Why You Need to Understand Medical Loans and Credit Cards

09 Mar Why You Need to Understand Medical Loans and Credit Cards

Posted at 08:00h in Finances by Triage Cancer

Have you ever felt pressured to pay for a medical service right after treatment, or to take out a loan or credit card to pay for a medical service?

As the cost of health care rises (up 4.6% in 2019, according to CMS), hospitals are increasingly teaming up with lenders to offer patients loans and credit cards to cover medical care. About 15 to 20 percent of hospitals have formed partnerships with lenders and that percentage is expected to grow, according to Bruce Haupt, CEO of ClearBalance loan servicing company.

Patient financing strategies can seem helpful, especially since hospital generally offer loans with low interest and don’t require a credit check. But, stories from patients like Laura Cameron make it clear that these loans should be used with caution.

Cameron relayed to Kaiser Health News that after a fall while three months pregnant, she was still laying on a stretcher when her provider presented her with an $830 bill. A hospital employee urged her to pay up immediately or take out a loan offered through the hospital. Taken aback by the high bill and knowing her coverage was usually more robust, Cameron decided to wait until she received her explanation of benefits (EOB) from her insurance company.

That decision paid off: the bill Cameron received from her insurance company was much lower than the one presented to her in the hospital. If she had taken that loan, even with no interest, Cameron would have been stuck paying the hospital’s estimated cost for her care, not the cost calculated by her insurance company.

Some patients may end up paying more than they need to because of hospitals’ inflated billing estimates. But, when a hospital provides an estimate, a payment plan, and an option to sign up for a loan on-the-spot, patients can feel pressured to sign.

If you feel pressured to sign an on-the-spot loan, ask to wait and receive the EOB from your insurance company first.

Medical credit cards are also offered to patients who can’t afford to pay for their care out-of-pocket. Three examples of medical credit cards are the CareCredit credit card, Wells Fargo Health Advantage Credit Card, and the AccessOne MedCard.

Medical Credit Card	APR	Deferred Interest	Services Covered
CareCredit	26.99%	6, 12, 18, and 24 months	Primary & Urgent, Chiropractic, Cosmetic, Day Spa, Dentistry, Dermatology, Specialists, Hearing, LASIK & Vision Care, Veterinary, Weight Loss
Wells Fargo Health Advantage Credit Card	12.99%	6-18 months	Hearing care/hearing aids, Eye Surgery, Dental Care, Veterinary Care
AccessOne MedCard	Varies by Healthcare Provider	Varies by Healthcare Provider	General healthcare procedures

These credit cards can be tempting because of their initial 0% interest rates, and can be leveraged strategically for unavoidable expenses. But, just like with medical loans, patients should use these cards cautiously and should read policies carefully.

Understanding how deferred interest works on these cards is extremely important. In 2013, CareCredit was fined $34.1 million by the Consumer Financial Protection Bureau for deceptive enrollment tactics that made it hard for customers to understand their deferred interest rates.

Medical credit cards usually require you to pay back your debt within a certain amount of time, typically 6 to 36 months. Often, they don’t charge interest during this period. However, if you have a high deferred interest rate (like CareCredit’s 26.99%) and can’t pay the loan within the designated time period, you’ll be charged back interest. This means you’ll have to pay back all the interest you avoided during the interest-free period. Also, if you miss a payment before the end of the interest-free period, you could face a penalty fee lose your low interest rate immediately. Just like medical loans, these credit card policies can leave you over-paying for care.

When it comes to your health, it’s difficult to weigh finances against the cost of necessary care. But, with medical debt being the #1 cause of personal bankruptcy in the United States, it is important to both your financial, physical, and mental health to research your payment options carefully. Saying “no” to a pushy provider is challenging, but it may pay off in the long run!

For more information about managing medical bills, visit www.CancerFinances.org.