare in the future, which can have ripple effects on the broader cost of healthcare, consumer wellbeing, and the economy.
The CFPB report found that between 2018 and 2020, people paid $1 billion in deferred interest payments for medical charges on top of $23 billion in overall medical expenses. The total fees vary by credit score, with people with lower credit scores being more likely to incur interest since they're also more likely to have shorter periods before being charged deferred interest.
Experts attribute the increased reliance on medical credit cards to the larger issue of healthcare costs in the US, with national health expenditures reaching $4.26 trillion in 2021. Out-of-pocket costs are continuing to rise, averaging $1,315 per capita in 2021. For those with employer-sponsored insurance, the average single deductible has increased by more than 57% since 2013 while the average family deductible has risen by more than 55%.
While medical credit cards may seem like a quick fix for medical debt, they often come with high interest rates and fees that can leave patients struggling to pay off their bills. Sara Collins, vice president for healthcare coverage and access at The Commonwealth Fund, states that medical credit cards are definitely not the solution to healthcare cost drivers and are leaving many poor and middle-class people with interest payments in addition to their healthcare bills that they may struggle for years to pay off, if ever.
Patients should consider speaking with their healthcare providers before turning to a medical credit card, as some providers offer payment plans with no interest rates or fees. This can often be a better option for patients who are struggling with medical debt. Additionally, some hospitals are required to provide financial assistance programs for patients who are unable to pay their medical bills.
In summary, the use of medical credit cards to finance healthcare costs can place a significant financial burden on patients and may compromise medical outcomes. Patients should consider alternative payment options, such as payment plans with their healthcare providers or financial assistance programs offered by hospitals, before turning to medical credit cards.
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