Healthcare providers are increasingly promoting financing options—such as medical credit cards and installment loans—instead of no-cost payment plans, according to a recent report by the CFPB.
According to the CFPB, there is a serious risk and lack of transparency around these financial products, and patients should exercise caution. In fact, according to the report, using these financing products can end up costing patients more money long-term.
Medical credit cards and loans used to be only for elective procedures, but now they are also offered for basic medical care and emergency healthcare. Medical financing companies promote their products to doctors and nurses, who then offer them to patients. However, patients may not fully understand the terms and sometimes end up with credit they cannot afford.
Many medical credit cards offer deferred interest terms, which means that if someone has a remaining balance after a certain period, they are charged all the interest that would have accrued since their original purchase date.
The report found that “between 2015 and 2020, people incurred interest on 20% of their healthcare purchases when using deferred interest cards or loans. People with credit scores below 619 incurred interest more frequently, for about 34% of their healthcare purchases. In part, people with lower credit scores may have been more likely to incur interest because they were more likely to have shorter periods before they were charged deferred interest.”
CFPB also noted that patients who should be eligible for reduced or free care may be signed up for a medical card or loan instead, and the terms of these financing plans can vary greatly. Overall, the use of medical cards and installment loans—and their promotion by medical providers—can increase the financial burden on patients and may compromise medical outcomes.
Private patient financing has been a concern for some time now, as reported in PaymentsJournal. But, as healthcare costs continue to rise and insurance coverage becomes more limited, individuals will continue to seek out alternative financing options to help them pay for their medical expenses.
However, as highlighted in the CFPB report, patients need to err on the side of caution, particularly since there may be risks associated with these financing products, including high interest rates and potential lack of transparency in terms and conditions.
To mitigate these risks, it will be important for regulators and healthcare providers to ensure that patients have access to clear and accurate information about financing options and their associated costs. Additionally, efforts to improve access to affordable healthcare and reduce the overall cost of medical care may help to reduce the need for private patient financing in the first place.