Savings From Medical "discount Cards" Questioned
Attorney General Spitzer today announced settlements with two companies that deceptively promoted medical discount cards to consumers who were struggling with health care costs.
"As health care costs continue to soar, consumers throughout the nation, especially the 40 million uninsured, are looking for ways to obtain more affordable medical care," Spitzer said. "Medical discount cards can offer some savings, but they are clearly not an alternative to health insurance."
A joint investigation by Spitzer's Health Care Bureau and Consumer Frauds Bureau found that the two companies -- U.S. HealthCard, based in Brooklyn and Medisavers, Inc., based in Manhattan -- failed to truthfully disclose the costs and benefits of their discount card programs. Instead, the two companies:
- Exaggerated the savings on medical expenses;
- Failed to disclose important information that increased the overall cost of the program to consumers;
- Exaggerated the number of health care providers accepting the discount card for payment of services.
In the case of US Healthcard, Spitzer's office raised objections to the many direct mailings and advertisements in newspapers, discount coupon books, and on the Internet that claimed savings as high as 90 percent for subscribers.
US HealthCard - which has enrolled over 10,000 consumers throughout the nation, including nearly 1,150 subscribers in New York State - claimed to provide discounts for such health care needs as primary and specialty care, dental, hospitalization and surgery, diagnostic testing, x-rays, MRI and CT scans, and prescription drugs.
Spitzer's office objected to US HealthCard's misleading claims in its brochures and ads, such as:
- Prominent display of tremendous savings and then small print disclosures contradicting these numbers. Even after Spitzer's office raised concerns about these brochures, US Healthcard printed brochures that continued to feature the attractive and misleading savings, and amended only the fine print to disclose more accurate - and lower - savings than were originally published;
- Promotions that asserted access to "over 50 percent of all US doctors" but failed to substantiate this claim;
- False special, limited-time discounts for those consumers who acted immediately;
- Baseless claims such as "this is the only medical/hospital program geared toward the uninsured..."; and,
- Reference to a non-existent "National Health Alliance" in its promotions, which left consumers with the false impression that the company and its services were endorsed and reputable.
US Healthcard also failed to provide information about important restrictions regarding its hospital savings program; information that, for some low-income consumers, would make the hospital benefit cost prohibitive. US Healthcard failed to adequately disclose that consumers must pay a $1,000 deposit for every projected day of a hospital stay in order to qualify for any hospital discount, or that consumers are responsible to pay the balance due on hospital bills within 30 days of discharge.
In the case of Medisavers, Inc., Spitzer's office raised concerns that the firm's promotional materials - including print ads, subway train ads and direct mailings - failed to disclose a 25 percent administrative fee for every medical procedure and service that greatly decreased the advertised savings.
Medisavers also failed to disclose an important restriction that would make the medical discount program cost prohibitive to some low-income consumers. In order to access the discounts available under Medisavers' program, the consumer's credit card must have adequate credit available to cover the physician's customary fee before the discount. For example, if a doctor's fee is $300 and the member has only $250 available on his/her credit card, the Medisavers' discount would not be available even if the discounted fee was $250 or less.
Medical discount cards are fast becoming the alternative of choice for individuals unable to afford health insurance. Many consumers do not fully understand that these plans are not an insurance policy and that cardholders remain liable for all health care fees incurred. Further, since the firms offering the discount cards often rent the provider networks from other companies, many doctors' offices and drug stores are unaware that they participate and consumers could experience difficulty getting participating doctors and pharmacies to charge the discounted rate.
"Attorney General Spitzer's action against the deceptive practices of medical discount cards and his effort to educate consumers about these cards comes in the nick of time, especially for seniors," said Michael Burgess, Executive Director of New York State Statewide Senior Action.
"With some prescription drug prices rising 15-20% a year and the failure of Congress to enact a comprehensive Medicare prescription drug benefit, many desperate seniors are turning to these cards to eke out whatever savings they can."
Spitzer noted that discount card programs can provide savings on health care services and prescription drugs. To help consumers decide whether to sign up with a medical discount program, Spitzer's office has developed a brochure (see attached).
"Consumers need complete and accurate information to decide whether these cards are suitable for their health care needs and will in fact save them money," Spitzer said.
The cases were handled by Assistant Attorneys General Dorothea Caldwell-Brown and Howard Gootkin of the Health Care Bureau under the supervision of Bureau Chief Joseph R. Baker III and by Assistant Attorney General Joy Feigenbaum of the Consumer Frauds and Protection Bureau.