Medical Credit Cards Can Cause Heartburn

You already trust your health care providers with your physical well-being. Should you also trust them with your financial health?

That's the question consumers are facing as a growing group of health care providers give patients the option to charge their treatment costs on so-called medical credit cards. These cards, offered by major financial-services firms such as Citigroup, GE Capital and Wells Fargo, are designed for consumers paying out of pocket for dental, vision, audiology and other treatments not covered by patients' insurance. These cards also can cover veterinary costs for your pet.

Many patients sign up for these cards in their health care provider's office. The cards typically offer "deferred interest" payment options that promise consumers will avoid paying interest as long as they pay the full balance within a certain time frame, often six months to two years. Most regular credit cards assess interest charges much sooner.

Such cards may sound like the perfect solution for seniors slapped with, say, a $3,000 dental bill that Medicare or private insurance won't cover. But consumer advocates and state attorneys general are raising a host of concerns.

Among potential problems are confusing features of the deferred-interest payment options that can cause consumers to rack up huge interest charges. In some cases, there's also the potential for consumers to be charged upfront for treatments they never receive. And paying promptly with plastic may mean that patients lose the opportunity to negotiate prices with health care providers-a move that could save them much more money than a zero-interest payment plan.

Patient advocates also question whether such products should be promoted in a doctor's office. Often, in a health care setting, "you're dealing with people in the most vulnerable state," says Mark Rukavina, principal at consulting firm Community Health Advisors, in Chestnut Hill, Mass. "Most people go into a health care provider with pain and concern, and they're not there to make a financial-services decision."

Medical credit cards have gained steam as health care costs spiral higher and many patients find themselves paying a greater share of costs out of pocket. The cards attract health care providers because they can encourage more patients to move forward with treatments and offer immediate payment for services. GE Capital's CareCredit card, for example, is now accepted by roughly 160,000 providers, up from fewer than 150,000 in 2011. Providers pay a fee to offer the cards. A 2010 investigation by New York's attorney general found that CareCredit paid providers rebates based on the amount consumers charged on the cards. CareCredit spokesperson Cristy Williams says "there's no longer any type of rebate program."

Untangling the No-Interest Option

Many patients, meanwhile, are attracted by the cards promising no interest charges when balances are paid in full within a specific time frame. These plans typically require minimum monthly payments. If consumers don't pay the full balance by the end of this zero-interest period, however, they may be charged interest-not just on the remaining balance, but on the full original purchase amount, retroactive to the purchase date. The interest rates are steep, with annual percentage rates in the realm of 27 percent to 29 percent. What's more, late payments during the zero-interest period sometimes trigger the retroactive interest charges.

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While these details are typically included in the fine print, consumer advocates fear that patients won't get a clear explanation of such complex conditions when applying for a card in a health care provider's office. "What the receptionist says will have a bigger impact than anything on a piece of paper," says Chi Chi Wu, staff attorney at the National Consumer Law Center.

The card issuers say they provide training to health care providers' office staff and extensive disclosures to ensure consumers understand the products' terms. Ninety percent of Wells Fargo Health Advantage card holders using the no-interest option pay off their balance before expiration of the zero-interest period "and, therefore, do not pay any interest," says Wells Fargo consumer lending spokesperson Natalie Brown.

Some patients complain that health care providers promote use of medical credit cards as a means of getting paid for pricey treatments even before the treatment has begun. In a class action complaint filed late last year against Syracuse, N.Y.–based Aspen Dental Management, which operates hundreds of dental practices in 25 states, patients allege that the company used aggressive sales tactics to get patients to commit to expensive treatment plans and encouraged them to apply for CareCredit cards to pay the bill ahead of time. The medical credit card "enables them to bill as much as possible upfront," says Brian Cohen, a New York City and Greenwich, Conn., lawyer representing the plaintiffs. And some patients' appointments are delayed or canceled as Aspen's scheduling system prioritizes the most profitable treatments, the complaint alleges.

In a statement on the class action complaint, Aspen said the allegations "are entirely without merit." Programs such as CareCredit "are a critically important option for many patients" and the terms are fully disclosed, Aspen Dental spokesperson Kasey Pickett said in an e-mail. "Patients are always presented with the option to pay for their care as service is rendered." Williams, the CareCredit spokesperson, says that the company restricts providers' ability to charge upfront for services, and "treatment needs to be provided within a certain time frame, depending on the specialty or course of treatment."

No matter what credit cards they're carrying, consumers shouldn't rush to plunk down the plastic when paying medical bills, consumer advocates say. Consumers paying out of pocket are generally charged providers' full price-rates far higher than those Medicare and private insurers pay. But they can often negotiate much better deals directly with the provider, especially if they're armed with data about the range of prices for the treatment they're seeking. But "when a patient pays with a credit card, the health care provider can charge the full rack rate and the consumer loses the ability to negotiate," Wu says.

Many providers will agree to extended payment plans, allowing patients to stretch payments over many months without running the risk of incurring high fees and interest charges or damaging their credit, Rukavina says. Providers also may offer "prompt pay" discounts, often ranging from 20 percent to 40 percent, for patients paying their bills within 30 to 60 days, he says.