Medical Credit Cards vs. Interest-Free Financing Plans: Which is Best?

The rising healthcare costs faced by Americans pose significant challenges for both consumers and healthcare providers. As patients struggle to receive and pay for care, hospitals and health systems struggle to maintain their revenue streams. Because of this, there is growing need for innovative solutions to increase healthcare accessibility and affordability. 94% of patients expect their provider to proactively offer payment options to repay their medical bills, including long-term financing. Programs such as medical credit cards and patient financing plans are becoming more popular, offering benefits for both patients and providers. As regulations surrounding medical billing become more stringent, it is crucial for healthcare providers to carefully consider the various financing options available and how they can impact both medical debt and the overall patient experience. By understanding these differences, providers can make informed decisions when choosing a financing partner, allowing them to effectively serve their patients, maintain compliance, and safeguard their financial stability.

The Urgent Need for Options

The medical debt crisis in America affects a staggering number of individuals, with over 100 million Americans feeling its impact. Rising out-of-pocket costs, confusing statements, and poor communication make it challenging for millions of consumers to make timely payments, even when they intend to do so. While recent regulations like the No Surprises Act and the price transparency rule aim to prevent patients from accruing medical debt, a study from revealed that only 36% of 2000 surveyed hospitals are currently in compliance. While financing options have promised to enhance transparency, education, and affordability, certain programs end up burdening patients with even more debt, leading to negative physical and financial outcomes.

Medical Credit Cards and Interest-bearing Financing

Medical credit cards are specialized credit cards to be used exclusively for healthcare expenses. These cards, along with lines of credit and loans, medical credit cards all fall under interest-bearing healthcare financing options. Despite claiming to make medical bills easier to manage and more affordable, these programs often come with hidden fees and deferred interest, often resulting in patients owing more than their original balance. While most medical credit cards offer an initial zero-interest period, usually between 6 and 18 months, if the balance is not paid in full by the end of this period, deferred interest is charged from the original purchase date–at rates as high as 27%.

The Consumer Financial Protection Bureau (CFPB) found that people used credit cards or loans with deferred interest to cover nearly $23 billion in medical expenses and $1 billion in deferred interest. Interest payments can inflate medical bills by up to 25%, potentially leading to patients being trapped in unaffordable repayment arrangements. Moreover, when the payment plan becomes too burdensome for patients, they may stop making payments altogether.

Although healthcare providers may benefit from these deferred interest programs, they risk reduced patient engagement and a negative patient experience, which can harm their reputation and the patient-provider relationship. Regulatory bodies are actively addressing the issue of unethical practices by third-party financing companies, expressing concerns about banks profiting from the medical debt crisis. In this regard, deferred interest plans have been specifically identified as inherently deceptive, and updated regulations are likely to impose stricter rules on these plans, impacting providers who fail to comply.

Zero-Interest Patient Financing

Zero-interest patient financing plans ensure that patients pay only what they owe, empowering them to take control of their healthcare expenses. This patient-centric approach not only makes care more affordable and accessible, but also opens the door to a larger pool of patients. Moreover, these plans provide healthcare providers with the same, if not more, revenue collection. Patients can pay a monthly amount that fits their budget over time, with no interest or hidden fees involved. The flexibility of these payment plans meets patients where they are, unlike deferred interest and interest-bearing programs which often lead to lower patient satisfaction and engagement.

As regulations surrounding patients' rights become more stringent, providers who fail to comply may face negative press and a tarnished reputation. With interest-free programs, particularly those that are non-recourse, the focus is on patient healthcare rather than billing. Outsourcing patient accounts to a non-recourse, interest-free third party vendor can help alleviate the labor shortages experienced by RCM departments while also reducing the burden and costs of collections.

Zero-interest patient financing programs improve collection rates, streamline cash flow, and ensure timely payments from patients, ultimately strengthening the provider's bottom line. By working directly with the health system and eliminating private bank involvement, providers can reduce legal risks and foster increased loyalty and trust between patients and providers. The transparent nature of zero-interest patient payment plans further enhances the overall patient experience.

The rising healthcare costs in America have created a need for innovative solutions to increase accessibility and affordability. While medical credit cards and interest-bearing financing options may seem appealing, they often burden patients with more debt and lead to negative outcomes. Alternatively, zero-interest patient financing plans offer a patient-centric approach that empowers individuals to take control of their healthcare expenses. These plans not only make care more affordable and accessible but also benefit healthcare providers by improving collection rates, improving the patient-provider relationship, and strengthening their bottom line. By embracing interest-free patient financing, providers can foster trust and loyalty while enhancing the overall patient experience. To learn more about the benefits of zero-interest patient financing and its impact on healthcare accessibility and affordability, visit our website or download or e-book, The Ultimate Guide to Patient Financing, below.



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