The Consumer Financial Protection Bureau (CFBP) recently released a report on financial services products marketed through doctors and care providers. The report highlights that patients used cards or loans with deferred interest terms to pay for over 17 million medical purchases totaling almost $23 billion from 2018–2020.

During this period, patients paid over $1 billion in deferred interest, causing them to pay significantly more than the cost of the care received. While these patients initially benefit from the ability to spread costly medical bills out over a period of time, the report suggests that these agreements may be causing people more harm than good when the total cost and financial damage are considered.

Employers can now proactively protect employees and their care providers from predatory financial agreements by arming them with a truly no-interest financing option.

How medical credit cards work

Medical credit cards are similar to traditional credit cards. At a basic level, they allow people to pay for healthcare services and spread the payments out over time. Usually, there are promotional periods attached, and different terms may be offered to people based on their credit.

Medical credit cards are different from regular ones because they usually can only be used for medical expenses. A medical credit card is a specific type of credit used to finance medical costs such as hospital bills, vision care, dental procedures, and prescription drugs.

These products are often marketed to patients immediately before or after they receive care as an easy way to pay for services over time, with terms that offer no interest for a limited time. But more often than not, as indicated by the CFPB report, these terms usually include a deferred or “springing” interest rate that kicks in when the promotional period is over or a monthly minimum payment isn’t met.

Patients who are unable to pay off their balances during the promotional term end up paying a lot more in the long run. The popularity of medical credit cards offered through doctors, hospitals, and other care providers has increased over the past decade as a means for care providers to be paid for deductibles, co-insurance, and co-pays due from their patients.

Unfortunately, these products often cause more harm than good for the patients that doctors are duty-bound to help. This conflict of interest between the doctor’s desire to be paid fairly and promptly for their services while simultaneously caring for the health of a patient is a fundamental flaw with these types of medical payments.

Yes, doctors should be paid fairly and promptly

Medical credit cards and financial installment plans rely heavily on care providers to inform patients about their products. These types of financial products are typically marketed to providers as a way to get paid faster than through insurance or in-house payment plans. They also tout their ability to help hospitals avoid or reduce “bad debt” which accrues when hospitals are unable to collect payment on owed bills.

However, recommending a payment solution that makes accessing healthcare services more expensive for the people who can least afford them is not a fair solution at all. In fact, it can severely jeopardize the patient/doctor relationship when those products put patients in even more precarious financial situations.

These payment types rely on the provider’s office to properly convey their terms and conditions. These are the professionals who should be focused on helping patients get and stay healthy. People who are sick or in pain are less likely to understand complex financial information when presented to them. And some consumers report being signed up for credit cards or installment plans without their knowledge.

When patients are pushed or opt into financing plans, they may also forgo eligibility for assistance that would allow them to seek care at a reduced cost or may even be free. Patients with low incomes, poor credit, or no insurance may, in fact, be eligible for health plans and social or government assistance programs that enable them to receive free care or financial assistance. If they sign up for a financing plan through their provider instead, it increases their financial burden and complicates their ability to challenge inaccurate medical bills down the line.

The Consumer Financial Protection Bureau offers practical advice for people who are eligible for financial assistance or can’t pay their medical bills, including how to confirm the bill is accurate and determine if they qualify for financial assistance.

Finding new ways to manage healthcare spending

If people don’t use medical credit cards, are not eligible for financial assistance, and don’t have enough liquidity to cover their healthcare expenses upfront, how can they pay for care? What are the alternatives to medical credit cards? It’s well-reported that when people can’t afford care they avoid seeking it altogether or end up with some form of medical debt.

Health insurance costs are one of an employer’s highest expenses after salary and wages. Nearly half of Americans are covered by employer-sponsored health insurance and as prices on those plans climb, companies often pass those costs onto employees. Increasing plan costs affect more than the bottom line, they also impact employee's ability to afford medical care and the ability to remain competitive when hiring and retaining talent. 68% of employees report difficulty getting the care they need, and affordability is especially an issue for those with lower incomes.

For companies looking to balance health plan costs and affordability for employees, a new benefit has emerged that eliminates the cost and conflict-of-interest issues inherent with medical credit cards. Truly interest-free financing can help prevent employees from entering into harmful financial arrangements when seeking medical care. TempoPay offers all employees the financial security and flexibility to pay for healthcare over time with no interest, no hidden fees, and no impacts on credit.

The path to equitable healthcare is a long one, and financial solutions are only part of the puzzle. For many, it starts with giving people the ability to pay for care in a way that doesn’t cause them harm. Along with financial education and resources, offering a truly no-interest, fee-free healthcare financing solution is one step in the right direction.