The Medical Credit Card Trap

Reprinted with permission from Helaine Olen, "The Medical Credit Card Trap," The American Prospect Online: August 15, 2007. The American Prospect, 2000 L Street, Suite 717, Washington, DC 20036. All rights reserved.

Michael Moore's film Sicko opens with the haunting vignette of a man who loses part of two fingers in a sawing mishap. As he lacks both health insurance and a bottomless bank account, hospital authorities give him a choice of which finger to re-attach.

It's a wonder the hospital finance office didn't simply tell Moore's hapless accident victim to apply for a line of credit -- an increasingly popular way for the cash-strapped under-insured to cover their medical expenses. Health-care chains such as Kaleida Health, which includes five hospitals and numerous outpatient facilities in upstate New York, advertise credit cards as a way for patients to commence receiving services. Kaleida helpfully notes that G.E.Money's CareCredit "lets you begin your treatment immediately -- then pay for it over time with low monthly payments that are easy to fit into your monthly budget."

In the years since the failure of President Bill Clinton's health-care reform package, credit cards have come to play an ever-expanding role in the American medical system. Not only do most doctor's offices and hospitals now routinely accept MasterCard and Visa as well as specialized cards like CareCredit, many help patients set up new accounts.

But as use of credit to pay for medical expenses becomes more and more common, a new concern has begun to worry reform advocates and other players in the system: Have we unwittingly given the nation's financial sector a seat at the table when it comes time to once again discuss restructuring our health-care system? The question takes on an even greater urgency with health care shaping up to be a significant issue in the 2008 presidential campaign.

"It's always hard to get through legislative change, and change is even harder if it is going to cost someone money," says Elizabeth Warren, the nationally known bankruptcy expert and co-author of a 2006 study on medical debt. "The consumer finance industry is becoming a stakeholder, and as they increase their profit from people who are struggling to pay their bills, it's going to make needed change much harder to accomplish. This is the central problem with these cards."

Americans are expected to spend $250 billion in 2007 on out-of-pocket medical expenses, and most observers expect that sum to grow over the coming years as employers and insurance companies continue to shift more and more medical costs onto the patient.

Many medical practices encourage patients to turn to plastic to cover their shortfalls, and those who study the issue say that it's easy for small bills to spiral into large expenses. When high-interest credit cards are used as a way of paying bills, many consumers find themselves on a financial treadmill that they find impossible to escape.

"There are hundreds of billions of dollars that patients are responsible for paying in medical costs every year, and each year health-care costs are escalating," says Mark Rukavina, the director of Access Project, a nonprofit consumer health advocacy group. "The credit card companies are moving in, and they are moving in quickly."

Numerous credit cards are pitched to consumers as a way of financing so-called "lifestyle" (read: unnecessary) medical expenses, things like Lasik eye surgery and cosmetic dentistry, on consumer-friendly terms. Take Citibank's Citi Health Card. Offered by ophthalmologists and dental practices -- and even veterinarians -- Citibank promotes the Health Card as a gentler credit card, with no annual fee, and, at least on some plans, no interest if consumers pay off their bills within a certain timeframe.