The Consumer Financial Protection Bureau (CFPB) is launching an inquiry into a practice used to coax patients into paying for routine care with medical credit cards and installment loans.
In partnership with the Department of Health and Human Services (HHS) and the Department of the Treasury, the three agencies hope to examine patients’ experiences with credit cards and loans as well as healthcare providers’ incentives to offer high-cost products.
“Financial firms are partnering with healthcare players to push products that can drive patients deep into debt,” said CFPB Director Rohit Chopra in a statement. “We are opening a public inquiry to better understand how these practices are affecting patients in our country.”
The agencies hope the inquiry will lead to a better understanding of the specialty medical payment product marketplace, patient experiences and whether consumers understand the risks that include aggressive debt collection practices and lawsuits. In addition, they're hoping it sheds light on billing and financial assistance for out-of-network patients.
In May, the CFPB released research showing medical credit cards and installment loans—traditionally used when paying for elective procedures like dental and vision care, fertility services and cosmetic surgery—have replaced low- or no-cost payment plans offered by medical providers, increasing the financial burden on patients and highlighting a lack of transparency for the average person.
Medical cards typically offer deferred interest for six to 18 months, and, if a patient has a remaining balance after a promotional period, they are charged the interest for the original purchase date, according to the study (PDF).
Between 2018 and 2020, patients paid $23 billion in healthcare expenses using cards or loans with deferred interest. Over a similar period, the share of medical borrowing on deferred interest grew relative to other deferred interest borrowing.
People with lower credit scores more often incur interest because those individuals are more likely to have shorter promotional periods, the study suggests.
Additionally, the mean credit card APR is 16%, whereas the typical APR of a medical credit card is nearly 27%.
“This inquiry builds on the Department's work to protect patients from unfair billing practices, lower costs, and increase transparency in our health care system,” said HHS Secretary Xavier Becerra in the news release. “Hearing directly from patients about their experiences will help shape policies that can prevent families from incurring medical debt.”
Financial firms market to hospitals and other providers, offering incentives for these providers to not always explain affordable alternatives to patients.
Additionally, healthcare providers sometimes share in the revenue of certain medical credit cards and installment loans or give better terms to providers that bring in more patients.
“Other medical payment product issuers offer lower processing or management fees to providers who enroll high numbers of patients—thereby incentivizing those medical providers to enroll as many of their patients as possible,” the news release said.