Editorial Policy

Health Care of the Future Requires Credit Cards?

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By Eva Norlyk Smith, Ph.D.
March 15, 2010

Will the health care of the future require patients to give out their credit card information before the doctor will see them? Indeed, if a new trend in physician payment services catches on, consumers may have to put their credit card information on file before getting certain services, much as is currently done when booking a hotel room or renting a car.

Two business service providers for physicians, mPay Gateway and Athenahealth, Inc, both recently launched new payment processing systems to help physicians collect payments from patients, while simultaneously reducing administrative costs. By implementing the new, pre-visit card swipes, doctors and medical clinics can reduce the risk of issuing services they might not be able to collect payment for.

Under mPay Gateway’s new credit-card payment program, for example, a patient arriving at a doctor’s office is given an estimate of a procedure’s cost. They are then asked to swipe their credit card, and, only after doing so, are admitted to see the doctor. Following the procedure, the patient is given a detailed statement of provided services and a receipt. The program then contacts the patient’s insurance company (if any) for coverage and then charges whatever balance remains to the patient’s card.

For medical providers, it’s a win-win situation: the new payment systems allow them to reduce operating costs while increasing revenues. Over the past years, health insurance companies have been increasing co-pays and deductible on many insurance plans. As a result, individual health-care bills have risen to over $300 billion per year in the U.S. alone, and they are projected to double in the next five years. For physician’s and medical clinics, the growth in individual health care bills is presenting an increasing problem. Nearly 20 percent of medical debts-a whopping $50-$60 billion-go unpaid. So not surprisingly, the new payment processing systems, which require patients to submit their credit cards for payment before receiving services, has broad appeal among medical providers.

Already, mPay Gateway’s program has been shown to reduce unpaid medical bills by up to 80 percent, as the co-pay is simply now charged to patients’ credit cards and then deposited into the medical providers’ bank accounts. In addition to ensuring patient payments, the new payment services are also marketed as helping to reduce administrative costs, promote faster processing, and reduce the risk of fraud or theft from abuse of mailed, paper invoices.

For consumers, if the new payment processing systems catch on, it could turn into a troubling trend. Patients to clinics who don’t pay their co-pay right away would end up having the payment added to their credit card accounts. For patients who have revolving credit card debt-and, according to research done by comScore in 2008, 55 percent of Americans fall into that category-processing doctors’ bills onto a high-interest credit card could compound debt at an alarming rate. By lumping in medical debt with other debts, interest charges could cause a procedure’s cost to inflate far above its upfront charge.

Just as bad, for people with frequent health issues, the increased credit card debt could lower their credit score by affecting their credit utilization ratio, an important component of FICO scores. Also, the mounting high-interest credit card debt from medical expenses sooner or later would push financially strapped consumers over the edge and into default, further trashing their credit score.

Once a person’s credit score goes bad, it creates a snowball effect of additional issues. Since many prospective employers and landlords check applicants’ credit scores, the lives of people with significant medical expenses could be seriously affected if they are not given sufficient time to pay off their medical bills before the debt lands on their credit report.

Already, medical debt ranks among the top causes of bankruptcy in the U.S. According to a study in the August 2009 issue of The American Journal of Medicine, 62.1 percent of 2007’s bankruptcies were caused by either medical debt or an illness-related loss of income.

Furthermore, those who can’t afford health insurance are often the ones shouldering the highest credit card balances: according to a 2007 report, “Borrowing to Stay Healthy,” published by Demos, insured households carried an average of $10,973 in debt while their uninsured counterparts struggled with $14,512 in credit card debt.