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updated 9/2/2010 9:55:22 AM ET 2010-09-02T13:55:22

These days, you may leave your dentist's office with more than a toothbrush and dental floss in your bag. Thousands of dentists are offering patients health-care credit cards to cover the work that needs to be done, with seemingly hard-to-resist repayment terms. If you need care and don't have insurance to cover it or cash in hand, it's tempting to sign up.

But beware: Many of the card companies and some of the practitioners who offer them are under scrutiny for deceptive and sometimes fraudulent practices. Think hard and read the fine print before you sign on the dotted line.

This month, New York Attorney General Andrew M. Cuomo announced an investigation into the health-care lending industry. The probe grew out of hundreds of complaints received by his office from people who had used the cards for dental work and for elective medical treatments often not covered by insurance, such as cosmetic surgery, chiropractic treatments, Lasik eye surgery and hearing procedures.

New York is not alone in looking at the practice. Last year Minnesota Attorney General Lori Swanson sued two chiropractic clinics, charging that, among other things, they signed patients up for credit cards without their knowledge and charged them thousands of dollars for services not yet provided. Those suits are ongoing, according to a spokesman for her office.

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In California, a law that took effect in January prohibits dentists from charging patients for services before they are done unless the dentists provide a detailed breakdown of the treatment to be performed and its costs. Within 15 days of a patient's request, the law also requires dentists to refund charges for work not yet performed.

According to investigators and patient advocates who have worked with consumers to resolve problems, patients frequently aren't even aware they're applying for a credit card; many think they're providing financial information to work out an extended payment agreement with their doctor or dentist.

Once they get the card, more unpleasant surprises can be ahead.

Many cards promise interest-free borrowing as long as consumers pay off the amount owed within a specified time, say six months or a year. But consumers who don't pay off their debt within that time frame often get hit with interest charges exceeding 25 percent on the entire amount, back to the original date they purchased the services. Other consumers have discovered they've been charged thousands of dollars for work that hadn't yet been done.

That's what Maxine Veach says happened to her. The 60-year-old retired postal worker has dental insurance through Excellus BlueCross BlueShield and MetLife. Suffering from a sore jaw, she visited a dentist near her Syracuse, N.Y., home who told her she needed three crowns and three extractions. She gave the office information about her insurance so they could bill for the charges. But Veach decided to sign up for the health-care credit card offered by the practice to cover any amounts not paid for by her plan.

After getting her teeth cleaned and a set of X-rays taken, Veach was surprised to receive a bill from the credit card company for $2,300.

Veach made numerous attempts to sort out the overcharge and get the office to bill her insurers for the work that had been done, but eventually she called Cuomo's office, which negotiated an $1,850 reduction in the amount owed. Now she's looking for a new dentist.

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"I was very upset with them," she says. "I told them they had a nice little scam going on."

New credit card regulations that became effective this month limit the size of late fees and restrict interest rate increases on balances. But the regulations continue to permit "teaser" or promotional rates, and they don't address the issue of charging consumers for services before they're provided, says Gail Hillebrand, a senior attorney at Consumers Union.

Cuomo's investigators allege that one card issuer, GE CareCredit, charges practitioners a fee to offer the cards and then gives them a rebate based on the amount of money they generate in sales. Stephen White, a spokesman for GE CareCredit, says that happens in "limited instances."

CareCredit, which is offered by 130,000 practices nationwide, is one of several companies Cuomo is investigating. "We're cooperating with the attorney general's inquiry and welcome the opportunity to discuss and explain our business," says White.

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Other credit card issuers that have been subpoenaed as part of the Cuomo investigation include Chase Health Advance and Citi Health Card. Chase officials said they had no comment and Citibank said it would cooperate with the probe.

Patient advocates are concerned that practitioners are taking advantage of patients' trust at a time when they need help and may be in pain. "Some of the people we've worked with feel pressured to apply," says Mark Rukavina, executive director of the Access Project, a Boston-based nonprofit that helps consumers solve medical-debt problems. "They need the services, and the provider is really encouraging them to use these medical credit cards."

