In most wealthy countries, getting sick does not threaten financial ruin. The costs of illness — the physician visits, the hospitalizations, the medications, the follow-up care — are covered by systems that distribute those costs across the population rather than concentrating them on the individuals who happen to get sick. The premise is straightforward: illness is not a choice, and a system that treats the costs of illness as the personal financial responsibility of the person who becomes ill produces outcomes that are both unjust and economically irrational.
The United States has not organized its healthcare financing on this premise. The result is a system in which medical debt is the leading cause of personal bankruptcy, in which tens of millions of people carry debt generated by healthcare costs they could not avoid and cannot pay, and in which the financial consequences of illness compound the health consequences in ways that make both worse. This is not a marginal problem affecting a small population of people with unusual circumstances. It is a structural feature of the American healthcare system that affects a substantial share of the population across income levels, insurance status, and health conditions — and that has no close parallel in any comparable wealthy country.
This article documents the scale of medical debt in the United States, how it distributes across the population, what it does to the people carrying it, and how the experience of healthcare-related financial harm in the United States differs from that of people in peer countries. The pricing system that generates medical debt is examined in How the Pricing System Works Against Patients. The populations that bear medical debt most heavily are documented in Who the American Healthcare System Actually Fails.
The Scale of the Problem
Measuring medical debt is methodologically complex, because medical debt appears in multiple places — in collections accounts, in credit reports, in hospital accounts receivable, in credit card balances accumulated to pay medical bills — and because the definition of medical debt affects the count. Different studies use different methodologies and produce different estimates, but the range of serious estimates consistently indicates that the problem is large.
A 2022 analysis by KFF — the health policy research organization formerly known as the Kaiser Family Foundation — using Consumer Financial Protection Bureau data found that approximately 100 million Americans, or roughly 41 percent of adults, carried some form of healthcare debt. This figure includes debt in formal collections, debt owed directly to providers, debt on credit cards used to pay medical bills, and money borrowed from family members or friends to cover healthcare costs. It is a broader definition than credit-report-based measures of medical debt and captures forms of healthcare-related financial obligation that narrower measures miss.
The credit-report-based measure — medical debt that has been sold to collections and appears on credit reports — has been better studied over time and shows a consistent pattern. The Urban Institute has tracked medical debt in collections using credit bureau data and has found that medical debt is the most common form of debt in collections for American adults, exceeding credit card debt, student loan debt, and other consumer debt categories combined. Before the three major credit bureaus announced changes to their medical debt reporting practices in 2022 and 2023 — removing paid medical debt and smaller medical collection accounts from credit reports — medical debt appeared on the credit reports of approximately 15 to 20 percent of Americans with credit files.
Medical debt is the leading driver of personal bankruptcy in the United States. Studies of bankruptcy filings consistently identify medical expenses as a primary or significant contributing factor for a large share of filers. The relationship between medical debt and bankruptcy is not limited to people without insurance — a substantial share of medical bankruptcies involve people who had insurance at the time of the illness that generated the debt, whose insurance did not cover the full cost of their care, and whose out-of-pocket liability exceeded what they could manage financially. This finding — that insurance is not a reliable protection against medical bankruptcy — reflects the underinsurance problem documented elsewhere in this hub and distinguishes American healthcare debt from the experience of people in countries with more comprehensive coverage.
How Debt Distributes
Medical debt is not randomly distributed across the population. Its distribution tracks the same inequities that characterize the broader healthcare system — income, insurance status, race, and geography — in ways that compound existing disadvantage rather than spreading the burden of illness equitably.
Income. Lower-income Americans carry higher rates of medical debt than higher-income Americans, for straightforward reasons: their insurance coverage, if they have it, typically has higher cost-sharing requirements relative to their income; they are more likely to be uninsured or to have gaps in coverage; and they have less financial cushion to absorb unexpected healthcare costs without going into debt. The relationship between income and medical debt is not simply that poor people get sick more — it is that the same healthcare event generates more financial harm for a lower-income person than for a higher-income person, because the cost-sharing structure of American insurance is not calibrated to income in ways that would make cost-sharing proportionate to ability to pay.
The perverse feature of cost-sharing in the American system is that it functions as a flat tax on illness: a $3,000 deductible represents a very different financial burden for a household earning $35,000 per year than for one earning $150,000 per year, but the deductible is the same in dollar terms for both. High-deductible health plans have become the dominant plan type in employer-sponsored coverage and in the ACA marketplaces partly because they lower premiums — making coverage nominally more affordable — while shifting more of the cost of care onto individuals at the point of service. For lower-income households, this trade — lower premiums, higher cost-sharing — often means that insurance exists but is not usable without financial hardship.
