Put that appendectomy on your credit card
Creditors find fresh meat at hospitals and doctor's offices. Great.
It’s May 10, 2023. Let’s talk about medical credit cards.
In the hospital? You’re fresh meat for creditors
Credit cards are being issued at…hospitals?
The journalist Matt Taibbi once referred to Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Many people have remembered that phrase, and it always stuck with me because I think it’s pretty apt to describe how much of the financial sector works, and many companies within it, not merely Goldman Sachs.
These companies just…find ways to suck the lifeforce out of anything and everything to make a buck. And the vampire squid analogy once again rose to the top of my mind this week when I saw this release from the Consumer Financial Protection Bureau regarding “medical credit cards and financing plans.” It’s a 21-page report, but here is, what I think, the key takeaway:
“The use of medical credit cards and similar products intended to cover the cost of medical devices, services, and procedures has steadily increased over time. Given their increased prevalence, we re-assessed some of the well-known incentive issues associated with these financial products and analyzed data showing the pitfalls of deferred interest products for consumers who are confused by the terms or unable to pay the high costs of credit.
Our research suggests that many patients—specifically those who are unable to pay off a deferred interest product during the promotional period—can pay significantly more than they would otherwise pay. Many people who sign up for medical financing in doctor’s offices and hospitals may otherwise be eligible to receive financial assistance or charity care that medical providers may offer or otherwise be required to offer under federal, state, or local law.
In short: There are systems and programs in place to help people pay for medical services, but people who otherwise cannot afford to pay for those services for whatever reason are instead being steered toward financing plans and credit cards.
It appears that the vampire squid’s (not necessarily Goldman’s, but just the financial sector, in this case) tentacles have found yet another crevice to poke and prod, looking for fresh meat. And what the CFPB is saying here — and what is taking the form of a warning to consumers via the Biden administration — is that medical credit cards are probably not worth it for many, if not most, patients.
I didn’t eve realize this was a thing. I did have a minor surgery around ten years ago, and remember asking how much I’d be on the hook for out-of-pocket when discussing the surgery with the hospital billing department. I was met with what was essentially “IDK lol we’ll see,” and ended up with a bill that was twice whatever they had quoted me. After some “what the hell is this” type of banter, they reduced it, but I still needed to go on a payment plan to knock it out — I don’t recall what I paid in interest, if anything.
But the CFPB points out that financing medical services is definitely profitable. The report notes that patients in the U.S. paid $1 billion in interest on medical credit cards and financing plans between 2018 and 2020. Cha-ching. It can also increase the overall cost of medical bills by 25%.
The report also includes a list of medical credit providers, the interest rates they charge, and the types of services they provide financing for. Credit providers include companies like Synchrony, CareCredit, Wells Fargo Health Advantage, and more. Here’s a look:
So, how can or should we think about this? Overall, I think it’s yet another sign that the healthcare sector in the U.S. continues to be a prime example of a market failure — maybe not entirely, but in many respects. We have a system that simply can’t be accessed by millions of people, and millions more who are put in a position in which they need to choose to take care of their health issues and go into debt, or deal with it — and maybe die.
I think that there probably is a place for financing tools in the medical industry, even though many or most other countries have found a cheaper, more efficient way to run a healthcare system. That’s a topic for another day, however, and when I’m still needing to wait four months to make a doctor’s appointment, I don’t really see how what we’re dealing with is any better than the U.K.’s NHS or Canadian Medicare.
Again, a topic for another day.
We’re looking at a situation in which we have people paying for insurance, and then having to sign up for a credit card in addition to that insurance to get the care they need. People who live in Burkina Faso don’t even need to deal with this type of thing.
I sort of feel like it’s similar to having to sit through the credit card sign-up announcements when you’re on a plane — you’re a captive audience, and yet, I’m being told that I’m doing my family a disservice if I don’t sign up for a credit card to get those bonus SkyMiles. Kill me.
Anyway, the issue of medical credit cards and financing was a bigger one than I realized. Roughly 100 million people in the U.S., or more than 40% of adults in this country, have some sort of debt related to healthcare, too, according to a report published last year by KFF Health News and NPR. So, this isn’t an insignificant problem.
Naturally, too, these credit issuers know damn well what they’re doing, and have honed in their skills at deceiving or confusing patients who are likely stuck thinking they don’t have a choice when trying to figure out ways to pay for medical procedures (again, even though there are programs out there designed to help them). One of the aforementioned medical credit issuers, CareCredit, was even ordered by the CFPB to refund more than $34 million for using “deceptive credit card enrollment tactics.”
Here’s what the CFPB said at the time:
“Many consumers, most of whom were enrolled while waiting for health-care treatment, incurred substantial debt because they did not understand how they could have avoided deferred interest, penalties, and fees…Many consumers were enrolled on the belief that it was an interest-free card, and did not understand that they were actually agreeing to a deferred-interest product with a 26.99 percent interest rate.”
It’s classic: They know that a good portion of the population isn’t too keen on the finer points, and they exploit it. You could argue that they have every right to, of course. But then you can get knee-deep in a Plato-inspired discussion invoking ethics and all sorts of things. The point is that there are predatory financial services companies out there, taking advantage of people when they are often at their most vulnerable.
It’s a problem, and we need to stop it (we won’t) if we want to improve people’s lives. I think we can forgo some profits here and there for better overall outcomes (we won’t).
This is all to say that you should keep an eye out for these types of predatory financing operations. You see similar ones everywhere: When buying a mattress, a car, taking a flight, even when ordering dinner.
As always, stay vigilant, and take every opportunity you get to slap away the financial sector’s bloodsucking tentacles. Even if sounds like a good idea, in the moment, to let it latch on for a bit.
Numbers and links
3.7%: The value premium added to homes that have pizza ovens. (Zillow)
49: The number of news and information sites that are seemingly produced entirely by AI software. (NewsGuard)
25%: The year-over-year change in Netflix CEO Reed Hastings’ pay package between 2021 and 2022, despite stock values dropping 51%. (The Hollywood Reporter)
Still burning: A look at the legacy of Waco, and how it’s fueling fires today. (The New Yorker)