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The Origins of Medical Debt

posted by Jim Hawkins

I’m very grateful to have the chance to spend some time here at Credit Slips.  I’ve learned a lot from reading this blog for the last few years, so it is fun to be a small part of it.

One of the things that has occupied my attention over the last year is medical debt.  I don’t mean how much medical debt people have or how much medical debt contributes to bankruptcy.  Instead, I started thinking about the mechanics of how people take out medical debt and the role doctors play in that process. 

To see how doctors influence debt, I looked at the websites of every fertility clinic in the US.  Fertility care is the perfect place to think about debt because most insurance doesn’t cover it, and it is really expensive.  People have to pay for it out of pocket, and most people don’t have enough money on hand to do so, so they have to seek credit.

What I found was surprising to me.

Mostly I was surprised by how active clinics are in patients’ credit decisions.  Here is what I found:

  • Clinics Offering Credit Counseling: 30.4% (n=116 of 381 total)
  • Clinics Mentioning Credit: 48.5% (n=185)
  • Clinics Mentioning a Limited Number of Credit Options 62.1% (of clinics
  • mentioning credit) (n=115)
  • Clinics Marketing Themselves Because of the Credit They Offer or Marketing the Credit 52% (of clinics mentioning credit) (n=97)

For the most part, clinics direct patients to specific lenders.  What is more disturbing is that people seem to just follow their doctors’ lead.  That makes sense to me.  When you go into a used car lot, you basically expect sellers to mislead you and to try to rip you off (sorry honest car dealers out there).  But, when you’re sharing the story of how you’ve struggled for 5 years to have a child, your “I might be ripped off here” radar is not on.  You trust your doctor’s medical assessments, so why not trust her financial direction as well? 

I’ll suggest reasons people would not want to trust their doctors in another post, but I wanted to end with one of the craziest stories I heard in interviewing people in the medical credit industry.  For me, it illustrates the ways doctors and lenders are intertwined.  It was from a sales rep for a major medical lender.  She told me how she would coach clinic staff to present the cost of fertility treatment in monthly payments instead of total cost in order to bring in more customers.  Saying “For just $225 a month, you can have a baby” was a lot more persuasive to people than saying “IVF will cost you $16,000.” 

The full paper is available here


I wonder how financing Lasik compares to your subject. Does the fact that the cost of the procedure is lower and the lower emotional content of the procedure make a difference in how people borrow and pay for it?

Go Coogs.

I know when I had my wisdom teeth removed (4 at the same time) my insurance would not pay to put me under. One of them was growing sideways and they had to cut into my jaw to remove it. Well.... there was a financing department at the maxiofacial..(something or other) office. Complete with the little room away from the show room floor. It was there when they hit me up and offered me something I wanted. To be put the "blank" out and I could even finance it through a credit card application. They ran my credit....there....in office! I was all..."this is a dentist office right?". I was grateful to be out for the whole procedure...kind of reminded me of that Seinfeld episode being all groggy and all....but I did find it a bit weird to have that "little room" like it was a car dealership or something....

Eye doctors, dentists, plastic surgeons and dermatologists are all heavily involved in offering and taking credit. There are a number of companies that specifically target these medical practices, since as stated above, insurance may be an issue for the customer/patient. I have also heard that in certain instances the credit providers ask the medical providers to discount their fee to them for certain credit challenged patients...

what about cosmetic surgery? Also not covered and a huge array of financing options. I don't think I've seen a billboard or ad for cosmetic surgery that didn't mention financing in one form or another.

It is interesting how many doctors have to provide credit to patients in all the medical contexts these comments point out. I'd guess context really does matter. Credit for fertility care may be more (or less) emotionally charged than credit for a face lift. I love your story Patches about going into the financing room of the dentist office! The question I want to post about tomorrow is why doctors don't loan the money directly to patients. They always seem to just arrange credit for their patients instead of loaning the money themselves.

I guess its because they can't borrow from the "fed" and they would not be considered a National Bank. They then would be relegated to the interest dictated by the particular state they practice in instead of charging South Dakota or Delaware interest. They do "I guess" lend out their time in that the co-pays and what insurance does not cover is part of the medical bill for time and expenses..but its definitely not a technical realized loss if the patients don't pay. Its just time...in Theory.

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