How Medical Debt Affects Millions of Americans Every Year, impacting nearly 40% of Americans who either carry medical debt or struggle to pay their medical bills, contributing to a total medical debt of approximately $220 billion. Even with insurance, about 12% of U.S. adults borrowed a combined $74 billion to cover healthcare expenses in the past year, highlighting the systemic issues within the healthcare system.
In this article, you will learn:
- Nearly 40% of Americans either have medical debt or struggle to pay medical bills.
- Approximately 23 million U.S. adults owe more than $250 in medical bills.
- About 5% of the population had unpaid medical bills on their credit reports as of June 2023.
- New York City has committed $18 million to wipe out approximately $2 billion in medical debt over three years.
- Medical debt can lead to reduced access to necessities like groceries and utilities.
- State and local governments are partnering with nonprofit organizations to purchase and forgive medical debt for qualifying individuals, typically those whose medical expenses exceed 5% of their annual earnings or who make up to 400% of the federal poverty level.
How prevalent is medical debt in the United States, and what makes it unique?
Medical debt poses a serious challenge across the United States, impacting millions of people—including many who have health insurance. Studies reveal that nearly 40% of Americans either carry medical debt or face difficulties paying their medical bills. For a significant number of adults, an unexpected $500 medical expense can push them into debt. This widespread issue affects an estimated 100 million Americans, with total medical debt reaching approximately $220 billion.
What sets medical debt apart from other financial burdens is its unpredictability. It often stems from sudden illnesses or accidents, leaving little time to prepare. This unpredictability places a heavy strain on households, particularly those with limited financial resources. When health issues persist, the costs can pile up quickly, making the situation even more difficult. Unlike other debts that might be planned for, medical debt often arises unexpectedly, catching individuals and families off guard.
In the past year alone, about 12% of U.S. adults—over 31 million people—borrowed a combined $74 billion to cover healthcare expenses for themselves or their loved ones. Despite having insurance, many still find themselves overwhelmed by out-of-pocket costs. A large portion of those struggling with medical debt have balances exceeding $250, highlighting the pervasive nature of the problem. The prevalence of medical debt underscores systemic issues within the healthcare system, including high costs, complex billing practices, and inadequate insurance coverage.
How many Americans are affected by medical debt annually?
Medical debt remains a significant burden for millions of Americans. Approximately 23 million adults in the U.S.—about 9% of the population—owe more than $250 in medical bills. Within that group, around 14 million people, or 6% of adults, are dealing with debts exceeding $1,000. For roughly 3 million individuals, the amount owed climbs above $10,000.
Close to 20 million adults face healthcare-related debt of more than $250, which translates to nearly 1 in 12 people. Additionally, an estimated 31 million Americans have borrowed money or taken out loans in the past year to cover medical costs. This borrowing often involves using credit cards, personal loans, or even tapping into retirement savings, further compounding their financial strain.
As of June 2023, about 5% of the population had unpaid medical bills reflected on their credit reports. These figures highlight the widespread and pressing issue of medical debt across the country. The impact extends beyond credit scores, affecting individuals’ ability to secure housing, employment, and other essential services.
Why does medical debt affect millions of Americans every year?
Why do so many Americans find themselves burdened with medical debt each year? A mix of factors is to blame, including skyrocketing healthcare costs, gaps in insurance coverage, and a maze of confusing billing practices. Many individuals end up shouldering significant expenses through high deductibles, copays, and cost-sharing, often forcing them to borrow money or make difficult sacrifices just to access necessary care.
Even those with insurance aren’t immune to steep medical bills. Out-of-pocket expenses like deductibles, coinsurance, and copays can add up quickly. Insurance plans frequently cover only a portion of the total cost—sometimes as little as 80%—leaving patients responsible for the rest. On top of that, limited provider networks and unexpected out-of-network charges can result in surprise bills that catch people off guard. For example, a routine surgery could lead to thousands of dollars in unexpected charges if an anesthesiologist is out-of-network.
High-deductible health plans pose yet another hurdle, requiring patients to pay a large sum upfront before their coverage even begins. If a claim is denied or care is received outside the approved network, expenses can escalate rapidly. For those who are uninsured or underinsured, the lack of clear pricing and limited plan options only makes matters worse. Many are unaware of the true costs until they receive a bill, making financial planning nearly impossible.
Adding to the strain is the healthcare system itself. Its fragmented nature often leads to duplicated tests, inefficient use of resources, and bloated administrative costs. All these issues combined have turned medical debt into a widespread and growing problem across the country. Addressing these systemic issues is crucial to alleviate the burden of medical debt on millions of Americans.
How do healthcare costs, insurance coverage, and high-deductible plans contribute to medical debt?
Rising healthcare expenses, limited insurance options, and high-deductible plans are significant factors driving individuals into medical debt. The exorbitant cost of essential services, such as hospital stays and prescription medications, can quickly overwhelm personal budgets. Even with insurance, many Americans face substantial out-of-pocket expenses through deductibles, copays, and coinsurance, making it difficult to manage healthcare costs.
