July 2008
Overdose of debt
Lenders push risky credit for everything from cancer to Botox
When you're buying a new car or a plasma TV, you're on guard against high-pressure sales pitches and finance schemes that
benefit the seller's bottom line rather than yours. But such tactics are probably the last thing you'd expect at a doctor's
or dentist's office.
Yet credit cards and finance lines that can reach exorbitant interest rates are being pitched to consumers seeking medical care, either directly or through their medical professionals.
Lenders tout this as a way for patients to cover medical needs or elective procedures. Citi Health Card offers plans at "participating providers that allow you to get the treatments you need right now." A promo for CapitalOne Healthcare Finance says, "Expert cosmetic surgery and procedures like liposuction, hair restoration, tummy tucks, and more are now within reach."
The cards and financing are promoted to doctors, dentists, and veterinarians as a way to make more money and get paid promptly. GE Money CareCredit provides this testimonial from Laser Elite, a hair and skin clinic in McLean, Va.: "Having CareCredit has definitely had a positive impact on our business. It helps us attract more patients and has increased our sales by 25 percent."
Moreover, hospitals are checking credit scores of patients and even offering their own cobranded credit cards.
Medical providers certainly should be paid for reasonable costs. But with consumers already sagging under record debt loads and medical credit lines reaching $40,000, the growing use of this kind of credit raises significant issues:
CapitalOne spokeswoman Pam Girardo defends the finance plans, saying they offer patients flexibility. "And medical practices
win because it allows the doctors to spend more time caring for their patients rather than completing paperwork or having
awkward discussions with patients about financing and credit decisions," Girardo says.
Consumer-credit experts say they are concerned nonetheless. "By persuading patients to use these financing plans, doctors and hospitals benefit because they get paid right away," says Howard Dvorkin, who founded a nonprofit agency, Consolidated Credit Counseling, in Fort Lauderdale, Fla. "But they can turn into terrible traps for consumers because card issuers know from experience that the majority will end up having to pay these double-digit rates."
Yet credit cards and finance lines that can reach exorbitant interest rates are being pitched to consumers seeking medical care, either directly or through their medical professionals.
Lenders tout this as a way for patients to cover medical needs or elective procedures. Citi Health Card offers plans at "participating providers that allow you to get the treatments you need right now." A promo for CapitalOne Healthcare Finance says, "Expert cosmetic surgery and procedures like liposuction, hair restoration, tummy tucks, and more are now within reach."
The cards and financing are promoted to doctors, dentists, and veterinarians as a way to make more money and get paid promptly. GE Money CareCredit provides this testimonial from Laser Elite, a hair and skin clinic in McLean, Va.: "Having CareCredit has definitely had a positive impact on our business. It helps us attract more patients and has increased our sales by 25 percent."
Moreover, hospitals are checking credit scores of patients and even offering their own cobranded credit cards.
Medical providers certainly should be paid for reasonable costs. But with consumers already sagging under record debt loads and medical credit lines reaching $40,000, the growing use of this kind of credit raises significant issues:
- Interest rates can jump to as much as 27.99 percent retroactively. That's the rate Chase HealthAdvance's zero-interest plan
charges, for example, if you miss a payment or don't pay off the debt in the promotional period. By contrast, the average
fixed-rate credit card charges 11.9 percent, according to Bankrate.com.
- Consumers report that they sometimes feel pressured by medical providers to finance needed medical care, in some cases while
sedated or recovering from treatment.
- Doctors and dentists have financial incentives under these arrangements to encourage patients to sign up for more expensive
treatments and to steer them to extended financing plans that take a smaller cut of the practitioner's fee.
- When hospitals persuade patients to tap unused credit, those patients can lose the power to bargain for discounts or even
obtain charity care.
Consumer-credit experts say they are concerned nonetheless. "By persuading patients to use these financing plans, doctors and hospitals benefit because they get paid right away," says Howard Dvorkin, who founded a nonprofit agency, Consolidated Credit Counseling, in Fort Lauderdale, Fla. "But they can turn into terrible traps for consumers because card issuers know from experience that the majority will end up having to pay these double-digit rates."
