The dentist set to work, tapping and probing, then put down his tools
and delivered the news. His patient, Patricia Gannon, needed a partial
denture. The cost: more than $5,700.
Ms. Gannon, 78, was staggered. She said she could not afford it. And her
insurance
would pay only a small portion. But she was barely out of the chair,
her mouth still sore, when her dentist’s office held out a solution: a
special line of credit to help cover her bill. Before she knew it, Ms.
Gannon recalled, the office manager was taking down her financial
details.
But what seemed like the perfect answer — seemed, in fact, like just
what the doctor ordered — has turned into a quagmire. Her new loan
ensured that the dentist, Dr. Dan A. Knellinger, would be paid in full
upfront. But for Ms. Gannon, the price was steep: an annual interest
rate of about 23 percent, with a 33 percent penalty rate kicking in if
she missed a payment.
She said that Dr. Knellinger’s office subsequently suggested another
form of financing, a medical credit card, to pay for more work. Now, her
minimum monthly dental bill, roughly $214 all told, is eating up a
third of her
Social Security check. If she is late, she faces a penalty of about $50.
“I am worried that I will be paying for this until I die,” says Ms.
Gannon, who lives in Dunedin, Fla. Dr. Knellinger, who works out of Palm
Harbor, Fla., did not respond to requests for comment.
In dentists’ and doctors’ offices,
hearing aid
centers and pain clinics, American health care is forging a lucrative
alliance with American finance. A growing number of health care
professionals are urging patients to pay for treatment not covered by
their insurance plans with credit cards and lines of credit that can be
arranged quickly in the provider’s office. The cards and loans, which
were first marketed about a decade ago for
cosmetic surgery
and other elective procedures, are now proliferating among older
Americans, who often face large out-of-pocket expenses for basic care
that is not covered by
Medicare or private insurance.
The American Medical Association and the American Dental Association
have no formal policy on the cards, but some practitioners refuse to use
them, saying they threaten to exploit the traditional relationship
between provider and patient. Doctors, dentists and others have a
financial incentive to recommend the financing because it encourages
patients to opt for procedures and products that they might otherwise
forgo because they are not covered by insurance. It also ensures that
providers are paid upfront — a fact that financial services companies
promote in marketing material to providers.
One of the financing companies, iCare Financial of Atlanta, which offers
financing plans through providers’ offices, asks providers on its Web
site: “How much money are you losing everyday by not offering iCare to
your patients?” Over the last three years, the company’s enrollment has
grown 320 percent. Another company
posted a video
online that shows patients suddenly vanishing outside a medical office
because they cannot afford treatment. The company offers a financing
plan as a remedy, with the scene on the video shifting to a smiling
doctor with dollar signs headed toward him.
A review by The New York Times of dozens of customer contracts for
medical cards and lines of credit, as well as of hundreds of court
filings in connection with civil lawsuits brought by state authorities
and others, shows how perilous such financial arrangements can be for
patients — and how advantageous they can be for health care providers.
Many of these cards initially charge no interest for a promotional
period, typically six to 18 months, an attractive feature for people
worried about whether they can afford care. But if the debt is not paid
in full when that time is up, costly rates — usually 25 to 30 percent —
kick in, the review by The Times found. If payments are late, patients
face additional fees and, in most cases, their rates increase
automatically. The higher rates are often retroactive, meaning that they
are applied to patients’ original balances, rather than to the amount
they still owe.
For patients, the financial consequences can be dire.
Ms. Gannon said she was happy with her
dental care,
despite the cost, and there was no suggestion that Dr. Knellinger had
done anything wrong. But attorneys general in a several states have
filed lawsuits claiming that other dentists and professionals have
misled patients about the financial terms of the cards, employed
high-pressure sales tactics, overcharged for treatments and billed for
unauthorized work.
The New York attorney general’s office found that health care providers
had pressured patients into getting credit cards from one company,
CareCredit, a unit of General Electric, which gave some providers
discounts based on the volume of transactions. Patients, the
investigation found, were misled about the terms of the credit cards,
and in some instances, duped into believing that they were agreeing to a
payment plan with dental offices when, in fact, they were being pushed
into high-cost credit.
In June, CareCredit reached a pact with Eric T. Schneiderman, the New
York attorney general, to improve protections for consumers, and a
spokeswoman said the company “does not incentivize providers to have
patients open accounts” or give referral fees to providers.
In Ohio, the attorney general has sued the operators of several hearing
aid clinics, claiming that they misled customers about using medical
credit cards to pay for batteries and warranties.
Cameron P. Kmet, a chiropractor in Anchorage, Alaska, said he had
stopped offering medical cards. “One missed payment can really ruin a
patient’s life,” he said. Mr. Kmet now runs a company that administers
payment plans directly between providers and patients, with annual
interest rates around 8 percent.
Regarding medical credit cards, Mr. Kmet said he had urged providers to
ask themselves “whether this is something that you would recommend to a
family member or friend.” The answer, he said, is usually no.
While medical credit cards resemble other credit cards, there is a
critical difference: they are usually marketed by caregivers to
patients, often at vulnerable times, such as when those patients are in
pain or when their providers have recommended care they cannot readily
afford. In addition to G.E., large banks like Wells Fargo and Citibank,
as well as several specialized financial services companies, offer
credit through practitioners’ offices.
The growth of this form of consumer credit is difficult to quantify
because data on medical credit cards specifically, as opposed to credit
cards generally, is unavailable. But credit cards of all types are
playing a growing role in financing medical care. In 2010, people in the
United States charged about $45 billion in health care costs on credit
cards, according to the consulting firm McKinsey & Company.
