Credit Cards Offer Discounts on Medical Expenses

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: