Senators raise concern over medical credit cards

Stamford-based Synchrony Financial and San Francisco-headquartered Wells Fargo received an open letter from five senators known for progressive policy asking for clarification on the matter of medical credit cards.

The letter, signed by Connecticut’s Christopher Murphy as well as Bernie Sanders of Vermont, Sherrod Brown of Ohio and both Elizabeth Warren and Edward Markey representing Massachusetts, outlined several concerns involving the credit cards and asked a series of questions about the industry.

Medical credit cards can only be used to pay for medical procedures, but are an increasingly popular financial option for dealing with ever-rising health care costs. CareCredit, offered by Synchrony, is among the most popular options, with more than 12.7 million card holders. The letter from the senators noted that according to U.S. Securities and Exchange filings, Synchrony collected 15% of its total fees in 2021 from the Health and Wellness segment, coming to $2.3 billion in a year where total profits were $4.2 billion.

“CareCredit is different from a regular credit card,” reads the card’s website. “Use it to pay for out-of-pocket expenses not covered by medical insurance, and special financing options are available that you may not be able to get with other cards.”

Wells Fargo offers the Wells Fargo Health Advantage Card, which is similarly limited to being used for medical procedures. However, the Wells Fargo Health Advantage Card can only be used for eye surgery, hearing related costs, dental care and veterinary care. Synchrony’s CareCredit can be used for a much wider array of procedures, including ones related to weight loss and cosmetic surgery, as well as a broad “other” category.

Putting medical expenses on credit cards can allow the uninsured or those needing treatment not covered under their plan to quickly pay for procedures or medicines. The cards also offer discounts and reduced APRs if certain conditions are met, which can be attractive to consumers. Hospitals appreciate that it speeds and simplifies payment.

However, the senators’ letter questioned the circumstances in which consumers are making the decision.

“The concern here is the current structure of our health care system often requires that patients enter into medical debt in order to access services they need,” the letter said. “Within that context, patients ”” often under duress because of concerns about their medical care ”” are being pushed into and then locked into medical credit cards despite the availability of alternative payment options that might be more beneficial and offer lower interest rates.”

The letter also pointed to documented cases of patients paying interest that totals more than the cost of the procedures they received, APRs raising as high as 26.99%, and some cards being maxed out as soon as they are approved. The letter claimed that patients using these cards are often billed at a very high “chargemaster” price, which medical providers often use as a starting point in negotiations with patients and insurance companies but rarely receive.

“If you pay 0% interest on a seriously inflated charge, it’s not a good deal,” the letter continued.

The senators also raised concern about rising levels of subprime debt, and expressed fears that medical credit cards might be uniquely damaging to credit scores, writing: “The cards may also adversely impact consumers’ credit reports because of the way they are treated by credit reporting agencies: the agencies recently agreed to remove 70% of medical debt from credit reports, but these changes will not benefit medical credit card holders.”

The letter concluded by asking both Synchrony Financial and Wells Fargo to respond to 16 questions ranging from specific information on the number of medical credit card users and partners to the terms of paid endorsement deals with healthcare professionals.

At the time of this writing, Senator Murphy’s office nor Wells Fargo have returned requests for comment.

A spokesperson for Synchrony said that the company will provide more information on either Jan. 26 or Jan. 27, after having engaged with the senators who originally requested the information by Jan 12.