“When the economy got worse, our business got better,” said Katie
Kessing, an iCare spokeswoman.
In 2010, a little more than a thousand
dentists offered the iCare finance plan — a program that requires
patients to pay 30 percent down as well as a fee of 15 percent of the
total procedure cost. The number of participating providers has since
risen to 4,200. Russell A. Salton, the chief executive of Access One
MedCard, a credit card company in Charlotte, N.C., said demand for
specialized cards — the MedCard has an annual interest rate of 9.25
percent — is driven by providers interested in removing an “obstacle to
providing valuable care.” The company says the number of hospitals
offering its credit cards has grown about 25 percent a year in recent
years.
While neither national medical or dental associations have formal
policies, ADA Business Enterprises, a profit-making arm of the American
Dental Association that connects dentists and businesses, endorses
G.E.’s CareCredit, whose cards are used by more than seven million
people nationwide.
“Cardholders tell us they like using CareCredit because it gives them
the ability to plan, budget and pay for certain elective health care
procedures over time,” said Cristy Williams, the spokeswoman for
CareCredit. She said the company had improved consumer protections,
going so far as to telephone “senior cardholders with significant first
transactions to confirm their understanding of the program and terms.”
She said roughly 80 percent of patients who opted for the deferred
interest paid off their debts before they were charged any interest. She
and others in the industry said the credit cards and credit lines had
helped patients afford otherwise prohibitively expensive care not paid
for at all, or in its entirety, by insurance providers.
But state authorities and care advocates in California, Florida,
Illinois, Michigan and elsewhere say that older people — many of them
grappling with dwindling savings and mounting debt — are running into
trouble with medical credit cards and loans.
“The cards prey on seniors’ trust,” said Lisa Landau, who heads the
health care unit at the New York attorney general’s office.
Minnesota’s attorney general, Lori Swanson, is investigating the use of
medical credit cards, which she said could come with “hidden tripwires
and other perils.”
Interviews with patients, along with the review of contracts and
lawsuits, show just how significant those perils can be.
Carl Dorsey, 74, recalled his experience at Aspen Dental Management, a
nationwide chain that has come under scrutiny for its practices. Mr.
Dorsey said that after a dentist at Aspen’s office in Seekonk, Mass.,
told him that he needed dentures, at a cost of $2,634, he was urged to
take out a medical credit card. He was charged the full cost upfront,
financial statements reviewed by The Times show. Mr. Dorsey, who made
about $800 a month working as a used-car salesman, in addition to
receiving Social Security, has since fallen behind on his payments. The
lapse set off a penalty interest rate of nearly 30 percent. Mr. Dorsey
said he was being pursued by debt collectors.
“This whole ordeal has been devastating,” said Mr. Dorsey, who along
with other patients is part of a civil lawsuit filed against Aspen in a
federal court in upstate New York. He said he still needed dentures,
noting that the ones he received from Aspen were unusable.
Diane Koi-Thompson said that her father, Harold Koi-Than, did not
realize that he had signed up for a CareCredit card during a dental
visit. She said Mr. Koi-Than, 82, was shocked when a company
representative called his home near Niagara Falls, N.Y., saying he had
missed a payment. “My dad had no idea he had a credit card, let alone
that he was behind on it,” Ms. Koi-Thompson said. She said her father
was upset because he is normally meticulous with his finances and
thought his memory was failing. Mr. Koi-Than, through a family member,
was able to cancel the credit card.
The industry’s growth is being driven by people seeking dental care and
devices like hearing aids, which are not covered by Medicare.
Dental care is a large and expensive gulf, according to Tricia Neuman,
the director of Medicare policy research at the Kaiser Family
Foundation. The new
federal health care law, she said, will not change that. “Lack of dental coverage remains a huge concern and expense,” Ms. Neuman said.
Working with care providers, financial services companies have rushed to
fill the void. To make medical cards attractive, some companies offer
them without checking patients’ credit histories. The cards can be
arranged in minutes, with no upfront charges. Such features are
attractive selling points.
“Your patient does not require good credit,” First Health Funding of
Salt Lake City, Utah says on its Web site. On the site of another
lender, the words “No Credit Check” flash in bright letters. First
Health Funding did not respond to requests for comment.
Lawyers and others who assist patients say such features make it easy
for people who are already on a weak financial footing to take on new
debt.
“Ultimately, this credit facilitates a bad financial decision that will
haunt a patient because it adds to indebtedness,” said Ellen Cheek, who
runs a legal help line for older people through Bay Area Legal Services
in Tampa, Fla.
Such critics also say that because there are no industrywide standards
for pricing care — costs vary from practice to practice — the cards
could encourage providers to charge more for treatment.
Brian Cohen, the lawyer representing Mr. Dorsey, said the cards enabled
providers to “bill whatever they want for care, regardless of whether
the cost is reasonable.”
State authorities say health care finance in general, and medical credit
cards in particular, are a growing worry. In 2010, Aspen Dental, the
chain where Mr. Dorsey signed up for a card, reached a settlement with
Pennsylvania authorities over claims that, among other things, it had
failed to tell patients that missing a payment would mean the rate would
rocket from zero to nearly 30 percent. A review of court records and
online forums shows hundreds of customer complaints against Aspen, which
is based in Syracuse. A civil case brought on behalf of customers is
pending in a federal court in upstate New York.
Kasey Pickett, a spokeswoman for Aspen, which is fighting the lawsuit,
said the accusations were “entirely without merit.”
Aspen provides mandatory training for office employees who discuss
financing with patients, according to Ms. Pickett. “We know that for
many patients,” she said, “the availability of third-party financing may
be the only way that they are able to afford the care they need.”
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