Insurance status. Uninsured individuals carry dramatically higher rates of medical debt than insured individuals, because they face the full chargemaster or near-chargemaster price for any care they receive without the insurer negotiation that produces lower rates for insured patients. An uninsured person who receives emergency care may be billed at rates two to ten times what Medicare would pay for the same services. Hospital financial assistance programs — charity care — reduce this burden for qualifying patients, but their availability, generosity, and accessibility vary enormously, and many uninsured patients who would qualify do not apply.
Race. Black and Hispanic Americans carry higher rates of medical debt than white Americans, reflecting the compounding of lower average incomes, higher rates of uninsurance and underinsurance, greater likelihood of residing in states that did not expand Medicaid, and the additional healthcare costs associated with higher rates of chronic conditions driven by structural inequity. The racial gap in medical debt is not simply an income gap — research that controls for income still finds that Black Americans are more likely to carry medical debt than white Americans with comparable incomes, reflecting the additional structural factors that compound financial harm for Black households in the healthcare system.
Geography. Medical debt rates are higher in states that did not expand Medicaid under the ACA, higher in rural areas with fewer providers and more limited access to charity care, and higher in regions with less competitive insurance markets where premiums and cost-sharing are higher. The geographic pattern of medical debt tracks the geographic pattern of healthcare access problems more broadly — the communities with the least access to affordable care are the communities carrying the most debt from the care they do receive.
What Medical Debt Does
Medical debt is not simply a financial inconvenience. It produces a cascade of downstream consequences that affect health, financial stability, and long-term economic outcomes in ways that extend well beyond the original healthcare event.
Delayed and forgone care. The most direct health consequence of medical debt is the effect it has on future care decisions. People carrying medical debt report higher rates of delaying or forgoing needed care than people without medical debt — avoiding physician visits, skipping recommended tests, not filling prescriptions — because they are unwilling to incur additional debt on top of what they already owe. This creates a self-reinforcing dynamic: the debt from one healthcare event makes it more likely that future healthcare events will go unaddressed until they are more serious and more expensive, generating more debt. Medical debt is both a consequence of the healthcare system’s cost structure and a cause of worse future health outcomes.
Credit damage. Medical debt that reaches collections — which can happen relatively quickly for unpaid hospital bills — appears on credit reports and damages credit scores. Credit score damage from medical debt affects the ability to rent housing, to obtain car loans, to qualify for mortgages, and to access credit at affordable rates. A person whose credit is damaged by medical debt they cannot pay faces higher borrowing costs across all their financial transactions, compounding the original financial harm. The 2022 and 2023 changes to credit bureau reporting practices — removing certain medical debt from credit reports — have reduced this harm for some people, but they do not address the underlying debt obligation, only its credit reporting.
Asset depletion. People managing medical debt frequently draw down savings, retirement accounts, and other assets to pay medical bills. Early withdrawal from retirement accounts to pay medical bills incurs tax penalties that compound the financial harm. The depletion of emergency savings to pay medical bills leaves households more financially vulnerable to future shocks — whether medical or otherwise. For older Americans managing healthcare costs in the years before Medicare eligibility, medical expense can consume the retirement savings that were intended to provide income security in their later years.
Bankruptcy. Medical bankruptcy — personal bankruptcy in which medical debt is a primary or significant contributing factor — is a legal process that provides a path out of unmanageable debt but carries lasting consequences: a bankruptcy filing remains on a credit report for seven to ten years, significantly constraining access to credit and housing during that period. For the people who go through it, bankruptcy is a financial crisis event that reorganizes their financial life around a healthcare event they did not choose and could not avoid.
Mental health consequences. The relationship between financial stress and mental health is well-established in the research literature. People carrying significant medical debt report higher rates of anxiety, depression, and stress-related symptoms than people without medical debt. The mental health consequences of medical debt interact with the physical health condition that generated the debt, often worsening outcomes for conditions where mental health and physical health are interconnected — as they frequently are in the chronic conditions that generate the largest medical bills.
The Hospital Billing System and Its Role
Medical debt does not arise spontaneously from illness. It is generated by a billing system that determines what patients are charged, how aggressively those charges are pursued, and what relief is available for people who cannot pay. Understanding how hospital billing practices contribute to medical debt is part of understanding the problem.
