Medical credit cards designed to cover patients’ costs are coming under increased scrutiny from the Biden administration, as are other loans and financial instruments offered to pay for consumers’ healthcare services.

In a rare collaborative healthcare effort by three federal agencies – the Consumer Financial Protection Bureau, the Department of Health and Human Services and the Treasury Department – the government seeks more information about such lending tools in the interest of potentially boosting regulation in the arena. The campaign follows on evidence of consumers being inappropriately steered to these higher-cost options.

The agencies are issuing a request for information related to those programs as part of a broader campaign to beat back rising healthcare costs for consumers. Digging into how the medical cards work, consumers’ experiences with them and healthcare providers’ financial incentives to offer them is one aspect of President Joe Biden’s initiative to aid consumers in fending off debilitating healthcare expense and debt.

“We’re tackling the growing use of third-party medical credit card and loans,” Neera Tanden, the White House Domestic Policy Advisor, told reporters Thursday during a conference call to discuss the agencies’ agenda. “These credit cards often include teaser rates and deferred interest features that lead to higher costs for consumers.”

The CFPB doubled down on the initiative Friday, saying in a statement it was launching “an inquiry into high-cost specialty financial products.” The agency plans to use the input it gathers as it “considers ways to address the patient harms caused by these specialty financial products,” the Friday CFPB statement said.

On Tuesday, the CFPB and Director Rohit Chopra will hold a hearing in Washington on medical payment products, including medical credit cards and installment loans, with participation by senior officials from the White House, as well as the departments of Health and Human Services and Treasury.  

The effort builds on a report issued by the CFPB in May on the growing use of medical cards and the costs consumers face when they use them. The cards sometimes come with 27-percent interest rates that outstrip average credit card interest rates, according to senior administration officials on the Thursday call with reporters who asked not to be identified.

From 2018 to 2020, consumers paid $1 billion in deferred interest payments on healthcare credit cards and loans, according to the May CFPB report. During that period, consumers used credit cards and loans to pay nearly $23 billion worth of healthcare costs ranging from emergency room visits and medications to dental and vision care. 

Wells Fargo, Synchrony Financial subsidiary CareCredit and Bread Financial subsidiary Comenity are the top companies offering medical credit cards, according to the CFPB.

”Many of these products have really surprise tricks and traps built into them,” one administration official said on the call, referencing deferred interest that can add up to sock a cardholder with the full cost on a given date in the future. “That can end up being significant debt.”

How the products are pitched to consumers is also suspect. Patients are sometimes being offered the cards in their healthcare providers’ offices as a means to cover impending healthcare treatments and procedures. As a result, consumers could be in a compromised position when they’re evaluating such lending products. 

There are also questions about whether consumers are receiving required disclosures in conjunction with the offers, such as with respect to collection practices, and whether those practices comply with the Fair Debt Collection Practices Act.

At non-profit hospitals, the products may be falling afoul of specific regulations that apply in those settings. Shifting bills onto such medical credit cards might affect the way those protections apply, the administration officials said.

“The CFPB’s research has highlighted that healthcare providers may be disincentivized to explain legally mandated financial assistance programs or zero-interest repayment options before offering these products to patients,” the CFPB’s statement Friday said. 

Concerns go beyond costs. Ballooning financial burdens have been documented to produce “negative health consequences,” one official said on the call.

The request for more information will allow the agencies to consider “potential policy actions” as they “continue to work to relieve the burden of medical debt,” Tanden said.

Tanden took the role heading the domestic policy council in May, after working as a senior adviser and staff secretary in the Biden White House for the past year-and-a-half, according to the news outlet Politico. 

The U.S. senators from Massachusetts, Democrats Elizabeth Warren and Edward J. Markey, have also been railing about the potential financial harm of medical cards to patients. In particular, they directed letters to Synchrony Bank and Wells Fargo earlier this year, raising concerns and asking about the products. 

“Banks have identified these cards as an opportunity to profit off of vulnerable patients who are unable to afford their medical care,” the senators said in a January press release.

By Lynne Marek on July 10, 2023
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