Biden administration issues new warning about medical credit cards

by NOAM N. LEVEY KFF Health News

THE Biden administration on Thursday cautioned Americans about the growing risks of medical credit cards and other loans for medical bills, warning in a new report that high interest rates can deepen patients’ debts and threaten their financial security.

In its report, the Consumer Financial Protection Bureau estimated that people in the U.S. paid $1 billion in deferred interest on medical credit cards and other medical financing in just three years, from 2018 to 2020. The interest payments can inflate medical bills by almost 25%, the agency found by analyzing financial data that lenders submitted to regulators.

“Lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,” said Rohit Chopra, director of CFPB, the federal consumer watchdog.

Nationwide, about 100 million people — including 41% of adults — have some kind of health care debt, KFF Health News found in an investigation conducted with NPR to explore the scale and impact of the nation’s medical debt crisis.

The vast scope of the problem is feeding a multibillion-dollar patient financing business, with private equity and big banks looking to cash in when patients and their families can’t pay for care, KFF Health News and NPR found. In the patient financing industry, profit margins top 29%, according to research firm IBISWorld, or seven times what is considered a solid hospital profit margin.

Millions of patients sign up for credit cards, such as CareCredit offered by Synchrony Bank. These cards are often marketed in the waiting rooms of physicians’ and dentists’ offices to help people with their bills.

The cards typically offer a promotional period during which patients pay no interest, but if patients miss a payment or can’t pay off the loan during the promotional period, they can face interest rates that reach as high as 27%, according to the CFPB.

Patients are also increasingly being routed by hospitals and other providers into loans administered by financing companies such as AccessOne.

These loans, which often replace no-interest installment plans that hospitals once commonly offered, can add hundreds or thousands of dollars in interest to the debts patients owe.

A KFF Health News analysis of public records from UNC Health, North Carolina’s public university medical system, found that after AccessOne began administering payment plans for the system’s patients, the share paying interest on their bills jumped from 9% to 46%.

Hospital and finance industry officials insist they take care to educate patients about the risks of taking out loans with interest rates.

But federal regulators have found that many patients remain confused about the terms of the loans. In 2013, the CFPB ordered CareCredit to create a $34.1 million reimbursement fund for consumers the agency said had been victims of “deceptive credit card enrollment tactics.”

The new CFPB report does not recommend new sanctions against lenders. Regulators cautioned, however, that the system still traps many patients in damaging financing arrangements. “Patients appear not to fully understand the terms of the products and sometimes end up with credit they are unable to afford,” the agency said.

The risks are particularly high for lower-income borrowers and those with poor credit.

Regulators found, for example, that about a quartaer of people with a low credit score who signed up for a deferred-interest medical loan were unable to pay it off before interest rates jumped. By contrast, just 10% of borrowers with excellent credit failed to avoid the high interest rates.

The CFPB warned that the growth of patient financing products poses yet another risk to low-income patients, saying association has asked lawmakers for another $60 million.

Some Medi-Cal members already know where they stand.

Anthony Kelley, a 53-year-old single dad, is one of them. Kelley, who lives with his 14-year-old son, Nicholas, in Pacifica, California, temporarily lost his job as a driver for a concrete company in the early days of the pandemic and signed up for Medi-Cal. He got his job back about a month later, along with access to employersponsored health coverage, but he has stayed on Medi-Cal for the past three years. His son has been on Medi-Cal since he was born. When San Mateo County sent Kelley a renewal form, he called and was told his $58,000 annual income likely meant he and his son would lose Medi-Cal coverage. Now, he’s waiting for that to happen.

“It sucks for my son,” Kelley says, adding that he fears Nicholas could lose his doctors. “But we’ll deal with it.”

If you are anxious or uncertain about what you need to do, don’t fret. Help is available.

You can call or visit your local Medi-Cal office to update your personal information or ask for assistance. The Department of Health Care Services (www.dhcs. ca.gov) lists on its website all county Medi-Cal agencies, with addresses, phone numbers, and links. You can also call Medi-Cal’s help line (800-541-5555).

If you want to avoid potentially long lines or telephone hold times, consider signing up for an account at www.benefitscal.com or www. mybenefitscalwin.org. Doing so will allow you to update your personal and financial information online and find your renewal date.

Another great resource is the Health Consumer Alliance (8888043536 or www. healthconsumer.org), which can help you navigate the complexities of renewal, or contest a termination decision you think is unwarranted.

Community clinics, which provide care for nearly one-third of Medi-Cal enrollees, often have navigators on-site who can help fill out forms and answer questions.

L.A. Care, the largest Medi-Cal health plan, has 11 centers across Los Angeles County that will offer help to anyone who needs it, not just its members. Fresno County has 14 such centers. Check with your health plan for similar resources.

Under a state law, SB 260, if you are bumped off Medi-Cal but still have income low enough to qualify for an insurance subsidy through Covered California, the state’s insurance marketplace, you will be auto-enrolled in a plan the exchange deems to be the best value at the lowest cost.

Once notified of the plan selection, you will have 30 days to accept it, choose another plan, or decline coverage altogether.

“This doesn’t need to be all doom and gloom for people who have Medi-Cal,” says David Kane,