Senators Warren and Markey probe medical credit cards as health care debts rise

Senators Ed Markey and Elizabeth Warren in Boston in December 2022.SAUL LOEB/AFP via Getty Images

Patients facing costs for everything from dental and vision care to cosmetic surgery are sometimes offered an alternative to a large medical bill, in the form of a medical credit card they can pay off over time. For years, people have used such cards to pay for procedures that health insurance generally does not cover, such as dental care.

But Massachusetts Senators Elizabeth Warren and Ed Markey have begun looking into the companies offering such cards, writing in a letter to executives from Synchrony Financial and Wells Fargo & Company that the promotion of medical credit cards could be predatory, and that the offer may lock people into plans with hidden terms that are worse than other payment plans.

“The concern here is the current structure of our health care system often requires that patients enter into medical debt in order to access services they need,” the senators wrote. “Within that context, patients – often under duress because of concerns about their medical care – are being pushed into and then locked into medical credit cards despite the availability of alternative payment options that might be more beneficial and offer lower interest rates.”

Senators have asked Synchrony and Wells Fargo to provide information on the number of card holders, average balances, interest rates, delinquency rates, all hospital partners, and more, as they look into potential financial harms.

Wells Fargo declined to comment. In a statement, a spokeswoman for CareCredit, a medical credit card brand operating under Synchrony, said protecting consumers was of “paramount importance” and said it was working to respond to the senators’ request.

“CareCredit works hard to ensure our products are offered responsibly and with clear, simple, transparent terms so consumers can make well-informed decisions about financing their care. Every credit card application is underwritten based on a consumer’s creditworthiness and ability to repay the balance,” the spokeswoman said.

Synchrony Financial’s CareCredit, is one of the largest issuers of such cards, with 12.7 million card holders, according to the letter. In Massachusetts, numerous health organizations accept CareCredit, including providers of dental, vision, and hearing care, primary care clinics, surgery centers, and more.

Wells Fargo also offers a Health Advantage card, which can be used for audiology, dental, veterinary or vision care and is similarly used by a number of Massachusetts organizations, according to its website.

While the cards are not new, their use is growing. CareCredit, which began in 1987, launched a co-branded credit card with Walgreens last year, in addition to signing partnerships with major medical systems in other states. Synchrony reported that its health and wellness portfolio, which included CareCredit, accounted for $2.3 billion, or 15 percent of its total interest and fees on loans for 2021, according to year-end company financial data.

Consumers typically learn about medical credit cards from health care providers, which make the products available to patients or clients, according to a 2014 report from the US Government Accountability Office. And often providers share in the wealth — of the 130 professional groups CareCredit partnered with, over 80 were paid endorsements linked to member enrollment in the medical credit card program, according to company financial documents.

Signage at a Wells Fargo bank branch in New York on Jan. 13, 2022. Massachusetts Senators Elizabeth Warren and Ed Markey wrote in a letter to executives from Synchrony Financial and Wells Fargo & Company that the promotion of medical credit cards could be predatory, and that the offer may lock people into plans with hidden terms that are worse than other payment plans.Victor J. Blue/Bloomberg

Despite the proliferation of such cards, the senators worry about some of the terms, including that CareCredit’s interest rate is as high as 26.99 percent — far greater than the average 16.27 percent rate for other credit cards, according to the letter.

Patients may also miss out on more advantageous payment plans. For example, Mass General Brigham, the state’s largest health system, offers a 0 percent interest monthly payment plan for most bills, as well as other financial assistance programs. The health system said it does not partner with any medical credit card providers.

Medical credit cards can also hurt a person’s credit score, as they are treated as credit card debt. Medical debts on traditional credit cards, however, are treated more favorably. Last year, the country’s three largest credit bureaus — Equifax, Experian, and TransUnion — agreed to remove medical debts paid in full from credit reports. Starting next year, the credit bureaus will no longer include medical debt in collections under $500 on credit reports.

The limit for the card is also sometimes set to the cost of the service, maxing out the card and damaging credit scores that way, the senators’ letter said.

Many medical credit card companies also advertise “no interest” periods ranging from six to 24 months. However the cards actually offer deferred interest promotions, in which the interest accrues and will be retroactively charged if the entire balance is not paid off by the end of the promotional period. In 2013, CareCredit, then part of GE Capital Retail Bank, was ordered by the Consumer Financial Protection Bureau to refund $34.1 million to consumers who were victims of allegedly deceptive credit card enrollment tactics, and to change its consumer disclosures.

“They are predatory and end up saddling people with debt and interest that in some instances they shouldn’t have at all,” said Andrew Cohen, director and lead attorney for the Access to Care and Coverage Practice at Health Law Advocates, a legal services organization focused on Massachusetts.

Cohen said that he has seen instances where people took out medical credit cards to pay for dental implants, which often are not covered by MassHealth. However people usually aren’t aware that their insurance would cover alternative services such as partial or full dentures.

“Even more problematic is, this isn’t just a credit card company,” Cohen said. “This is a doctor or dentist you’re supposed to trust. Yet they are partnering with this company that has terms that are problematic for consumers.”

Medical credit cards add to the growing problem of health care debt. In Massachusetts alone, 13 percent of residents reported having family medical debt, according to a survey of Massachusetts residents released in July. Of those with family medical debt, 88 percent incurred all of those medical bills while they and their family members had health insurance.

In 2007, a study conducted by Warren and others found that medical debts contributed to over 60 percent of bankruptcy filings.

Providers may be incentivized to take medical credit cards to save the time and resources negotiating with a patient’s insurance company, or instead of putting patients on payment plans. But ultimately, the senators said, such cards may “serve only to exacerbate [the] financial harm of unaffordable healthcare.”