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The White House announced a proposed rule to crack down on “junk insurance” products, as well as new federal guidance for surprise medical billing.
Last Friday, the Consumer Financial Protection Bureau (CFPB), Department of Health and Human Services (HHS), and Treasury Department announced that they would be requesting information from the public and other interested parties about medical payment products, including installment loans and credit cards. These financing tools have been criticized as deceptively circumventing existing medical debt protections, as the Prospect previously reported.
This interagency initiative is one component of the Biden administration’s pitch to voters about protecting them from health care junk fees as a part of the “Bidenomics” agenda. The White House also announced a proposed rule to crack down on “junk insurance” products that mislead about what’s actually covered, as well as new federal guidance for surprise medical billing practices, effectively strong-arming insurance providers into compliance. Lastly, the White House touted a new report published by HHS that shows how 19 million seniors and other Medicare Part D beneficiaries will save hundreds of dollars per year when Biden’s $2,000 out-of-pocket cap takes effect in 2025.
The fight against junk fees has lagged elsewhere. As the Prospect previously reported, the airline industry is using an upcoming must-pass bill to try to roll back consumer price transparency protections for airfares. When the White House was previously asked by the Prospect about this industry-friendly rollback, they did not respond.
The Prospect recently detailed how medical credit cards, previously reserved mostly for elective surgeries, have expanded to basic medical treatment and emergency services. While hospitals get paid up front, consumers must endure misleading and deceptive offers and high interest payments.
In the CFPB, HHS, and Treasury’s announcement, they specifically cited the “loss of medical bill negotiating power” for consumers. Further down, they state that they want information about the incentives health providers have in accepting alternative medical financing products. This aligns with the concerns about financialization in the medical field that CFPB director Rohit Chopra noted earlier this year. “Turning healthcare providers into the sales team for credit card companies erodes patient trust and can interfere with a patient’s important healthcare decisions.” Those comments came as the CFPB published an earlier report in May on medical credit cards and financing plans.
In the short term, the agencies will have a 60-day period to collect information, which will likely be published as part of an additional report later this year or sometime next year. The combination of the agencies involved paints an interesting picture. Aside from questions about the impact on consumers, the request for information includes sections by each agency for the medical providers about the structure of the health care market. The information acquired from those questions could be huge for future potential regulation and guidance.
The CFPB’s questions focus on unfair, deceptive, and abusive credit lending and debt collection practices. Meanwhile, the HHS questions focus on how alternative medical financing products interact with programs like Medicare, Medicaid, CHIP, ACA marketplaces, and the Indian Health Service. This is notable, as reports from consumer advocate groups have pointed to how the debtors for medical finance products often could have qualified for a public program or other low-cost form of assistance.
Treasury’s questions further elevate the importance and role of publicly funded institutions, namely nonprofit hospitals. The questions home in on whether nonprofit hospitals are explicitly publicizing financial assistance programs for consumers. This focus is critical as nonprofit hospitals are increasingly outsourcing billing operations to third-party revenue cycle management (RCM) firms. Some of these RCM firms have been investigated by regulators in the past for inadequate patient data protection and onerous debt collection practices.
Notably, these RCM companies have caught the attention of private equity firms. A report detailing private equity health care acquisitions in 2022 stated that RCMs were attractive to investors because of “a permanent demand for healthcare services, an aging population defined by a high disease burden, and the fact that many subsectors within healthcare are fragmented and therefore ripe for consolidation.” The report concluded that private equity’s strategy for outsized returns over short time periods could lead to “cost-cutting efforts that negatively impact patients and workers.” That dynamic would be exacerbated as private equity relies on debt to fund its investments, “leading to unwieldy debt service obligations that can divert money away from patient care and fair compensation for employees.”
The three agencies have not overlooked private equity’s role in the medical financing space. The request for information includes passages about how the most prominent medical payment product companies are backed by private equity firms. Further, there are questions about the market concentration of medical payment product companies and what role private equity firms play in this market dynamic.
Taken together, this tri-agency effort puts the practices of medical payment products into focus. But from a broader perspective, it shows serious federal regulatory interest in unwinding the financialization of the health care industry. As with other alternative credit products, hopefully a future report details how reliant the medical payment product industry is on customers becoming trapped in cycles of inescapable debt.
