Even healthy consumers feel the pain of skyrocketing health-care costs.
A family of four pays nearly $3,300 in insurance premiums each year, according to Kaiser Family Foundation, a nonprofit health policy and research firm. Tack on deductibles, co-payments, prescription drugs and uncovered services, and the bill is closer to $6,700.
Some relief is being offered by a surprising source: credit cards. Now, consumers can earn cash for their health-savings accounts, and discounts on prescriptions, as well as dental and vision care by paying for their medical expenses with plastic. Bank of America offers two such credit cards. Citibank's card offers discounts of up to 60% on prescription drugs. HSBC is market testing a debit card linked to drugstore CVS's Extra Care rewards program. Even Target is in the game, offering a 10% discount coupon for every 10 prescriptions filled and paid for with your store credit card.
"It's a huge sign that our health-care system is broken, when banks see that [medical expense] market as an opportunity," says Tamara Draut, director of the economic opportunity program at Demos, a New York-based economic research and advocacy group. "The credit-card companies wouldn't be offering these rewards if they didn't think they could snag a couple of consumers with revolving debt."
Used wisely, however, these cards can offer decent savings for cardholders. With the Citi Professional card (see chart), for example, an uninsured consumer could pay just $158.45 at CVS for a 60-dose disk of asthma med Advair — a 12% discount off the regular price of $180.99. Assuming the inhaler is used twice a day, the savings would come to $270.48 over the course of a year. With the Aetna Healthy Living card (see chart), the average $2,081 paid out of pocket to heal a compound leg fracture would garner a $25 rebate check.
But these cards aren't your best option if you're eyeing them as a way to pay your medical bills. "Reward points should be a fringe benefit," says Curtis Arnold, founder of CardRatings.com. "You've got to look at this as a financial play, and generally speaking, you're going to be paying more interest on these than you could be elsewhere." Instead, negotiate your bills directly with your hospital or doctor. Due to a growing number of defaults, many offer low-rate or even no-interest plans in the hope of encouraging patients to pay, he says.
Even small health-care expenses can become problematic if you put them on plastic. "This is dangerous debt without a plan to pay it off," warns Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies. Households with medical debt on their credit cards owe an average $11,623, compared with the $7,964 owed by those who don't, according to Demos. Scarier yet, a separate Harvard University study found that 50% of consumers who file for bankruptcy cite accumulated medical expenses as a factor.
If you're a responsible borrower who can afford to pay the bills off each month, then consider a health-care credit card that carries a reasonable interest rate. Our experts like all three of the cards currently on the market:
|Health-Care Credit Cards|
|Aetna Healthy Living||9.90%||Open to any consumer covered by an Aetna insurance plan. Earn three points per $1 spent on health-related purchases, such as medical bills, co-payments, weight-loss center memberships and vitamin purchases. Earn one point per $1 spent on other purchases. Redeem points for cash direct deposits to a health savings account, or for other standard rewards.|
|Caremark Visa||9.99%||Open to any consumer covered by a Caremark drug plan or enrolled in one of its discount prescription drug programs. Earn two points per $1 spent at pharmacy outlets, and one point per $1 spent elsewhere. Earn 50 points for choosing a preferred brand drug under your health insurance plan, and 75 each time you opt for a generic. You'll also earn 100 points for employing other cost-cutting measures, like filling prescriptions online. Redeem points through Bank of America's standard rewards catalog, which includes health and wellness products like fitness equipment and blood pressure monitors.|
|Citi Professional||10.74%||Open to any consumer. Cardholder benefits include free access to PrescriptionDiscountBenefit.com, which offers discounts of up to 60% on prescription medications. For a fee of $8.95 a month, you can add on a vision and dental discount program, with discounts of up to 60% on services and eyewear.|