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The Medical Credit Card Trap
Health care providers are increasingly pushing special credit cards as a way for the cash-strapped under-insured to cover their medical expenses. But then the bills start piling up.
Michael Moore's film Sicko opens with the haunting vignette of a man who loses part of two fingers in a sawing mishap. As he lacks both health insurance and a bottomless bank account, hospital authorities give him a choice of which finger to re-attach.
It's a wonder the hospital finance office didn't simply tell Moore's hapless accident victim to apply for a line of credit -- an increasingly popular way for the cash-strapped under-insured to cover their medical expenses. Health-care chains such as Kaleida Health, which includes five hospitals and numerous outpatient facilities in upstate New York, advertise credit cards as a way for patients to commence receiving services. Kaleida helpfully notes that G.E.Money's CareCredit "lets you begin your treatment immediately -- then pay for it over time with low monthly payments that are easy to fit into your monthly budget."
In the years since the failure of President Bill Clinton's health-care reform package, credit cards have come to play an ever-expanding role in the American medical system. Not only do most doctor's offices and hospitals now routinely accept MasterCard and Visa as well as specialized cards like CareCredit, many help patients set up new accounts.
But as use of credit to pay for medical expenses becomes more and more common, a new concern has begun to worry reform advocates and other players in the system: Have we unwittingly given the nation's financial sector a seat at the table when it comes time to once again discuss restructuring our health-care system? The question takes on an even greater urgency with health care shaping up to be a significant issue in the 2008 presidential campaign.
"It's always hard to get through legislative change, and change is even harder if it is going to cost someone money," says Elizabeth Warren, the nationally known bankruptcy expert and co-author of a 2006 study on medical debt. "The consumer finance industry is becoming a stakeholder, and as they increase their profit from people who are struggling to pay their bills, it's going to make needed change much harder to accomplish. This is the central problem with these cards."
Americans are expected to spend $250 billion in 2007 on out-of-pocket medical expenses, and most observers expect that sum to grow over the coming years as employers and insurance companies continue to shift more and more medical costs onto the patient.
Many medical practices encourage patients to turn to plastic to cover their shortfalls, and those who study the issue say that it's easy for small bills to spiral into large expenses. When high-interest credit cards are used as a way of paying bills, many consumers find themselves on a financial treadmill that they find impossible to escape.
"There are hundreds of billions of dollars that patients are responsible for paying in medical costs every year, and each year health-care costs are escalating," says Mark Rukavina, the director of Access Project, a nonprofit consumer health advocacy group. "The credit card companies are moving in, and they are moving in quickly."
Numerous credit cards are pitched to consumers as a way of financing so-called "lifestyle" (read: unnecessary) medical expenses, things like Lasik eye surgery and cosmetic dentistry, on consumer-friendly terms. Take Citibank's Citi Health Card. Offered by ophthalmologists and dental practices -- and even veterinarians -- Citibank promotes the Health Card as a gentler credit card, with no annual fee, and, at least on some plans, no interest if consumers pay off their bills within a certain timeframe.
But critics point out that Citi Health cardholders who cannot pay off their debt by the end of their agreed-upon payment period face interest rates exceeding 20 percent -- beginning from the date of the first purchase. In addition, Citi Health can also be used to pay for more urgent medical procedures such as dental surgery since the practitioners who offer the card can allow patients to use it on all the services they offer, not just those deemed nonessential. As anyone who has ever had, say, a root canal knows, quibbling over treatment costs or looking over the fine print of a credit application for terms, interest rates, and penalties are not high priorities for a patient in a lot of pain.
And the still relatively new frontier of Health Savings Accounts (HSAs) and Flexible Spending Accounts has also offered financial institutions fertile ground to ply their trade. Wells Fargo, for example, has issued more than 100,000 debit cards linked to these plans. Other companies have extended credit to consumers who have not fully funded their HSAs and need to borrow the money to pay the high insurance deductibles linked to these plans.
"The financial services institutions are becoming much more active in the medical marketplace than ever before," notes Richard L. Clarke, president and CEO of the Healthcare Financial Management Association, a trade organization for financial professionals ranging from controllers to accountants in the health industry. "They see a huge volume of transactions, large dollar amounts flowing back and forth, and they see themselves as the middle person being able to process those transactions, manage that cash, and make some money."
To be fair, consumer credit allows doctors and other providers to receive payment for care quickly. But when consumers turn to plastic in lieu of adequate insurance, they unwittingly collaborate in masking the societal cost of Americans' ever-higher personal health-care expenses. "The shift from direct medical debt to credit card debt hides the degree of stress on families," Warren argues. "It looks like too many trips to the mall, not a family who couldn't pay for an appendectomy."
No one expects the gravy train to stop anytime soon. After all, banks and other issuers of credit can make money from medical services in numerous ways: collecting a fee from the medical provider for handling a transaction, charging interest on patient bills, and charging employers for acting as administrators of their HSAs and other medical spending accounts. It seems unlikely that any business would give up on this growing income stream without a fight. "If there was Medicare for all in which the private health insurance industry had little or no role, that would have a very dampening effect," Clarke observes. "The insurance companies would be much more vocal than the banks ... but the banks would be right behind the insurance companies." Helaine Olen is a freelance writer whose work has appeared in The New York Times, The Los Angeles Times, The Wall Street Journal and numerous other publications.
© The American Prospect
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18 Comments so far
Show AllOh goody, another way for the bankers to rack up those interest dollars. Is everyone in this goddamn country nuts?
Several years ago my dog was hit by a car and needed surgery and recovery time at the vets. I was told when I made the decision to try to save my pet that I could get the money through a company they worked with. What I wasn't told until the day I was to bring her home was that the credit card company was going to charge 24 per cent from the first day issued. 24 PER CENT!! On top of the sadness was a huge ANGER. I ended up rejecting that but did put the surgery and all the other expenses on another card. It took me a long time to pay off that debt.
