When Janet Frederick of Urbana had breast cancer in the late 1990s, her medical bills started piling up fast.

And so did her money problems.

Frederick, 52, had health insurance but couldn't afford all the copayments for her doctor visits and medicines, so she started charging them on her credit card.

"I didn't have any other way," she said.

Because of her illness, Frederick couldn't keep working full time. And then she couldn't keep up with her bills. Ultimately, she wound up filing for Chapter 13 bankruptcy.

Think this could never happen to you?

A new report shows medical debt has become a significant part of credit card debt for insured and uninsured patients alike. That trend may grow as more employers switch to high-deductible, smaller-benefit health plans.

These new plans help companies control their rising benefits costs, but they're hard on lower-income and middle-income families who can't afford all the higher out-of-pocket costs that come with them – increasing the likelihood that they'll add medical bills to their growing credit card debts, according to the Access Project and Demos, two public policy organizations.

"The other thing we found was that being insured really didn't protect you from being medically indebted," said Mark Rukavina, director of the Access Project.

The report compiled by the two organizations found low- and middle-income families with medical debt now carry an average credit card debt of $11,623 – while the average credit card debt for families in the same income brackets without medical expenses was $7,964.

The report also found 62 percent of families with medical debt are contacted by bill collectors, compared with 38 percent of debtors who don't owe money for medical expenses.

For many consumers, the report found, the use of credit cards also increased the amount of their medical debts because they're now paying interest and penalty fees on top of the doctor and hospital bills.

"The concern that we have in this is that high-interest credit cards are not a great way to pay for health care," Rukavina said.

Providers get involved

Of concern to Rukavkina and his organization is the number of health care providers now directing patients who owe them money to new credit card options. Many providers even sign up patients for a new breed of medical credit cards, he said.

"People would like to pay off these bills, but for many of them, they just can't afford to do it. They want to preserve their relationship with their provider, so they put things on their credit cards," Rukavina said. "They're making decisions that aren't necessarily in their best financial interest, but that are in their best medical interest."

Locally, both Provena Covenant Medical Center, Provena United Samaritans Medical Center and Carle Foundation Hospital say they work out their own interest-free payment plans directly with patients, and don't sign them up for any new credit cards.

Those payments to Carle hospital can be as low as $25 a month, and patients who can't afford that "probably qualify for charity care anyway," hospital spokeswoman Allison McLaughlin said.

Vicki Semanie, chief financial officer for Provena's Urbana and Danville region, said the two hospitals accept existing credit cards if patients want to use that payment option.

"But we do not refer people to credit card companies. We set up payment plans that are interest-free," she said.

This adds some financial risk for the hospitals, Semanie said, but Provena thinks it's the most fair option for the patients.

"We just made a decision that you're kind of adding insult to injury when you have big medical debt and you're adding interest to it," she said.

Carle Clinic also prefers to work out interest-free payment plans directly between the clinic and patients, and neither directs patients to credit card options nor signs them up for new credit cards, according to clinic spokeswoman Jennifer Hendricks.

Christie Clinic has an arrangement with a medical credit card company called CareCredit to finance its patients' bills that stretch beyond three months. But a clinic official said this arrangement can be a big advantage to patients who need time to pay their bills.

A business unit of GE Money, CareCredit says 60 percent of its business is financing dental procedures, and most of the rest of its business is for elective medical and veterinary procedures, though the company does carry some debt involving primary medical care. The company's Web site directs customers looking for a doctor in Champaign-Urbana to Christie Clinic and several local dentists and veterinary services.

CareCredit offers deferred interest plans for up to 18 months in which customers can avoid all interest charges if they pay off their debts in the agreed term, company spokeswoman Christy Williams said.

However, customers who fail to meet the terms are subject to interest rates of about 23 percent or higher for the entire debt, and the interest rate can rise to 27 percent or higher on delinquent payments, according to a CareCredit application.

CareCredit also offers fixed-payment options of 24 to 60 months, in which the annual rate is between 9.9 and 14.9 percent interest, Williams said, adding the average CareCredit debt is a bit more than $1,100.

Lisa Redden, business services director for Christie Clinic, says the clinic doesn't promote the CareCredit card. It offers it and signs patients up if they ask.

A lot of patients can't pay their bills these days, she said, and the CareCredit option is "hopefully fitting more comfortably into their budgets."

The clinic allows patients 90 days to pay off their bills directly to the clinic without interest, but bills stretching beyond that are subject to interest charges at an annual rate of 18 percent, she said.

Christie Chief Financial Officer Jeff James says the clinic offers CareCredit because it offers clinic patients longer interest-free payment plans and a lower interest credit option than the clinic can provide.

James sees options such as CareCredit becoming more customary with the growing popularity of high-deductible health plans, as more patients find themselves with higher out-of-pocket medical expenses. More patients can't afford those expenses, he said, "and more providers can't afford to carry them."

Make a careful choice

Claudia Lennhoff, executive director of Champaign County Health Care Consumers, said she knows firsthand how easily health problems can wind up adding to credit card debt.

She wound up putting about $1,200 worth of medical expenses she couldn't afford on credit cards at a time she was trying hard to pay those cards off.

"I have good health coverage, but I've had a number of outpatient procedures over the years at the hospital," she said. "I've had deductibles and copays that are significant – to me, $200 is significant."

Lennhoff said CareCredit is a significant concern to her organization right now because Health Care Consumers received about a dozen complaints during the past year from local patients, some of them from Christie, who signed up for that card and didn't understand the terms. Williams said CareCredit trains provider billing departments to explain the terms carefully, and Redden said the billing staff at Christie works hard to make sure patients understand what they're signing up for.

But Lennhoff says there's still a communication gap.

"Every call we get when people run into CareCredit problems is that they didn't understand what they were signing up for," she said.

What it boils down to for Lennhoff is a belief that medical debt just isn't like other kinds of consumer debt. People making financial decisions about their health care are under a much different kind of pressure than a person out shopping for a bigger TV or a new couch.

"Health care ... deals with a vital service that we need to live," she said.

When providers sign up patients for credit cards, she said, it's "inherently coercive," because people want to maintain their relationships with their doctors and may accept an option that isn't in their best financial interests.

Williams begs to differ: Deferred interest plans like the one CareCredit offers can be effective ways to pay off medical expenses interest-free – as long as consumers read the terms carefully and know if they will be in a position to pay off the amount owed in the agreed time frame.

"If you're good with money and a smart consumer, I think it's a great program," she said.