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Thursday, August 16, 2007
(1:57 PM) | Stephen:
Medical Credit Cards

In other Ezra news, he points out a TAP article about the increasing popularity of medical credit cards. Not only will providers accept plastic, but some actually advocate the use of specialty credit cards and will help patients apply for them. Americans have a real problem with understanding how credit works - that you actually have to pay the money back and that the interest rates are so high it's often impossible to pay off the debt by making minimum payments. In fact, if the amount charged is high enough, a person could double the minimum or more and still end up being charged more in interest each month than they are paying.

For the financial sector this type of thing is great. It's a whole new market for them. From the article,
banks and other issuers of credit can make money from medical services in numerous ways: collecting a fee from the medical provider for handling a transaction, charging interest on patient bills, and charging employers for acting as administrators of their HSAs and other medical spending accounts.
Helaine Olen, the author, sees the financial sector's involvement as troublesom for those who want to enact universal healthcare. With so much profit being generated in so many ways, creditors are going to resist any changes which might threaten the status quo. Private insurers - making money hand over fist while turning away any applicant they want - are of course the other powerful, entrenched interest that will oppose universal healthcare, or at least any form of it that doesn't ensure their continued profitability. What we're doing is making the opposition more powerful.

There is another problem with using credit cards to pay medical bills, one that isn't discussed in the article. Several states have protections in place for patients that are unable to pay their hospital bills. You can see some of the protections that have been recently enacted here. Connecticut has done some great work in this area. Some highlights:
Public Act 03-266 ensures that:
  • Patients are notified of free and discounted care policies. All hospital billing and collection agents, whether internal or external to the particular hospital, have to include notice of the available charity programs in every collection notice sent to patients.
  • Patients indebted to a hospital are assessed by the hospital to determine whether they are eligible for charity care assistance. These assessments must be conducted before the hospital can sue the patient for the debt. If a collector learns that a debtor may qualify for charity care, the collector must cease collection activities, even if a lawsuit is in progress or the collector has won a lawsuit.
  • Medical debt is recognized as involuntary debt and not subject to the same kind of punitive debt collection tactics that Connecticut law normally allows.
  • The interest rates that hospitals are allowed to charge to patients are capped. The maximum monetary judgment interest on hospital debt is now set at 5 percent. For other debts, the maximum judgment can be 10 percent. Until this law was passed, hospitals had been able to collect 10 percent interest.
  • Special hearings are held before wage garnishment or bank execution (when the hospital or collection agency takes money out the patient’s bank account) is permitted .
These protections are for debts owed to hospitals. Debt owed to credit card companies is under no such protection. Whatever protection any particular state has for people that incur medical debt completely flies out the window when Visa, MasterCard and American Express are the ones sending the bills.

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