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Medical credit cards purport to ease medical cost burdens, but end up creating stress. A new Western Center-sponsored bill could change that

By Jen Flory, Western Center Health Policy Advocate

For many medical consumers, medical credit cards are offered as a way to pay for unexpected medical costs not covered by insurance. Those costs can include trips to the dentist, chiropractors, and veterinarians. Most people know how quickly medical bills can upend a person’s finances, so medical credit cards can seem like a good deal – especially when they are presented with a zero percent introductory rate.

The tricky part about medical credit cards, and what many consumers of the cards misunderstand, is that while they enjoy that zero percent rate for a period of time, when the introductory period is up, they will not only pay a higher rate (which is to be expected), but they will also face deferred interest. Deferred interest provisions allow card issuers to charge interest on the entire original balance, regardless of how much is paid off during the introductory period. That extra interest adds an unexpected burden for the medical consumer who thought they were doing something to help with their medical bills.

For example, if a consumer puts $1,000 on their card and pays off $900 by the end of the introductory period, the new 26.99% interest rate will be charged not on the remaining $100 balance, but on the original $1,000. The consumer will end up paying $269.90 in interest on a $100 balance.

To add insult to injury, many people are encouraged to sign up for medical credit cards while they are awaiting services in treatment rooms. Without the time and means to research alternatives, and in such stressful circumstances, consumers don’t have the opportunity to fully understand what they are signing up for.

Consumers have also reported being signed up for credit cards while sitting in a dental chair about to get treatment, or for dental services that could have been covered by Medi-Cal. Many Medi-Cal recipients are still being charged for dental services in spite of the restoration of dental services for adults with Medi-Cal. In some cases, the needed services are not covered by Medi-Cal; in other cases, Medi-Cal services are available to treat the condition, but patients are upsold more expensive services, which often end up on medical credit cards.

In 2009, AB 171 (Jones) was passed to require dentists to give notices prior to signing a patient up for a credit card to pay for services. In 2014, SB 1256 (Mitchell) expanded those rules to any licensed health care provider. While the law does provide for basic patient notification, few consumers understand how deferred interest provisions work, so they are shocked by high interest charges later added to their account.

To protect medical consumers, Senator Holly Mitchell has introduced SB 639, which would prohibit medical providers from offering products with deferred interest provisions, and would prohibit them from signing patients up for medical credit cards in treatment areas. The bill would also require providers that accept Medi-Cal to explain to patients what Medi-Cal does and does not cover, and it would require language in the notices about medical credit cards to be written at a 6th grade reading level.

Third-party financing may have a place when patients need services they cannot immediately pay for, but more must be done to protect consumers. Products with ‘gotcha’ clauses like deferred interest have no place in a medical practice. Consumers should never feel pressured into applying for medical credit cards, and they should always understand what they are signing up for — especially since their health and wellbeing is on the line.