The hidden healthcare debt trap

ORLANDO, Fla. – Over 20 million people. That’s about the population of New York State. It’s more than the number of U.S. veterans – 18 million – but fewer than the roughly 24 million naturalized citizens in the country. America has about 267 million adults – meaning 20.4 million is roughly 7.5% of the adult population or about 1 in 13.

Why is this number so important?

One in 13 adults, 7.5%, or about 20.4 million people in the United States are living with medical debt – debt that one study says adds up to over $220 billion. Other research suggests medical debt figures are as high as 1 in 10 adults, 9% of the adult population, or up to 23 million people. And across the data, healthcare debt is not only one of the leading causes of bankruptcy – much of it is never paid down.

America’s health system doesn’t just produce quality medical care – it also churns out debt that reshapes lives.

Medical Bills and Healthcare Costs Can Be Overwhelming

A recent U.S. Census Bureau’s Survey of Income and Program Participation (SIPP) report, using 2021 data, found that most medical debt is over $1,000. More than half the people in medical debt – 11 million – owe more than $2,000. Three million people have debt between $5,001 and $10,000. Over $10,000? That’s another 3 million people.

Not only is all of that debt hard to pay off – high medical costs also adversely affect people’s ability to stay healthy. Many Americans with medical debt report delaying doctor visits, skipping follow-up appointments, not filling prescriptions, or rationing medications because they cannot afford both their bills and their treatment.

And the burden does not end with the bill – that pain is not distributed evenly. Medical debt and the cost of care hit hardest in communities already facing lower incomes and greater barriers to getting treatment.

According to KFF.org, about half of African American adults (49%) report difficulty affording healthcare. That’s much higher than white adults (39%), but below Hispanic adults (55%). And if you’re living in a household that makes less than $40,000, you’re more likely to have financial difficulties with healthcare costs than households making over $40,000. KFF also found that one in five adults aged 65 or older (about 22% of the older adult population) had some form of medical debt.

The problem does not stop at the bill itself. For many households, medical debt is the result of a health care system that still leaves even insured patients vulnerable to high deductibles, copays, surprise charges, and denied claims. Insurance often fails to shield people from financial ruin.

The Coverage Cliff

Medical debt often starts long before a bill is sent to collections – high deductibles, copays, surprise charges, denied claims, and out-of-network care can leave patients owing thousands of dollars out of pocket, even when they have insurance. Coverage, in many cases, doesn’t eliminate risk – it redistributes it.

Over the past decade, that burden has steadily shifted toward patients.

Employer-sponsored plans now routinely carry deductibles in the thousands, meaning many families must pay significant costs upfront before insurance begins to help. At the same time, complex billing systems and narrow provider networks make it easier for routine care to become unexpectedly expensive.

The result is what some experts describe as a “coverage cliff”—the point where the promise of insurance starts to give way.

A routine medical event – a broken bone, an ER visit, a diagnostic test – can quickly turn into a financial shock as high deductibles, copays, coinsurance, out-of-network care, and a claim denial. For some households, that cliff comes sooner and hits harder because they are already living closer to the edge financially. A bill of a few thousand dollars isn’t just an inconvenience – it can mean missed rent, mounting credit card balances, or delayed care the next time something goes wrong.

Once that debt begins to snowball, it can follow patients well beyond the hospital. Medical debt influences credit reports, loan decisions, and can easily push a household deeper into financial instability.

Some Relief from the Credit Bureaus

On March 1, 2022, a study by the Consumer Financial Protection Bureau (CFPB) found that Americans collectively had an estimated $88 billion in medical debt on their credit reports maintained by the three National Credit Reporting Agencies (NCRAs – Equifax, Experian and TransUnion). The report was critical of the credit agencies, but instead of attacking the CFPB study, the NCRAs acknowledged “medical collections debt often arises from unforeseen medical circumstances” and that they were taking steps to mitigate the effect of those debts.

Collectively, the three would no longer report certain types of medical bills in collections.

Specifically, the companies announced they would increase the time before medical bills in collections can appear on credit reports – from 180 days to one year. Second, the companies would stop reporting medical bills that had been in collections but were resolved. Third, the companies would remove medical bills below $500 from credit reports. The CFPB announcement was released March 1 – the NCRAs responded 16 days later.

And for a brief moment, it looked as though Washington might also offer some relief for medical debt affecting people’s credit.

In January 2025, the Consumer Financial Protection Bureau finalized a rule that would have kept medical debt off credit reports and barred lenders from using it in lending decisions, a move the agency said would help about 15 million people and remove roughly $49 billion in medical bills from credit files.

The rule was originally drafted under the Biden administration, but when a lawsuit challenged the government’s authority, the newly installed Trump administration declined to defend the rule and instead sided with the plaintiff (July 2025).

The CFPB protection was blocked in court, leaving the issue unresolved and shifting more of the fight to the states. Some states have already put their own rules in place following the lead of the NCRAs. As of February 2026, 15 states outlaw many medical debts from being included on credit reports:

• California

• Colorado

• Connecticut

• Delaware

• Illinois

• Maine

• Maryland

• Minnesota

• New Jersey

• New York

• Oregon

• Rhode Island

• Vermont

• Virginia

• Washington

What Comes Next

Even as credit bureaus scale back how medical debt appears in reports and some states move to limit those impacts, these changes address only part of the problem. These changes may soften the consequences of medical debt – but they don’t prevent it in the first place.

At its core, medical debt is not simply a credit issue – it is the result of a healthcare system where costs remain high, coverage remains uneven, and patients are often left navigating complex billing and insurance rules at the worst possible moments. For many Americans, the financial risk begins the moment care is needed – not when the bill arrives.

For the millions of Americans already carrying the burden of an unpaid medical bill, the stakes remain deeply personal. Medical debt can shape decisions about housing, employment, and whether to seek care again. It can delay recovery, strain families, and create a cycle where financial instability and health challenges reinforce one another.

What comes next will depend on whether reforms move beyond credit reporting and begin to address the underlying drivers of medical debt itself: the cost of care, the design of insurance, and the systems patients must navigate to access care and coverage.

For millions of Americans, having insurance is no longer the same as being protected.