It’s not at all uncommon to walk into your favorite home improvement store or major retail electronics chain to see a table with an employee offering your their store brand credit card with a “no interest” special offer if you apply today. But what if you went to your doctor’s office on your next visit and were given the same offer?
As patient costs rise and the personal incomes of many are sagging, the ability to finance an elective procedure not covered by insurance is tempting and doctors and credit companies are all too happy to oblige. In fact, maybe too happy. Earlier this month, the Attorney General of New York State has joined Minnesota and California who are investigating the practices of the health care lending industry resulting from hundreds of complaints from patients who were duped into signing up for the credit cards by their doctors.
The primary lender under investigation is CareCredit, a subsidary of General Electric Co., which has been endorsed by the American Dental Association and the American Society of Plastic Surgeons. These associations are also being asked to justify their endorsements. Other lenders under investigation include Chase Health Advance and Citi Health Card.
The lure is in the “no interest” option to cover your out of pocket expenses if you pay off the balance in the agreed to period of time, which can range from 6 months to 2 years. However, a quick review of the terms on each of the cards websites reveal that if you do not pay off the amount in full, or if you are late with your payment, your finance charge can climb to an annual percentage rate (APR) of 29.99%. And I thought pay-day lenders were sharks!
What really irks me is the fact that these credit companies have doctors fronting as their sales people. This apparent conflict of interest and potential violation of doctor-patient trust is also what is driving the investigation in New York state. Yet, the financial incentives provided to the doctors by the credit companies are apparently too good for many to pass up, as the CareCredit card is accepted by over 125,000 providers of LASIK, veterinary care, dentistry, cosmetic treatment and surgery, and hearing devices according to the company’s website.
How it works for the doctors is that first and foremost, they receive payment for their services in as few as two days, compared to several months of collection attempts from insurers and patients. Secondly, doctors receive rebates from the lenders that increase as the number of enrolled patients increases.
The problem for patients is that according to complaints filed, people have been over charged and billed for services they have not received yet. Additionally, may patients are unaware that they are signing up for a credit card that carries the potential for such high interest penalties.
For a long time now I’ve advocated for the Health Savings Account (HSA) where you deposit money into a savings account that you own and hold it for the occasion where you might need it for either an elective or an emergency procedure. The beauty with the HSA is that you have the cash in your account and as they say, cash is king. When you offer to pay your doctor in cash from your HSA, most will give you up to a 30% discount on their service fees. This is because they receive payment right away and don’t have to incur the costs of billing, collecting and waiting for payment which can take months. So here’s an incentive for your doctor that you are in control of.
If you don’t have an HSA and don’t have the cash in hand to cover an emergency procedure, all is not lost. You can typically ask for an extended payment plan with your doctor or hospital with no interest – without enrolling in a health care credit card. They will gladly accept payments over time than receive no compensation at all.
The bottom line is that the person who has the cash has the control. In using an HSA or even developing an extended payment plan with no interest, you retain control. As soon as you venture down the health credit card route, you give up control – so I suggest you do your best to avoid this option. In doing that you can maintain your personal health and your financial health.
-Paul Kulpinski, LMT
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