CFPB Report Shows Medical Credit Card Debt Is 'a Symptom' Of U.S. Health Care, Expert Says
As healthcare costs continue to rise in the United States, many Americans are turning to medical credit cards for their medical bills.
However, a new report from the Consumer Financial Protection Bureau (CFPB) warns of high fees and costs associated with these cards.
"Expanding the promotion and use of medical cards and installment loans can increase the financial burden on patients, forcing them to pay more than they would otherwise, and worsen outcomes," he said. Research shows that when people can't pay their medical bills, it can prevent them from getting the help they need in the future. The use and promotion of health cards and installment loans by health care providers have far-reaching implications for overall spending on health care, consumer welfare, and the economy.
About 41% of Americans have medical debt. Medical credit cards typically offer a deferred interest payment period for many of these payments. However, the CFPB found that people paid an additional $1 billion in fees between 2018 and 2020, for a total of $23 billion.
Total fees depend on credit history. For example, those with a credit score below 619 had to pay about 34% in interest on medical purchases, while a CFPB report found that people with lower credit scores were more likely to pay interest because they also had more to pay. You will earn deferred interest for a short period of time.
"These cards are a sign of the growing affordability issues people face with health plans that don't provide the cost protection they need to access timely care," said Sarah Collins, vice president of health insurance and affordability. Commonwealth Fund, according to Yahoo Finance. "Medicare credit cards are certainly not the answer to health care cost drivers and leave many poor and middle-class people with health care interest payments that, if paid at all, will cause problems for years to come."
Why people "could be better off" without them
Experts blame the growing reliance on medical credit cards for the larger health care spending problem in the United States, with an estimated $4.26 trillion in national health care spending in 2021.
"The use of medical credit cards and other deferred interest rate products has dramatically shifted from treatments and procedures not normally covered by insurance to services normally covered by insurance". Today, these products are used to cover a range of medical expenses, including co-payments and urgent care costs. Thus, it is likely that individuals covered by Medicare, ACA market-based plans, or employer insurance will also experience adverse effects from these products.
Cost overruns continue to rise, averaging $1,315 per person in 2021. For those with employer-sponsored insurance, the average individual premium has risen 57% since 2013, and the average household premium has risen more than 55%.
Eva Stahl, vice president of public policy at RIP Medical Debt, told Yahoo! ".Financing.
The compound annual percentage rate (APR), defined by the CFPB as "the annual cost of your loan, including fees expressed as a percentage," is 23.84% for general purpose credit cards. For medical credit cards, the rate is around 27%.
According to the latest Commonwealth Fund 2-Year Health Insurance Survey, 39% of people who have trouble paying medical bills or debt in 2022 say they have taken on credit card debt. While the survey didn't specify what type of credit card it was, Collins noted that it was a measure of "the number of times people pay off their medical debt at high interest rates."
"These products often replace cheaper credit, such as low-cost loans offered by health care providers themselves, or infringe on some patients' right to financial assistance that many hospitals are supposed to provide," a CFPB spokesperson said.
Collins and Stahl stress that patients should talk to their health care providers before choosing a medical credit card, as some providers offer payment plans with no interest or fees.
"The report shows that people may be better off without these cards because they can qualify for financial assistance programs through their health care benefits, and it's hard to argue that the bill is wrong." "Right now we're working with a third party," Collins said.
Medical Loan "Eligible Loan"
Last year, the National Credit Bureau announced that medical debt under $500 would be removed from people's credit reports, which was good news for many whose credit scores were damaged by health care costs.
However, Stahl noted that people can lose this benefit if their medical debt turns into credit card debt.
"It's problematic for a number of reasons," he said. First, it hinders politicians' ability to understand the severity of the health debt crisis, as it turns into another form of debt. The same thing happens when people borrow from friends and family to pay off their medical debt.”
This is because the credit bureaus have no way of accurately knowing the cause of credit card debt, which means the number of people with medical debt could be high due to underreporting.
"The whole health care financing system is broken," Stahl said. "This is not an isolated issue. Health insurance does not meet people's needs and does not cover their medical expenses. Patients are usually asked to pay an amount they cannot afford, which discourages them from seeking treatment at all."
According to a 2022 Kaiser Family Foundation survey, 43% of U.S. adults say they or a loved one has delayed or delayed getting needed health care because of cost considerations. Separately, 47% of adults with medical debt went to a collection agency, 35% said their debt negatively affected their credit rating, and 3% were forced to file for bankruptcy.
"The health system needs to do more to ensure that patients have easy access to charitable financial assistance when they qualify, and we need to review our medical debt collection laws," Stahl said. "Healthy debt is not optional debt. It's emergency debt."
Adriana Belmonte is a political reporter, health policy expert and Yahoo Finance editor. You can follow her on Twitter @adrianambells and reach her at adriana@yahoofinance.com.
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