Dive Brief:

• Medical credit cards, which exploit loopholes in debt protection law and can add costs to already-high medical bills, are increasingly being offered to patients in medical offices and physician settings, nonprofit Public Interest Research Groups warned in a new report.
• The relatively new credit cards, which target patients with medical debt, lack the same consumer protections that limit how healthcare debt can impact credit scores, PIRG said.
• The Biden administration has been cracking down on medical credit cards over concerns they drive up the cost of healthcare services by luring patients with deferred interest rates, before hitting customers with interest rates higher than regular credit cards.

Dive Insight:

Medical credit cards are offered to patients in healthcare settings as a solution to pay off medical debt, often featuring enticing interest-free or deferred interest rate periods of several months.

Medical credit card companies say their products help families and individuals pay for out-of-pocket healthcare costs. But the deferred interest rates on the cards can lead to patients paying higher interest rates on medical bills than they would with normal credit cards if they miss a payment or are unable to pay the full card balance on time.

Patients in the U.S. paid $1 billion in deferred interest on medical credit cards and other healthcare financing between 2018 and 2020, according to a May report from the Consumer Financial Protection Bureau.

Increasingly, hospitals and physician offices themselves advertise medical credit cards. CareCredit, a medical credit card offered by Synchrony Bank, says it has partnerships with 250,000 providers to market the credit cards, according to the CFPB.

Providers can offer up the credit cards in lieu of other low- or no-cost payment plans that might be more beneficial to consumers, PIRG noted. Recently, a number of nonprofit health systems have come under increased scrutiny for deficits in programs meant to help low-income patients cover the cost of their care.

“MDs have the expertise to prescribe drugs — not financial advice. You wouldn’t go to an investment banker for a medical diagnosis,” said Patricia Kelmar, U.S. PIRG’s senior director of healthcare campaigns, in a press release. “Evidence shows that medical credit cards can worsen debt and even lead to bankruptcy. And your provider or hospital can’t cure that.” 

Medical credit cards also exploit loopholes in debt protection laws, according to PIRG. They do not include consumer protections that limit the impact of medical debt, including those that eliminate medical debt from credit reports after being paid off and those that remove debt under $500 from credit reports.

Before the three largest credit bureaus changed how they track medical debt between July 2022 and April this year, medical debt would remain on credit reports for up to seven years.

The Biden administration has zeroed in on medical credit cards as it increases scrutiny on rising healthcare costs. In July, three federal agencies — the HHS, the CFPB and the Treasury Department — issued a request for more information on the use of medical credit cards.

The collaborative effort followed the May report from the CFPB finding that the top companies offering medical cards — Wells Fargo, CareCredit and Bread Financial subsidiary Comenity — could push patients deeper into healthcare debt.

In Oregon alone, CareCredit is the single most frequently listed medical debt holder, beating the 10 most frequently reported health systems, according to an analysis of 2019 bankruptcy filings in the state from a PIRG affiliate.