Three federal agencies launched a joint inquiry July 7 to gather more information on medical credit cards and installment loans.
In addition to asking companies for information, the Health and Human Services Department, Treasury Department and Consumer Financial Protection Bureau opened a 60-day public comment period to gain feedback from consumers, lenders and providers. After the comment period ends in September, the agencies hope to have a better understanding of the payment products, how they affect consumers and where protections might be needed.
Here's what you need to know as federal agencies take a closer look.
What are medical payment products?
Medical credit cards and installment loans were originally used to cover non-urgent or elective procedures such as cosmetic surgery or dental work. More recently, however, an increasing number of patients use these payment products for primary, specialty and even emergency care.
The products typically carry high interest rates—with some exceeding a 30% annual percentage rate. Many credit cards also come with a months-long grace period offering deferred interest. If the full balance is paid within a specified time frame, patients owe no interest. However, if they fail to do so, patients are responsible for all of the deferred interest accrued from the original balance.
Why is this type of financing problematic?
Consumer groups and elected officials have raised concerns about the predatory nature of the payment products, which are often presented to patients in stressful situations as they face large, looming medical bills. In many cases, patients lack full knowledge of the products when they sign up, and promotions disproportionately target vulnerable self-pay or low-income patients lacking insurance coverage. The products are often presented to patients in lieu of lower-risk financial assistance programs for which they could be eligible, according to the CFPB.
The CFPB issued a report in May that looked at medical financial options and some of the negative impacts they could have on consumers.
"While medical payment products can offer an enticing promise of cost savings, convenient payment plans and administrative ease for medical providers, our research indicates that in many cases patients who use these products can end up worse off," Rohit Chopra, CFPB director, said in prepared remarks at a Tuesday hearing conducted by the hearing. "The promotion of these high-cost products instead of more affordable options to cover the cost of care drives up healthcare costs and medical debt for patients."
Where do providers come in?
Hospitals, health systems and other providers promote medical payment products to their patients, and the agencies want to know why.
Representatives at federal agencies say some providers could be pushing the products on patients to sidestep insurance paperwork and financial assistance agreements. Providers could also benefit by sharing part of the revenue from credit cards and installment loans or securing lower processing fees if a certain number of patients sign up. In some cases, the payment products could enable providers to charge higher prices to self-pay or uninsured patients, representatives say.
Why are the agencies taking action?
The joint inquiry builds off of previous studies on healthcare costs and the impact they have on patients' financial stability, in addition to recent efforts by the Biden administration to lower them. The inquiry was one of several HHS announcements on July 7, including a crackdown on short-term "junk" insurance plans and new data showing how changes to the Medicare Part D program can lower out-of-pocket costs for prescription drugs.
Diane Thompson, senior adviser to the CFPB director, said the organization has watched medical billing for years, and the agency's interest in payment products grew out of efforts to assess the legitimacy of those bills. The CFPB has also received many consumer complaints about the financial products and other billing issues.
"Everyone I talk to has some nightmare story they can tell about being caught between the insurance company and the doctor or the hospital and just taking months to get it straightened out," Thompson said.
The inquiry also builds on momentum from the No Surprises Act, legislation that took effect in January 2022 and that seeks to protect patients from surprise medical bills. The Biden administration estimates the No Surprises Act protects 1 million Americans every month from unfair out-of-network charges.
What do the agencies hope to gain?
Once federal representatives have a better understanding of medical payment products, they can assess where agencies may need to step in. That could include helping states shape legislation on medical billing or determining whether certain financial products are subject to regulations.