Good morning. Thank you to everyone who has joined us in-person and online for the Consumer Financial Protection Bureau’s hearing today.
Today, we are talking about an issue that impacts over 100 million Americans – medical debt. As many of you know, the practices used to bill and collect for medical services have tremendous consequences for American consumers. Medical bills are a major financial pain point for Americans, and the fear of cost can be enough to stop some families from even seeking care. National health expenditures account for more than 18 percent of our country’s gross domestic product, with consumers’ out of pocket expenses accounting for a staggering $433.2 billion.1
Medical billing and collection practices have lasting effects on people’s financial, physical, and mental health. Poor medical billing and collection practices can result in patients delaying or declining needed medical care while they struggle to cope with the financial consequences of the debt burden placed upon them, even when that debt burden derives from predatory pricing, faulty, inaccurate billing, or insurance company runarounds. In fact, consumers report that errors in medical billing and insurance payment are common. Among those with medical debt, more than four in ten say they received an inaccurate bill, and nearly seven in ten say they were asked to pay a bill that should have been covered by insurance.
The CFPB is part of an all-of-government effort to address the burden of medical debt and lower healthcare costs for consumers. Last week, President Biden highlighted that cabinet agencies are working with the CFPB on an emerging issue for patients: medical payment products. We have launched a public inquiry with the Department of Treasury and the Department of Health and Human Services to gain a better understanding of these products that are peddled to patients. I want to particularly thank Secretary Becerra and Secretary Yellen for their partnership on the inquiry.
Medical payment products include special-purpose credit cards and installment loans used to cover the cost of medical treatment. While medical payment products can offer an enticing promise of cost savings, convenient payment plans and administrative ease for medical providers, our research indicates that in many cases, patients who use these products end up worse off.
This spring, the CFPB published a report on the use of these payment products. Our research shows that these payment products have less favorable terms than other general credit products and can land patients with significant amounts of deferred interest. Indeed, over a three-year period, patients paid $1 billion in deferred interest on medical credit cards. This deferred interest isn’t something that’s fair or transparent — people can find themselves hit with large and unexpected interest costs even when they’ve been making payments on the bill all along.
Interest and fee charges for these products can also be high. The typical medical credit card has an interest rate of 27 percent — substantially higher than the 16 percent average for general purpose credit cards. And it isn’t the just the amount of the overall interest, we have also heard about hidden finance charges where the amount borrowed may be inflated.
These products are sometimes pushed on patients to avoid the insurance claims process and financial assistance programs. The promotion of these high-cost products instead of more affordable options to cover the cost of care drives up health care costs and medical debt for patients. It can also impede people’s ability to negotiate bills with their medical providers or sort out insurance coverage or even apply for and receive required financial assistance.
We’ll hear several examples of this today — routine dental visits that lead to costly surgery, instances of patients in an emergency room who desperately need care and feel no other option but to sign the paperwork in front of them. Unlike when a consumer is shopping around for other credit products, there is often a sense of pressure in these circumstances. When a patient is sitting in a medical facility and told that they need emergency surgery or risk severe health consequences, that leaves little to no choice but to sign the paperwork in front of them. In some cases, individuals have been under the impression they are signing consent for treatment, not for financing. And in others, they are simply taking these products because they cannot afford the care received, not because it is an affordable means of payment. Still others may think that the deferred interest product is an old fashioned, interest-free payment plan, reasonably assuming that something offered by their provider would be designed to help and not hurt them.
Our public inquiry includes a formal request for information for the public to tell us about their experiences. We hope to not only gain a better understanding of consumer harms and financial challenges raised by specialty medical payment products but to also bring some light to market that has often operated in the shadows.
We want to understand more about why and how these products are sold to patients. Are providers pushing them to avoid the headache of insurance paperwork, perhaps without understanding fully the consequences of the product themselves? How are the financial companies convincing providers to offer these products to their patients at the point of care?
Our effort today complements a range of work the CFPB is pursuing on medical billing and collections. For example, CFPB’s work has led to major changes in the way medical bills are reported to the three credit reporting conglomerates: Equifax, Experian, and TransUnion. Consumer credit reports should not be used as a tool to coerce patients into paying bills that they already paid or may not even owe.
We have already heard from California Attorney General Rob Bonta, and our colleagues at the Department of Health and Human Services, and in just a little bit, we are going to hear from our panel of experts and the public about their experiences with medical payment products.
Thank you again to everyone for joining us today.