Medical Credit Can Lead to Financial Ruin

Thursday, 17 Oct 2013 11:04 AM

By Michelle Smith

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Medical credit is touted as a solution to otherwise inaccessible healthcare, but critics warn it's an option that can be a tripwire for financial disaster.

A growing number of healthcare professionals are urging patients to pay for out-of-pocket medical costs with credit cards and lines of credit that are arranged in the providers' offices.

The New York Times calls it "a lucrative alliance" between American healthcare and American finance.

Editor's Note: Gov. Prohibited From Helping Seniors (Shocking)

This type of financing has been around for about a decade and was originally used to fund cosmetic surgeries and elective procedures, The Times explains.

Now, with Medicare and insurance companies offering less coverage, medical credit is commonly solicited for basic care, dental work and items like dentures and hearing aids.

It's a glowing option for medical providers. It opens up the possibility that patients can get costly procedures they may not otherwise consider, and it provides upfront payment in full for services rendered.

But for the patients, these financial arrangements can be perilous, according to The Times.

Many of the medical credit cards have interest-free promotional periods of six to 24 months, which tends to be a selling point to people who view the bought time as a deal.

It becomes a far less attractive option for those who have a balance remaining at the end of their promotional periods, as steep interests rates kick in, generally ranging from 25 percent to 30 percent.
And, that interest is retroactive, applying to the full original balance regardless of how much has been paid.

And a missed payment usually results in a steep penalty and may trigger even higher interest rates, which are also retroactive, explains The Times.

Cameron Kmet, a chiropractor in Anchorage, Alaska, tells The Times, he stopped offering medical cards to his patients.

"One missed payment can really ruin a patient's life," says Kmet, who now runs a company that administers medical payment plans organized directly between providers and patients.

Critics say another problem with medical credit is that it encourages healthcare providers to inflate their charges.

"The cards prey on seniors' trust," Lisa Landau, head of the healthcare unit at the New York Attorney General's office, tells The Times.

"Ultimately, this credit facilitates a bad financial decision that will haunt a patient because it adds to indebtedness," says Ellen Cheek, who runs a legal help line for older people through Bay Area Legal Services.

Attorneys general in several states have filed lawsuits alleging patients have been overcharged, billed for unauthorized work and misled about the financial terms. Authorities also claim the cards are peddled using high-pressure sales tactics.

CareCredit and its parent company, GE Capital Retail Bank, are the biggest in the business of healthcare financing, according to the New York Attorney General's office.

Its investigation revealed that about 65 percent of medical credit card holders applied while in a provider's office, a time when critics say people are particularly vulnerable since many are suffering with an ailment.

New York authorities also found that of the 90 percent of CareCredit consumers who choose the "no-interest-if-paid-in-full" promotion, about 25 percent end up paying a 26.99 percent interest rate, when the promotional period ends.

Editor's Note: Gov. Prohibited From Helping Seniors (Shocking)

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