A colleague of mine — a college-educated professional with employer-sponsored health insurance — told me recently that she had been ignoring a persistent pain in her abdomen for four months. Not because she couldn't get an appointment. Not because she didn't trust her doctor. Because she was still paying off a $3,200 bill from her last emergency room visit two years ago, and she could not face another one.
She eventually went. The diagnosis was gallstones — a treatable condition that, had it been addressed earlier, could have been managed electively rather than as a semi-urgent surgical case. Her delay added complexity, recovery time, and cost. And her story is statistically unremarkable. This is how medical debt works in America: it does not just drain bank accounts. It changes health behavior in ways that make people sicker.
The scale of the problem
Medical debt is the most common form of debt in collections in the United States. An analysis of credit bureau data by the Consumer Financial Protection Bureau found that 58% of all debts in collections were medical debts, affecting approximately 43 million Americans (CFPB, 2022). This exceeds the combined prevalence of utility debt, telecommunications debt, and credit card debt in collections.
The total magnitude is staggering. The Kaiser Family Foundation estimates that Americans collectively owe at least $220 billion in medical debt, though this figure is widely believed to understate the true total because it excludes debt on credit cards, personal loans, and payment plans that were originally medical (Kluender et al., 2021). A study published in JAMA found that nearly one in five American households carries medical debt, with a median amount of $2,000 — though the distribution is highly skewed, with 3% of households owing more than $10,000 (Kalousova & Burgard, 2013).
Medical debt is not distributed randomly across the population. It disproportionately affects people with chronic health conditions, racial minorities, residents of states that did not expand Medicaid, and adults aged 25-64 — the working population that is most likely to have insurance with high deductibles and cost-sharing requirements (Himmelstein et al., 2009). Having health insurance, it turns out, is necessary but insufficient protection against medical financial toxicity.
How insurance fails
The conventional wisdom that medical debt is primarily a problem of the uninsured is wrong. A study published in the American Journal of Public Health found that 62.1% of individuals who filed for medical bankruptcy had health insurance at the time of the illness that generated their debt (Himmelstein et al., 2019). The mechanism is straightforward: the steady erosion of insurance generosity over the past two decades has shifted an increasing share of medical costs from insurers to patients.
The average annual deductible for employer-sponsored health insurance was $303 in 2006. By 2023, it had risen to $1,735 — a 473% increase over a period in which wages grew by approximately 55% (KFF, 2023). High-deductible health plans, which were virtually non-existent in 2006, now enroll more than half of all workers with employer-sponsored coverage. These plans were designed to make consumers more "cost-conscious" in their healthcare utilization. The evidence suggests they have instead made consumers more cost-afraid — deferring and avoiding care rather than shopping for it (Brot-Goldberg et al., 2017).
A study published in Health Affairs found that high-deductible plan enrollees reduced their use of both low-value and high-value services equally, cutting preventive screenings and chronic disease management at the same rate as potentially unnecessary imaging and specialist visits (Wharam et al., 2018). The theory that patients would become educated consumers, selectively eliminating wasteful care, has not been supported by the evidence. Instead, patients confronted with out-of-pocket costs make blunt, indiscriminate decisions to avoid medical spending — decisions that often worsen their long-term health and generate higher costs downstream.
The health consequences of financial toxicity
Medical debt does not merely represent a financial burden. It creates a feedback loop in which financial strain worsens health, which generates additional medical costs, which deepens financial strain. Researchers have termed this dynamic "financial toxicity," and its health consequences are measurable and severe.
A longitudinal study published in JAMA Internal Medicine followed adults over six years and found that those with medical debt were significantly more likely to defer prescribed medications (34% vs. 12%), skip recommended follow-up appointments (29% vs. 10%), and avoid seeking care for new symptoms (42% vs. 15%) compared to adults without medical debt (Yabroff et al., 2016). These are not frivolous behaviors. They are rational responses to an irrational system — people making calculated decisions about which bills to pay and which risks to accept.
The mental health consequences are equally significant. A study published in Social Science & Medicine found that medical debt was associated with significantly higher rates of depression, anxiety, and psychological distress, even after controlling for income, insurance status, and physical health conditions (Sweet et al., 2013). The relationship was dose-dependent: larger debts were associated with worse mental health outcomes, and the effect persisted after the debt was paid off — suggesting that the experience of medical financial crisis leaves lasting psychological scars.
