CFPB Launches Inquiry Into Healthcare Patient Finance

The Consumer Financial Protection Bureau (CFPB), the U.S. Department of Health and Human Services (HHS), and the U.S. Department of Treasury recently launched an inquiry into the various forms of patient finance that are available to consumers at or before the point of sale in healthcare settings; these primarily include medical credit cards and “buy now, pay later” installment loans. The inquiry will seek information about the prevalence of these products, how and when patients use them, and the incentives that care providers may have to offer them.?

From the press release announcing this inquiry, it’s clear the CFPB’s primary concern is that these products could ultimately drive up healthcare costs and add to the already staggering level of medical debt in the U.S.?

A separate CFPB research report released in May goes into more specifics about its concerns, which include:

• Heightened prevalence and misaligned incentives: Patient finance used to be reserved for elective procedures, but it is now offered for basic medical treatment and emergency care by doctors in settings where patients can be under significant stress. Doctors may be incentivized to leverage patient finance as a mechanism to expedite collections (bypassing the need for the often lengthy adjudication and reimbursement processes with insurance carriers) and decrease administrative burden.
• Complex fee structure: Patients don’t always understand how these products work, and as a result they can end up with debt they can’t afford. For example, the CFPB research report found that deferred interest is prevalent in the healthcare ecosystem; patients paid $1 billion in deferred interest for patient financing activities between 2018 and 2020. Furthermore, people used credit cards or loans with deferred interest terms to pay for almost $23 billion in healthcare expenses, and for over 17 million medical purchases, over the same time period.?
• High cost: The APR of a typical medical credit card is 26.99%, while the average APR for all general-purpose credit cards is roughly 16%.
• Cheaper alternatives may exist: Patients who could be eligible to receive reduced or free care through a government assistance program or their existing health plan may instead opt for a medical card or loan. This can sometimes work against the best interests of the patient, as the overall financial burden can be higher, and the patient’s ability to challenge an inaccurate bill becomes more complicated when they are working through a third-party financial institution.?

While the above concerns represent the initial findings of CFPB research, it’s important to note that this inquiry is still in progress. We’ll be watching this story closely as it develops, as patient finance has been a hugely popular area of interest for builders at the intersection of healthcare and fintech. Any further regulation to patient finance could have serious implications, such as shrinking existing portfolios for existing businesses, significantly impacting new loan originations, or prompting incumbents/payvidors to potentially bake in financing schemes into their offerings. Meanwhile, if patients could arrange financing here is also an opportunity to rethink the product experience and focus on delivery through non-provider distribution channels to circumnavigate the issue of potentially misaligned incentives.?

Our hope is that rather than stymying innovation in a space that is capable of providing crucial access to various forms of medical care, the CFPB inquiry pushes both incumbents and startups to keep at it, while refining their product and pricing strategies to be as patient-friendly as possible.

– Marc Andrusko, a16z fintech partner

Learn more about the intersection of healthcare and fintech

• The Opportunity for Healthcare and Fintech
• Healthtech x Fintech’s Biggest Prize: The Financial Operating System for Healthcare
• Payvidors, Unbundled: Opportunities in Healthcare Fintech

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