Connecting the Dots: Credit Cards and Health Care

We’ve commented in past posts on the relatively new-found freedom of banks to charge interest rates that once would have been deemed usurious, the further sop of an overly-creditor-friendly bankruptcy bill, and the efforts of the Pentagon to push back against some of the lenders’ more extreme practices, namely products that carry interest rates of 300% a year (the Pentagon wants a cap at a mere 36%).

None of these conditions, sadly, will generate much traction with the public at large (and more important, their representatives). But the New York Times Op-Ed columnist, Bob Herbert, may have found an issue that will galvanize public interest, namely, that low and middle income people are increasingly using high-interest-rate credit card debt to pay for major medical expenses. From his essay, “Your MasterCard or Your Life:”

A disturbing new report shows that with health care costs continuing their sharp rise, low- and middle-income patients are reaching for their credit cards with alarming frequency to cover treatment that they otherwise would be unable to afford.

This medical debt, to be paid off in many cases at sky-high interest rates, is being loaded onto consumer debt that is already at dangerously high levels. Many families have been crushed by the load, driven from their homes, forced into bankruptcy, and worse.

The report, released last week, was jointly compiled by Demos, a public policy group in New York, and the Access Project, which is affiliated with a health policy institute at Brandeis University and is trying to broaden the availability of health care in the U.S.

Imagine for a moment the seriously ill patient who needs to be hospitalized. In the cold new world of health care, the primary message to such patients is often “Show me the money!”

In many instances, of course, the patient does not have the money. What the report found is that even people with health insurance are being drained by health care costs to the point where the credit card seems the only option…

“In recognition of the evolving payment landscape and the risk of hospital bad debt, health care providers are more aggressively seeking upfront collection of co-pays and deductibles. A component of this strategy is to encourage patients to use third-party lenders such as credit cards to pay for medical expenses they cannot afford, which families frequently do to meet high medical bills.”…

A society is seriously out of whack when legalized loan sharks are encouraged to close in on those who are broke and desperately ill.

Here we have the rallying cry. Herbert states that 20% of lower and middle income families who have credit card debt report they used credit cards to cover major medical expenses. 29 million Americans are carrying medical debts (note that this would include hospital and other bills owed directly).

Now this is primarily a health care issue, rather than a consumer credit issue, but the fact that the banks are charging such aggressive interest rates to individuals who are in an untenable position puts their lending and pricing practices in ugly relief.

If William Proxmire were still around, things might never have gotten to this point. But perhaps another young Congressman will recognize the need for someone to take the banking industry to task.

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