\n\tNoam N. Levey<\/span><\/p>\n

The Biden administration on Thursday cautioned Americans about the growing risks of medical credit cards and other loans for medical bills, warning in a new report that high interest rates can deepen patients\u2019 debts and threaten their financial security.<\/p>\n

In its report<\/a>, the Consumer Financial Protection Bureau estimated that people in the U.S. paid $1 billion in deferred interest on medical credit cards and other medical financing in just three years, from 2018 to 2020.<\/p>\n

The interest payments can inflate medical bills by almost 25%, the agency found by analyzing financial data that lenders submitted to regulators.<\/p>\n

\u201cLending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,\u201d said Rohit Chopra, director of CFPB, the federal consumer watchdog. \u201cThese new forms of medical debt can create financial ruin for individuals who get sick.\u201d<\/p>\n

Nationwide, about 100 million people \u2014 including 41% of adults \u2014 have some kind of health care debt, KFF Health News found in an investigation<\/a> conducted with NPR to explore the scale and impact of the nation\u2019s medical debt crisis.<\/p>\n

The vast scope of the problem is feeding a multibillion-dollar patient financing business, with private equity and big banks looking to cash in when patients and their families can\u2019t pay for care, KFF Health News and NPR found<\/a>. In the patient financing industry, profit margins top 29%, according to research firm IBISWorld, or seven times what is considered a solid hospital profit margin.<\/p>\n

Millions of patients sign up for credit cards, such as CareCredit offered by Synchrony Bank. These cards are often marketed in the waiting rooms of physicians\u2019 and dentists\u2019 offices to help people with their bills.<\/p>\n

The cards typically offer a promotional period during which patients pay no interest, but if patients miss a payment or can\u2019t pay off the loan during the promotional period, they can face interest rates that reach as high as 27%, according to the CFPB.<\/p>\n

Patients are also increasingly being routed by hospitals and other providers into loans administered by financing companies such as AccessOne. These loans, which often replace no-interest installment plans that hospitals once commonly offered, can add hundreds or thousands of dollars in interest to the debts patients owe.<\/p>\n

A KFF Health News analysis of public records from UNC Health, North Carolina\u2019s public university medical system, found that after AccessOne began administering payment plans for the system\u2019s patients, the share paying interest on their bills jumped from 9% to 46%.<\/p>\n

Hospital and finance industry officials insist they take care to educate patients about the risks of taking out loans with interest rates.<\/p>\n

But federal regulators have found that many patients remain confused about the terms of the loans. In 2013, the CFPB ordered<\/a> CareCredit to create a $34.1 million reimbursement fund for consumers the agency said had been victims of \u201cdeceptive credit card enrollment tactics.\u201d<\/p>\n

The new CFPB report does not recommend new sanctions against lenders. Regulators cautioned, however, that the system still traps many patients in damaging financing arrangements. \u201cPatients appear not to fully understand the terms of the products and sometimes end up with credit they are unable to afford,\u201d the agency said.<\/p>\n

The risks are particularly high for lower-income borrowers and those with poor credit.<\/p>\n

Regulators found, for example, that about a quarter of people with a low credit score who signed up for a deferred-interest medical loan were unable to pay it off before interest rates jumped. By contrast, just 10% of borrowers with excellent credit failed to avoid the high interest rates.<\/p>\n

The CFPB warned that the growth of patient financing products poses yet another risk to low-income patients, saying they should be offered financial assistance with large medical bills but instead are being routed into credit cards or loans that pile interest on top of medical bills they can\u2019t afford.<\/p>\n

\u201cConsumer complaints to the CFPB suggest that, rather than benefiting consumers, as claimed by the companies offering these products, these products in fact may cause confusion and hardship,\u201d the report concluded. \u201cMany people would be better off without these products.\u201d<\/p>\n

KFF Health News<\/a> is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF\u2014an independent source of health policy research, polling, and journalism. Learn more about KFF<\/a>.<\/p>\n

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