July 2008
New market for card companies
Some of the biggest names in the consumer-credit business are mining the area of patient and medical financing because the
potential for profit is so big.
About $45 billion worth of consumers' out-of-pocket medical costs is charged on credit cards now, but that number could more than triple, to $150 billion, by 2015, according to a recent report from McKinsey & Co., a management consulting firm. "Plastic will play an increasing role as patients' out-of-pocket medical costs continue to grow, and they finance those expenses in the ways they would finance any consumer debt," says Richard Gundling, a vice president at Healthcare Financial Management Association, a professional group.
But paying for chemotherapy on credit isn't quite the same as charging a plasma TV, and it's usually more costly.
Patients' out-of-pocket medical payments are projected to rise from $269 billion in 2007 to $464 billion by 2017, according to the federal Centers for Medicare and Medicaid Services. Peel off even a small bit of that in fees, and you're talking about a lot of money, says Mark Rukavina, director of the Access Project, a national health-care advocacy group.
GE Money CareCredit says its financing is primarily used for elective procedures such as teeth whitening, Botox treatments, and Lasik eye surgery, as well as for necessary dentistry not covered by insurance. But it also is last-resort financing for uninsured or underinsured patients with urgent medical needs, says Claudia Lennhoff, executive director of Champaign County Health Care Consumers, a nonprofit consumer health-advocacy organization in Champaign, Ill. "The consumers who come to us for help when they are struggling with CareCredit debt are desperate people who were required to provide payment for an appendectomy or cancer treatment at the time of service," Lennhoff says. "Health-care providers steered them into these finance plans with rates that they didn't understand. This is really the medical equivalent of subprime mortgages."
GE Money spokeswoman Cristy Williams says almost 80 percent of its medical-financing customers pay off the full amount in the promotional period. But Federal Reserve Board figures show almost 60 percent of households with regular cards carry a revolving balance.
Concern is running so high in California that the legislature is considering a bill to prohibit predatory marketing of high-interest credit for dental care. CareCredit was cited by consumer health groups in several cases that spurred the legislation, including one in which the patient says she was signed up by the dentist's office for $8,000 worth of dental work while sedated.
GE Money says that providers are trained to clearly represent CareCredit to their patients and that a company survey shows high customer satisfaction.
Even if a procedure is a matter of choice, there's plenty to be cautious about. Chase's online marketing aimed at patients proclaims that "you can enjoy the option of having to pay no interest at all." It could be a good deal if you pay it off within the promotion time. But if you don't or miss a payment, you'll be hit with interest rates of up to 27.99 percent.
About $45 billion worth of consumers' out-of-pocket medical costs is charged on credit cards now, but that number could more than triple, to $150 billion, by 2015, according to a recent report from McKinsey & Co., a management consulting firm. "Plastic will play an increasing role as patients' out-of-pocket medical costs continue to grow, and they finance those expenses in the ways they would finance any consumer debt," says Richard Gundling, a vice president at Healthcare Financial Management Association, a professional group.
But paying for chemotherapy on credit isn't quite the same as charging a plasma TV, and it's usually more costly.
Patients' out-of-pocket medical payments are projected to rise from $269 billion in 2007 to $464 billion by 2017, according to the federal Centers for Medicare and Medicaid Services. Peel off even a small bit of that in fees, and you're talking about a lot of money, says Mark Rukavina, director of the Access Project, a national health-care advocacy group.
GE Money CareCredit says its financing is primarily used for elective procedures such as teeth whitening, Botox treatments, and Lasik eye surgery, as well as for necessary dentistry not covered by insurance. But it also is last-resort financing for uninsured or underinsured patients with urgent medical needs, says Claudia Lennhoff, executive director of Champaign County Health Care Consumers, a nonprofit consumer health-advocacy organization in Champaign, Ill. "The consumers who come to us for help when they are struggling with CareCredit debt are desperate people who were required to provide payment for an appendectomy or cancer treatment at the time of service," Lennhoff says. "Health-care providers steered them into these finance plans with rates that they didn't understand. This is really the medical equivalent of subprime mortgages."
GE Money spokeswoman Cristy Williams says almost 80 percent of its medical-financing customers pay off the full amount in the promotional period. But Federal Reserve Board figures show almost 60 percent of households with regular cards carry a revolving balance.
Concern is running so high in California that the legislature is considering a bill to prohibit predatory marketing of high-interest credit for dental care. CareCredit was cited by consumer health groups in several cases that spurred the legislation, including one in which the patient says she was signed up by the dentist's office for $8,000 worth of dental work while sedated.
GE Money says that providers are trained to clearly represent CareCredit to their patients and that a company survey shows high customer satisfaction.
Even if a procedure is a matter of choice, there's plenty to be cautious about. Chase's online marketing aimed at patients proclaims that "you can enjoy the option of having to pay no interest at all." It could be a good deal if you pay it off within the promotion time. But if you don't or miss a payment, you'll be hit with interest rates of up to 27.99 percent.
