Paying out-of-pocket health care costs

"We are definitely seeing an increase in these types of (cards) as people are looking for options to fund their health care costs," says Maik Klasen, senior director of the Healthcare and Life Sciences Consulting Group at Frost & Sullivan, a consulting firm based in Palo Alto, Calif.

Like typical credit cards, you apply for them, and their terms are based on your credit score and history. Not everyone will qualify. Some cards offer low teaser rates or zero-percent interest financing for a limited time. Others are linked to payroll deductions. The latter is a growing method, especially for health care system employees who can have procedures done and pay the bill through payroll deduction, says Braun.

"For people who run into a situation where they are basically out of cash and need to get a procedure done which hasn't been planned for, (these cards) are a relatively attractive alternative to bridge a short-term income issue," says Klasen. The hitch is, if you don't pay your bill on time or you pay less than the minimum payment, your rate could skyrocket to as high as 30 percent, increasing your overall cost substantially.

Chip away at your medical bill with a payment plan

Payment plans come in two forms -- informal and formal. Under the informal plan, a consumer will make a payment when a bill arrives, reducing the bill by that amount, then getting a bill the next month and continuing to pay it until the cost is paid off, says Braun.

Under more formal arrangement, you set up a payment plan with your health care provider during a financial counseling session. You can pay monthly or twice a month by having a predetermined amount automatically deducted from your checking account over a specified period of time, such as six, 12 or 18 months.

If you are entering into a payment plan agreement, be sure to ask about the financing terms. Many hospitals still offer interest-free payment plans, especially for smaller amounts, but more may move to charging interest and fees as a way to generate revenue, says Gillen.

Seek loans to cover elective surgery

Health care loans are similar to signature loans, but they are granted by a financial institution for a health care expense, generally a fairly expensive elective procedure such as Lasik eye surgery or braces. They are generally offered through individual doctor's offices and include information on payment terms and an application.

If you're interested in one of these loans, be sure to compare the terms with other credit so you get the lowest cost credit possible. In general, doctor's offices offer these plans as a service to patients and don't receive payments from the financial services companies that provide them, says Klasen.

With the need for consumer health credit rising so quickly, providers who take advantage of this trend to offer credit options may find themselves with a competitive advantage, says Gillen, because consumers will be searching more aggressively for this type of credit.

"If you need to get a certain procedure done, and quality and outcomes are the same at two given institutions but one offers some kind of medical credit and the other doesn't, the existence of medical credit at one could be a differentiating factor going forward," says Gillen.


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