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Medical Debt on Credit Cards

posted by Bob Lawless

Over the weekend, the Champaign News-Gazette published a story about rising medical debt and the use of credit cards to finance that debt. The story followed report earlier in January from Demos and The Access Project about the use of credit cards by low- and middle-income households to pay for medical expenses. The report, "Borrowing to Stay Healthy: How Credit Card Debt Is Related to Medical Expenses," is available online. Among its key findings:

"Twenty-nine percent of low and middle-income households with credit card debt reported that medical expenses contributed to their current level of credit card debt. Within that group, 69 percent had a major medical expense in the previous three years. Overall, 20 percent of indebted low- and middle-income households reported both having a major medical expense in the previous three years and that medical expenses contributed to their current level of credit card debt."

The report suggests troubling policy issues for those concerned about credit, bankruptcy, or health care. The report is well worth a quick read, and it suggests a fair amount of consumer debt may be medically related. Credit card debt is expensive. Moreover, we may not have a good handle on burden that high-deductible insurance plans are imposing on middle-class families. The government statistics each month simply report "consumer debt," and policy makers will take away from that label whatever information they're inclined to see in it.

It was not surprising to me that the local newspaper in Champaign, Illinois, would have spent the resources to create a story on this topic. We're one of the battlegrounds over what it means for a hospital to be nonprofit. Last September, the director of the Illinois Department of Revenue issued a ruling that one of our local hospitals lost its exemption from real estate taxes for failing to provide a minimal level of charity care. An explanation of the decision from law firm Duane Morris appears here.

The hospital involved in that decision, Provena Covenant, is featured prominently in the newspaper article. Both Provena and another local hospital, Carle, provide interest-free repayment plans to patients who qualify. The third area hospital, Christie Clinic

"has an arrangement with a medical credit card company called CareCredit to finance its patients' bills that stretch beyond three months. . . . CareCredit offers deferred interest plans for up to 18 months in which customers can avoid all interest charges if they pay off their debts in the agreed term, company spokeswoman Christy Williams said. However, customers who fail to meet the terms are subject to interest rates of about 23 percent or higher for the entire debt, and the interest rate can rise to 27 percent or higher on delinquent payments, according to a CareCredit application."

It sounds like we may continue to be a battleground in the definition of "nonprofit."

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