High-deductible health plans (HDHPs), while offering lower monthly premiums, require patients to pay a large sum before their coverage begins to fully cover costs. This can quickly lead to mounting debt, especially when unexpected medical needs arise. Gaps in coverage, narrow provider networks that limit choices, and extra fees for out-of-network care further exacerbate the financial strain. Many insurance policies cover only a percentage of the total bill, leaving patients responsible for the remaining balance, which can be a significant burden. In some instances, aggressive hospital billing practices, including inflated charges or lack of transparency, can result in unexpected and unaffordable bills.
For the uninsured or underinsured, even routine medical treatment can trigger severe financial hardship. Preventative care may be forgone due to cost, leading to more serious and expensive health issues down the line. Without adequate coverage, a single health issue can spiral into a long-lasting economic challenge, impacting credit scores, housing stability, and overall quality of life.
Which populations are most vulnerable to accumulating medical debt?
Several groups are more prone to medical debt than others, including people with lower incomes, those without health insurance, individuals with chronic health issues, residents of rural communities, and those living in the South. Factors such as income, insurance coverage, overall health, and location significantly influence the likelihood of incurring medical debt.
Individuals with limited income or no insurance are particularly vulnerable. Without financial resources or adequate coverage, even a single unexpected medical expense can become overwhelming, leading to debt that is difficult to manage. Racial and ethnic minorities, as well as individuals with disabilities, also face increased risks due to systemic economic and social barriers that make managing healthcare costs more challenging.
For example, George, despite having insurance through his low-wage job, incurred $20,000 in medical debt after an accident. His experience highlights how even those with coverage aren’t immune if their income is low.
Adults under 65 without insurance are especially likely to struggle with healthcare costs. Disparities exist across racial groups, with nearly 60% of Black and Hispanic adults reporting difficulty affording medical care, compared to about 40% of White adults. Households with lower incomes are three times more likely to face these challenges than wealthier ones.
Younger adults and families with children are also disproportionately affected. A significant percentage of minority adults have had to borrow money to cover medical bills.
- Roughly 23% of Black adults report borrowing money for medical bills,
- 16% of Hispanic adults report borrowing money for medical bills,
- 9% of White adults report borrowing money for medical bills.
Families with children under 18 are twice as likely to incur medical debt. The problem is especially severe in the South, which has the highest rates of medical bills being sent to collections.
Are low-income, uninsured individuals, racial and ethnic minorities, and people with disabilities disproportionately affected?
Yes, medical debt disproportionately affects certain populations, creating significant financial strain. Individuals with lower incomes, those without health insurance, racial and ethnic minorities, and people living with disabilities often face greater challenges in affording necessary medical care.
Low- and middle-income adults are particularly vulnerable, as limited financial resources make it difficult to manage unexpected healthcare costs. Even routine medical services can strain tight budgets, increasing the likelihood of falling behind on payments and accumulating debt.
The absence of health insurance coverage exacerbates the problem. Uninsured individuals must bear the full cost of medical treatment, leading to rapid accumulation of out-of-pocket expenses and a higher risk of medical debt.
Racial and ethnic minorities, especially Black Americans, experience disproportionately high rates of medical debt due to historical inequalities in healthcare access, income, and employment opportunities. These systemic disparities contribute to a cycle of financial instability and debt accumulation.
Similarly, people with disabilities often face substantial medical debt due to their ongoing need for specialized care and support. The higher frequency of medical treatments and related expenses can create significant financial burdens, making it difficult to maintain financial stability.
How does medical debt impact Americans’ financial well-being and access to credit?
Medical debt can take a serious toll on Americans’ financial well-being, especially for families already struggling to make ends meet. For those with limited income, the weight of unexpected medical bills can feel overwhelming.
Medical debt can indeed lead to bankruptcy and make it harder to afford everyday essentials, significantly impacting a person’s financial stability in several ways:
- Reduced Access to Necessities: People burdened with high medical costs often cut back on necessities such as groceries, rent, or utility bills to manage their debt,
- Depleted Savings: Many individuals are forced to dip into their savings, leaving them without a financial safety net for future emergencies,
- Increased Debt Burden: Some turn t
- o credit cards or personal loans to stay afloat, which can quickly spiral into even more debt due to high interest rates and fees.
Medical debt frequently appears on credit reports, negatively affecting credit scores. A lower score can make it more difficult to qualify for loans, credit cards, or even certain jobs. The Consumer Financial Protection Bureau has highlighted that including medical debt in credit evaluations can sometimes lead to misleading or unfair assessments, further complicating financial access.
This type of debt can affect many aspects of daily life. For example, lenders may hesitate to approve loans for someone carrying significant medical debt, and even if approval is granted, the interest rates are often higher, making borrowing more expensive. Renting a home can also become more challenging, as landlords often review credit histories during the application process.
In the most extreme cases, mounting medical bills can push families into bankruptcy. When large healthcare expenses are combined with job loss or reduced income, the financial strain can become unmanageable. Studies have shown that medical costs are a major factor in many bankruptcy filings. Beyond the immediate financial stress, this kind of debt can erode long-term financial stability and peace of mind.
Can medical debt lead to bankruptcy or affect the ability to afford basic necessities?