Nonprofit hospitals — which represent a substantial majority of American hospitals — receive tax exemptions premised on the community benefit they provide, including charity care for patients who cannot pay. The Internal Revenue Service requires nonprofit hospitals to maintain financial assistance policies and to make them publicly available. But the adequacy of these policies, the aggressiveness with which hospitals pursue debt before applying financial assistance, and the accessibility of the application process vary enormously.
Investigative reporting and policy research have documented cases in which nonprofit hospitals — including some of the most prominent academic medical centers in the country — have pursued aggressive debt collection practices against low-income patients who would have qualified for charity care had they known to apply: filing lawsuits, garnishing wages, and placing liens on homes. These practices are not universal, and policy changes in recent years have constrained the most aggressive collection tactics at some institutions. But the variation in practice across institutions means that a patient’s experience of medical debt — whether they are pursued aggressively or offered relief proactively — depends heavily on which hospital billed them, not on their own financial circumstances.
The opacity of hospital billing — chargemaster prices that bear little relationship to what anyone actually pays, financial assistance policies that are technically available but not proactively communicated, billing statements that arrive weeks after care and list charges in formats that patients cannot easily interpret — creates conditions in which patients cannot effectively advocate for themselves in the billing process. A patient who does not know that they qualify for financial assistance, who does not know that chargemaster prices are negotiable, and who does not know that they can request an itemized bill and dispute charges that appear incorrect is at a significant disadvantage in the billing encounter.
How This Differs From Peer Countries
Medical debt as a structural feature of a healthcare system is largely a uniquely American phenomenon among wealthy countries. The financial toxicity of illness — the combination of medical debt, medical bankruptcy, care avoidance due to cost, and asset depletion to pay medical bills — does not have close parallels in the healthcare systems of countries with universal coverage.
This is not because illness does not impose costs in other countries. People in countries with universal coverage may face some cost-sharing — copays, modest deductibles, out-of-pocket limits — that are part of how those systems manage utilization and distribute costs. But the cost-sharing in universal coverage systems is generally calibrated to income, capped at levels that prevent catastrophic financial exposure, and structured to ensure that cost-sharing does not function as a barrier to necessary care for people who cannot afford it. The concept of medical bankruptcy — personal financial ruin generated by healthcare costs — is largely absent from the lived experience of people in countries with comprehensive universal coverage, because the systems are designed specifically to prevent it.
The comparison is not between perfect systems and a flawed one. Countries with universal coverage have their own healthcare challenges — wait times, rationing decisions, workforce shortages, fiscal sustainability pressures. But they have addressed the specific problem of financial toxicity from illness in ways that the American system has not. The breadth of the medical debt problem in the United States — affecting roughly 40 percent of adults by the broadest measure — is itself evidence of a system design that has not solved a problem that peer countries regard as a basic requirement of an acceptable healthcare system.
What Would Change It
Medical debt is the downstream consequence of several upstream structural features of the American healthcare system: the coverage gaps that leave people uninsured or underinsured, the pricing system that generates bills that bear little relationship to cost, the cost-sharing structures that shift financial risk onto individuals in ways not calibrated to their ability to bear it, and the billing practices that determine how aggressively debt is pursued and what relief is available.
Addressing medical debt at scale requires addressing those upstream features. Policy approaches that work at the margin — expanded charity care requirements for nonprofit hospitals, changes to credit reporting practices, debt relief programs — reduce harm at the edges without changing the structural conditions that generate the harm. The Congressional Budget Office has estimated that Medicaid expansion in the states that have not yet expanded would reduce medical debt substantially in those states — one of the clearest policy levers with documented debt-reduction effects.
The more fundamental changes — to coverage, to pricing, to cost-sharing structure — are the subject of the reform debate documented in The Full Range of Reform Proposals. What the medical debt data establishes is the scale of the financial harm the current system generates and the populations that bear it most heavily. The people carrying that debt — the worker who put a hospitalization on a credit card, the family that depleted its retirement savings to pay for a parent’s cancer treatment, the person whose wages are being garnished for a bill from an emergency they did not choose — understand the system’s financial consequences with a clarity that policy analysis can document but cannot fully convey. Their experience of what medical debt does to a household, a financial plan, and a sense of security belongs in the deliberation this hub is designed to support.
This article was researched and drafted with AI assistance under human review. See our full AI and editorial practices.