Medical credit cards serve a useful purpose: they allow us to break the cost of expensive procedures into manageable chunks. However, they’ve gotten quite a bit of bad press lately, as well as investigations from two separate state attorneys general. In Minnesota, a chiropractor was censured for abusing health care credit cards. There have been accusations of manipulation and outright fraud, raising the possibility that the lines of credit are predatory cards targeting people at their most vulnerable. However, they may seem like the only option to a patient facing staggering medical bills. Even with health insurance, medical expenses can be a constant source of worry. In a time of physical, emotional and mental stress, the added financial pressure of hospital bills is difficult to cope with. Here are a few strategies to lessen the burden of, or avoid altogether, medical credit cards.
Plan ahead: put some money away
While medical emergencies tend to crop up unexpectedly, we all know we’ll face one at some point. One way to plan ahead is with health savings accounts, a popular option that many employers provide along with a high-deductible, low-premium health insurance. The accounts appeal to the young and healthy, and are also used by freelance and self-employed professionals. Like an IRA, workers can contribute part of their income into an HSA (up to the contribution limit) without paying taxes. The funds do not incur taxes on the way out, either, as long as they pay for qualified medical expenses as diverse as co-payments, hearing aids, braces, and prenatal vitamins. As of 2011, however, some over-the-counter drugs do not qualify. The funds roll over from year to year, allowing young mortgage- and child-free individuals to prepare for health problems later on. On the downside, an HSA can only be opened with a high-deductible insurance plan, and may be subject to high annual fees.
A counterpart to the HSA is the flexible spending account, which is more accessible but less helpful in long-term planning. Workers contribute to their accounts before payroll taxes are deducted, and the money is not taxed if used for medical expenses. Among the qualifying expenses are childcare, LASIK, and cosmetic surgery. There are two main differences between an FSA and an HSA: anyone can enroll in an FSA, even if they don’t have a high-deductible plan, and unused FSA funds disappear at the end of the year while HSA dollars accumulate indefinitely.
An HSA is a solid choice for young or healthy people, who want to prepare for future expenses but are unlikely to need more comprehensive plans at the moment. An FSA, on the other hand, is sensible for those who can accurately predict their medical expenses for that year.
Just as health care costs have skyrocketed, medical tourism has increased considerably in recent years. Cancer treatments, joint replacements and surgery are all offered abroad at a fraction of the cost at a US hospital. American care-seekers, though, should be cautious. There is, to an extent, a tradeoff between safety and security on one hand, and cost on the other. The Joint Commission International is a third-party organization that provides hospital accreditations around the world, and is a reliable resource for finding safe treatment centers.
Insurers, too, are excited about the prospect of medical tourism. Cheaper treatments, after all, save money for them as well as for the patient. More and more, providers are willing to pick up part of the tab for approved treatments from certified facilities abroad.
Respond carefully: don’t sign without thinking
A vulnerable, pain- and drug-fogged patient is generally not in the best state to deal with negotiated rates and facility cost comparisons. Still, cost-control of medical expenses can prevent the long-term debt of a medical credit card.
You may be able to avoid some medical expenses simply by choosing urgent care over emergency services when appropriate. Obviously, if you have chest pains or are bleeding profusely, then you’ll want to head for the ER straightaway. But choosing urgent care for important but not life-threatening issues can cut the bill by up to 70%. Ambulance rides, in particular, take a toll on the wallet: an 8-mile ambulance ride in Chicago could cost over $1,000.
Once you actually get the bill, check it over for errors. The hospital may charge you for a repeat x-ray caused by a technician’s goof (I know from personal experience). It’s not your responsibility to pick up the tab for the hospital’s error. Call to get the charge removed. Also, find out if you can pay the same discounted rates as insurance companies do. You may be able to get certain fees reduced simply by being persistent.
When the bills are due
If you’re still concerned about your ability to pay off your bill, you have a few options. Ask your insurance company how much they will pay for, and make sure you’re getting your full benefits. You may be able to take out a regular line of credit with a low interest rate. If you’re in dire straits, a nonprofit may be of help.
If you do find yourself needing a medical credit card, be careful. Take out separate lines of credit for different procedures, or even for treatment spread out over multiple sessions. Try to make sure that there are no prepayment penalties, and avoid hair-trigger penalty interest rates if possible. And most importantly, follow the NerdWallet Golden Rule; always read the terms of the agreement.
Tim Chen is the CEO of NerdWallet.com, a credit card website dedicated to helping consumers find the best credit card rewards.
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