Beware of "Surgery Today, Pay Later"

Filed in archive Health on June 11, 2008

Photo courtesy of iStockphoto, Jacob Wackerhausen

You know those no-interest, "buy now, pay later" offers you'll see from furniture stores or appliance retailers, the ones where you get the merchandise today and as long as you pay it off in the next 12 months it's interest free? Well, the dirty little secret of those offers has always been that if you don't completely pay off the balance in the assigned time period, you get charged ALL the interest that would have accumulated over those 12 months. Even if you only still owe about $20, if you miss the deadline, you have to pay the whole year's interest, now at a very high interest rate.

Well, it seems that many doctors and hospitals, in partnership with well-known finance companies, are offering the same deal. Get your gall bladder out today and make no payments until 2009!

From the article:

Lenders like Citigroup, Chase, Capital One and General Electric's financial services unit, GE Money, are offering patients up to $40,000 in medical credit lines with offers that seem enticing. However, consumers must be aware of the costs hidden in the fine print.

While the cards can carry no interest for up to two years, they also have incredibly high interest rates - up to 27.99% for Chase's HealthAdvance card - that get retroactively attached to the original balance, regardless of how much of the balance is paid during the term. If patients miss a payment, they can also get stung by the retroactive rate.

Furthermore, medical-care providers are joining forces with the lenders because they get paid sooner and the credit line allows customers to opt for expensive treatments they might not get otherwise, according to an investigation by Consumer Reports, which is distributed by the nonprofit Consumers Union. In return, lenders get a portion of the practitioner's fee.

Consumer Reports calls the practice "akin to subprime mortgages," saying that some patients are pressured into risky financing plans by the caregivers they trust without fully understanding the terms.

The health care crisis no doubt will drive many people with no insurance or inadequate insurance to use these "health credit cards." However, while it's good for the doctors & hospitals who get paid faster, it's not such a great deal for you. In most cases, your health care provider will work out a payment plan with you that does not have the potential to charge you 20% interest. In fact, you'll usually pay your bill with no interest at all, and in some cases the doctor or hospital will give you a big discount on the original bill if you're able to make a payment that satisfies half the bill (or so, depending on what you owe).

This is one credit card to definitely stay away from.