Medical debt can severely destabilize a person’s finances, often making it difficult to afford basic necessities. Many people struggle to keep up with everyday costs when faced with substantial medical expenses.
For some, these financial burdens become so overwhelming that they contribute directly to personal bankruptcy, especially for individuals dealing with chronic illnesses or long-term health issues like cancer, where treatment costs can skyrocket. Even those with stable incomes can find themselves forced to choose between healthcare and essentials like rent, food, or utilities.
As this pressure builds, the situation can quickly spiral. The weight of mounting debt may leave bankruptcy as the only viable path forward. The consequences of medical debt extend beyond immediate financial strain, impacting credit scores, limiting access to future loans, and creating long-term financial instability.
What are the potential health consequences of medical debt?
Medical debt exacts a significant toll on both physical and mental well-being. The stress of unpaid medical bills frequently induces anxiety, which can exacerbate existing health conditions and even lead to new ones. This anxiety manifests as sleep disturbances, appetite changes, and a general decline in overall health.
Many individuals delay or forgo necessary medical care to avoid accumulating further debt. This avoidance can lead to a worsening of treatable conditions, resulting in more complex and costly interventions later on. For example, a person with diabetes might skip insulin doses to save money, leading to dangerous blood sugar levels and potential hospitalization.
The financial strain of medical debt also carries a heavy emotional burden. This burden can manifest as:
- increased stress and anxiety: Constant worry about finances can lead to chronic stress,
- feelings of shame and guilt: Individuals may feel ashamed or guilty about their inability to pay for healthcare,
- depression: The overwhelming nature of medical debt can contribute to feelings of hopelessness and depression.
This emotional distress, combined with the physical consequences of delayed care, creates a vicious cycle that makes it increasingly difficult for individuals to manage their health and financial obligations.
Does medical debt cause people to delay medical care or negatively affect mental health?
Medical debt significantly hinders access to healthcare and negatively impacts mental health. The stress of unpaid medical bills often triggers anxiety and depression, leading individuals to delay or forgo necessary medical care due to fear of further financial strain.
This delay can exacerbate health issues, creating a vicious cycle of declining health and mounting debt. For example, someone with a chronic condition might skip essential check-ups to avoid incurring more costs, potentially leading to serious complications that require even more expensive treatment in the long run.
The emotional burden of medical debt, combined with the avoidance of necessary care, creates a significant barrier to overall well-being.
What measures are being taken to address medical debt and improve patient affordability?
Government programs and hospital-led efforts are actively working to ease the burden of medical debt and improve access to affordable healthcare. Many hospitals provide financial assistance for patients facing difficulties in covering their medical expenses. There’s also a growing push for greater transparency in healthcare pricing, helping patients better understand and anticipate their costs.
Across the country, state and local governments are partnering with nonprofit organizations that specialize in eliminating medical debt. These groups purchase outstanding medical bills from healthcare providers at a reduced rate, then forgive the debt for qualifying individuals. Typically, eligibility is based on income, focusing on those whose medical expenses exceed 5% of their annual earnings or who make up to 400% of the federal poverty level.
Some cities are taking bold steps. New York City, for instance, has committed $18 million to wipe out approximately $2 billion in medical debt over a three-year period. Similarly, Columbus, Ohio, is collaborating with area hospitals to forgive $335 million in medical bills for residents who meet specific income criteria.
On a national level, the Consumer Financial Protection Bureau (CFPB) is also stepping in. The agency plans to remove medical debt from credit reports, a move aimed at safeguarding consumers’ financial well-being.
Several resources are available for those struggling with medical debt:
- hospital financial aid programs: many hospitals offer financial assistance programs to help patients cover their medical expenses. Contact the hospital’s billing department or financial aid office to inquire about eligibility and application procedures,
- government-backed initiatives: state and local governments are partnering with non-profit organizations to purchase and forgive medical debt for qualifying individuals. Check with your local government or health department to see if such programs exist in your area,
- CFPB reforms: the Consumer Financial Protection Bureau (CFPB) is working to remove medical debt from credit reports, which can improve your credit score and overall financial well-being. Stay informed about these reforms and how they may benefit you.
Are there government programs or hospital initiatives to help people with medical debt?
Yes, several programs are available to support individuals dealing with medical debt. These programs operate at the state, non-profit, and hospital levels, each offering unique forms of assistance.
Expanded Medicaid programs in some states provide low-income residents with access to essential healthcare services, significantly reducing or eliminating medical expenses for those who qualify. Eligibility requirements vary by state, but these programs often represent a crucial safety net.
Nonprofit organizations also offer vital relief by negotiating lower bills with healthcare providers, providing direct financial assistance to patients, and guiding individuals toward helpful resources and debt management strategies. Some organizations specialize in specific conditions or patient populations.
Many hospitals have established their own debt relief initiatives to assist patients experiencing financial hardship or those who fall within specific income brackets. These programs may include payment plans, discounted care for eligible individuals, or even complete debt forgiveness in certain situations.
These collective efforts aim to ease the financial strain of medical costs, enabling more people to access necessary care without incurring overwhelming debt. Understanding the available resources and eligibility requirements is the first step toward navigating medical debt challenges.