In cancer care, where the term "financial toxicity" originated, the consequences are particularly stark. A study published in the Journal of Clinical Oncology found that cancer patients reporting financial hardship had a 79% higher risk of death compared to those without financial hardship, independent of disease stage and treatment factors (Ramsey et al., 2016). The mechanism is multifaceted: patients with financial toxicity are more likely to skip doses of expensive medications, delay follow-up imaging, and decline recommended treatments.
The systemic drivers
Understanding medical debt requires understanding the structural features of the American healthcare system that generate it. Three are particularly consequential:
Price opacity. The United States is the only developed country in which healthcare prices are effectively unknowable in advance for most services. Despite mandated price transparency rules implemented in 2021, a study found that only 24% of hospitals had fully complied with the requirements two years after implementation (Bai et al., 2023). Patients routinely receive bills for amounts they could not have anticipated, from providers they did not know were involved in their care, for services they did not understand they were authorizing.
Surprise billing. Although the No Surprises Act of 2022 addressed the most egregious forms of surprise medical billing — particularly from out-of-network providers at in-network facilities — significant gaps remain. Ground ambulance transportation, the most common emergency transport, was explicitly excluded from the law. And the complexity of the dispute resolution process has led to lengthy delays and uncertainty for patients caught in billing disputes.
Aggressive collection practices. A ProPublica investigation documented that hospitals, including nonprofit institutions with tax-exempt status, routinely sue patients for unpaid medical bills, garnish wages, and place liens on homes — in some cases for debts as small as a few hundred dollars (Thomas et al., 2019). These practices are concentrated in the communities least able to absorb them: low-income neighborhoods where residents have the fewest financial options.
What is changing
The policy landscape is shifting, though slowly. Several developments are noteworthy:
The three major credit bureaus — Equifax, Experian, and TransUnion — announced in 2022 that they would remove paid medical debts from credit reports and exclude unpaid medical debts under $500. This protects some consumers but leaves large medical debts visible and damaging.
Several states have enacted medical debt protection laws. Colorado, for example, prohibits medical debt from appearing on credit reports entirely and caps interest rates on medical debt at 3%. Maryland, New Mexico, and Connecticut have enacted similar protections.
Nonprofit organizations like RIP Medical Debt have demonstrated the feasibility of purchasing and forgiving medical debt at scale — the organization has abolished over $10 billion in medical debt since its founding. This is admirable but addresses symptoms rather than causes.
The fundamental problem remains: a healthcare system that generates more individual financial liability than any other developed nation, in a population that increasingly lacks the financial reserves to absorb it. Until the structural drivers of medical financial toxicity are addressed — prices, insurance design, billing practices, and collection policies — medical debt will continue to function as a silent, pervasive determinant of health in America.
References
- Bai, G., et al. (2023). Hospital price transparency compliance two years after the mandate. Health Affairs, 42(1), 81–89.
- Brot-Goldberg, Z. C., et al. (2017). What does a deductible do? The impact of cost-sharing on health care prices. Quarterly Journal of Economics, 132(3), 1261–1318.
- CFPB. (2022). Medical Debt Burden in the United States. Consumer Financial Protection Bureau.
- Himmelstein, D. U., et al. (2009). Medical bankruptcy in the United States. AJPH, 99(8), 1563–1568.
- Himmelstein, D. U., et al. (2019). Medical bankruptcy: Still common despite the Affordable Care Act. AJPH, 109(3), 431–433.
- Kalousova, L., & Burgard, S. A. (2013). Debt and foregone medical care. JHSB, 54(2), 210–228.
- KFF. (2023). Employer Health Benefits Survey. Kaiser Family Foundation.
- Kluender, R., et al. (2021). Medical debt in the US, 2009-2020. JAMA, 326(3), 250–256.
- Ramsey, S. D., et al. (2016). Financial insolvency as a risk factor for early mortality among patients with cancer. JCO, 34(9), 980–986.
- Sweet, E., et al. (2013). The high price of debt: Household financial debt and its impact on mental and physical health. SSM, 91, 59–67.
- Thomas, K., et al. (2019). Hospitals and debt collection. ProPublica.
- Wharam, J. F., et al. (2018). High-deductible health plans and chronic disease management. Health Affairs, 37(8), 1328–1336.
- Yabroff, K. R., et al. (2016). Financial hardship associated with cancer. JCO, 34(3), 259–267.