When I had to undergo surgery without insurance, my doctor wrote off my bill. Not the hospital, PeaceHealth. They made me a kneebreaking offer: Put a lien on my home or they knew a friendly credit agency that would only charge me 16% interest. Fortunately for me, that was during the "credit flowing like water" period and I refinanced my home, pulling out equity, to pay the bill. At another time - like now - I would have been in a lot of trouble.
We don't need these insurance friendly plans everyone is cooking up, especially the mandatory signup ones that Wyden and Edwards are espousing. We need HR676, the only single payer plan out there.
If I have given any thought to voting for Edwards, he lost me with his insurance plan. Why he wants to benefit the insurance industry is beyond me, he got rich fighting them.
Everyone go see SiCKO. No matter how much you are informed, you will gain from it.
Some of our fellow citizens do not have any money, credit or insurance to pay for something as basic as the preservation of their health and sometimes their life.
This article illustrates the point, a man killed his beloved wife for he could not afford the payments.
http://www.cnn.com/2007/US/08/16/wife.killed.ap/index.html?iref=mpstoryview
The USA health care system is inhumane and barbaric.
It's nice to have one in a pinch but as my mom ages, her expenses are only going to go up for medical and dental. That's wrong. It really puts a damper on what should be quality time she spends with her family in her few remaining years! Damn the for-profit medical and dental industry! They are evil.
By the way, I spent some time today sending that story in ragnarok's message around to congressmen and Michael Moore and Sanjay Gupta.
Sears, car dealers and many other US businesses freely admit that their credit divisions are either their only or their most profitable profit center. Look for this business model to be applied to more industries.
sjc_1 August 16th, 2007 10:16 pm
"Some people are going to other countries for surgeries. There are even insurance policies that are much more affordable that will cover patients for procedures done in other countries. A heart bypass can cost 1/10th the price and the health care is excellent. If the AMA will not allow competition in this country, then the world market will."
If you plan on doing this, be sure to tell everyone who asks that you are leaving the country to go on vacation.
Attention all home owners:
If you and your spouse don't have a "Homestead" exemption filed at the Registry of Deeds, it's time to call your lawyer and get one recorded to cover yourselves against potential future creditors.
Do it before it's too late! Congress is always changing laws to protect the interests of the corporate predators who serve their campaign needs.
Some people are going to other countries for surgeries. There are even insurance policies that are much more affordable that will cover patients for procedures done in other countries. A heart bypass can cost 1/10th the price and the health care is excellent. If the AMA will not allow competition in this country, then the world market will.
It's so plain and simple, just as Micheal Moore explained. When you have an institution that is driven FOR PROFIT, then why would they be best for the public. From insider knowledge, I have found, not only do hospitals overcharge expenses, but pharmaceuticals overcharge on their medicines. But as screwed policies goes, health is of utmost the most devious. Distract. When you're thinking only of your family, when really do you have time to think of anything else?
Nobody wants to address the real problem with the "health care" industry. That is that there are outrageous profits on top of profits on top of profits piled on every aspect of the entire industry. Someone like me who is in the limbo of owning a little property but still making barely over the poverty line is effectively shut out of the system. I heard somewhere that uninsured like me are charged 4 to 10 times what an insurance company would pay for the same services. And since I actually own some property and can be found and hounded for the money, I can't just go to the emergency room like the illegal aliens do. I am learning to practise minor self-surgery. I have been getting down to a very good diet with very little processed food, and I have practically eliminated all my vices. I got some dental pliers on ebay for pulling my old mom's rotten teeth. $25 for pliers has already paid for themselves 10 times over! If I ever need some real surgery, I'm going to take my chances and go to Mexico. Welcome to third-world America!
The uninsured with property will pay the full list price. Insurance companies negotiate deals for much less than list price. So they either pay less or deny coverage. Which ever makes them the most profits.
Gail, WHY?
If you live on the border with Mexico, you can buy a Mexican health policy for much less than a similar American one? Why? Two reasons. ONE NO MANDATES. In California, EVERY policy sold must cover, among many other things, mental illness and drug addiction treatment. What this means is that, assuming that you are not mental or a druggie, you get to subsidize the drug addicts and the crazies. These mandates can add a good 25% to the cost of a policy. In Mexico there are no mandates. TWO Malpractice insurance. A HUGE cost of health care in the US goes to John Edwards type lawyers. And, YOU get to pay for it in your insurance premiums.
you are all lunatics, i went to mexico to do dental work on my teeth. they screwed everything up. i lost 30,000 dollars to fix my teeth. let's hear from the other bloggers who have gone to third world countries to do medical procedures.
oh Felipe Calderon, lot's of talk from you, go ahead and get you're dental care from mexico, don't mind abscessed teeth and all the other inconvient future problems that might occur, vive el mexico
I have a friend who got her dentures in Mexico last year. For the money she saved, she was able to vacation in Mexico. Linda said her the dentures are great.
So I don't know what damon13 is talking about regarding abscessed teeth. I've heard people here in the U S talk about suck dentists. I've gone to one myself.
Anyway Linda went with a group of people that go to Mexico regularly for dental care. The U S needs to shape up - and shape up quick.
Here's something which should be addressed in New Mexico: many single parents register themselves and their children for Medicaid services. They're abusing a system which doesn't check to see a. if they're in a relationship with a domestic partner who's supporting them financially, b. if they have given a mailing address, it's always in the barrios. Many of these 'single parent homes' are actually two parent homes with sizable incomes and living in the newer and affluent subdivisions. I find this particularly annoying, and would like to see the state government check this fraud out.