As health care costs continue to rise, more people are struggling to cover their medical bills. Using plastic may seem like a good—and sometimes the only—solution. According to a study by management consultants McKinsey & Co., credit cards accounted for less than 20 percent of consumers’ out-of-pocket medical spending in 2007, or $45 billion. However, with the “right” business models that make consumer-to-provider payments more efficient, the study predicted, credit card spending could more than triple, to $150 billion, by 2015.

There are better options than putting charges on a credit card, say patient advocates. The simplest: Ask for an extended payment plan.

Many providers will offer it and charge no interest, says Rukavina.

"You've got a relationship there, and both of you want to preserve it," he says.

© 2012 This information was reprinted with permission from KHN. Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

Video: How to steer clear of recession scams

  1. Transcript of: How to steer clear of recession scams

    ANN CURRY, co-host: This morning on TODAY'S CONSUMER , a scam alert. With the economy struggling, perhaps it's no surprise that con artists are out in force and now the government is cracking down on one of their schemes. TODAY's financial editor Jean Chatzky joins us now to tell us what we should be watching out for. Jean , good morning.

    Ms. JEAN CHATZKY (Today Financial Editor): Good morning.

    CURRY: This is maddening. It's not only rough out there, it looks like it's going to be getting worse in terms of the economy and there are people who are actually preying on people who have lost their homes, who are looking for jobs, who need health care . It's maddening.

    Ms. CHATZKY: It's maddening and the more desperate people are, the more likely they are to look for an easy fix. That's what 's happening here.

    CURRY: Let's take a look at these four common scams that are out there.

    Ms. CHATZKY: OK.

    CURRY: One's called the health care hustle. And just last week the Federal Trade Commission announced it's going to be doing a crackdown on one of the -- on one of these.

    Ms. CHATZKY: On many of these, actually.

    CURRY: Hm.

    Ms. CHATZKY: We have an advertisement to show you what this looks like. Essentially, it is a case of companies trying to sell you what looks like health insurance but what is actually a medical discount card. And what people are finding is as they go to their doctors, their hospitals, their pharmacies to fill prescriptions, it's not accepted. So they're paying hundreds of dollars and they're losing that money as well as some additional fees. We should point out as far as this particular ad is concerned, the company's been charged by the FTC and taken into receivership, but there's been no liability found as yet.

    CURRY: OK. So from the idea of targeting the uninsured, there is also -- there are also scams that are targeting the people who don't have jobs and you call this the job hunting high jinks scam.

    Ms. CHATZKY: Here we have a scam where people are told you can pay some money up front, pay us a fee and we'll get you a job, we'll give you a list of places where they have jobs. You'll get access to a Web site where you can find real opportunities. In fact, that just proves not to be the case. Often what people find are Web sites where they get some leads, but perhaps not in their area and they're charged additional fees to it even apply for these jobs.

    CURRY: People who have lost their jobs, really are struggling to pay their, you know, their housing payments and so some of these people who are now moving towards foreclosure are also getting scammed.

    Ms. CHATZKY: And you'll see headlines like, 'We can stop foreclosure.' 'We can save your house.' In many of these cases, again, there are upfront fees, you always have to be wary of that, and they're asking you to sign over the title to your home and then perhaps rent your home back from them. When they tell you you can buy it back at a later date, never happens.

    CURRY: So let's talk about how we can help people avoid these scams. What are your strongest tips on how to protect yourself?

    Ms. CHATZKY: First of all, if there are upfront fees, you've got to know to be very, very careful of that. You should not have to pay somebody to get you a job. Secondly, I want people to pause. If it sounds like you're under pressure, if it sounds like somebody wants you to sign on the dotted line or that the deal is going to go away immediately, this is something that you should absolutely run away from because it's not a good idea. And whatever the company is, check them out with the Better Business Bureau . That's a very easy thing to do on the Internet . You go to the bbb.org web site , type in the name of the company and its location and they'll tell you whether it's real or it's not. And finally, if anybody's asking you to give you the ability to let them fill out paperwork for you, absolutely not.

    CURRY: All right, Jean Chatzky , trying to sell -- save people from these things. Thank you so much ...

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