Medical Debt
Medical debt is a big burden for the middle class.
Debt crisis
Medical debt currently exceeds credit cards, personal loans, utilities and phone bills combined.
The Biden administration had the Consumer Finance Protection Bureau (CFPB) develop rules to bar unpaid medical bills from affecting patient's credit scores.
The CFPB formally finalized and issued the rule to completely ban medical debts from consumer credit reports. The rule was to take place on January 1, 2025.
Republicans had been attacking the CFPB and conservatives on the Supreme Court have been chipping away at federal regulatory powers.
Hospitals and credit collection agencies immediately came out against the administration's plans. Threatening people's credit scores is the number one method to get them to pay.
Overinflated hospital costs leading to most of this outstanding debt was not being discussed.
Industry groups and credit reporting agencies immediately sued to block the rule. The Trump administration joined the suite.
On July 11, 2025, the U.S. District Court for the Eastern District of Texas officially vacated the rule. The nationwide ban never fully went into effect.
• Healthcare related debt encompasses more than just unpaid or past due bills from providers.
Many people carry debt from medical and dental bills that they have paid off by taking on other forms of debt, including credit cards, personal bank loans, or loans from family and friends.
• The Consumer Financial Protection Bureau (CFPB) estimates that $88 billion in medical debt is reflected on Americans’ credit reports.
The total amount of medical debt is likely higher because not all medical debt is visible to consumer reporting companies.
• An analysis of 2020 Census Bureau data found 17% of households owed medical debt in 2019.
A Kaiser Family Foundation (KFF) survey found that four in ten adults have some form of healthcare debt.
♦ Uninsured adults, women, Black and Hispanic adults, parents, and those with lower incomes are especially likely to say they have healthcare related debt.
• About a third of adults with healthcare debt owe less than $1,000.
30% of the people surveyed by KFF, said they would be unable to pay a $500 unexpected medical bill without borrowing money.
30% expect they will be able to pay off their medical debt within a year, but 20% say they don’t think they will ever be able to pay off their debt.
Adults with healthcare debt report making sacrifices to pay down debt. Most report cutting back on household spending, and more than four in ten say they or a household member have used up all or most of their savings due to their healthcare debt.
Many also report more serious consequences like skipping payment on other bills, delaying college or buying a home, or changing their housing situation as a result of their debt.
• Other consequences of debt, such as being contacted by debt collectors and having their credit scores negatively affected, can lead to additional financial problems such as difficulty buying vehicles needed for work or buying or renting a home.
Some relief from debt collectors
Congress, federal agencies, and others have taken some small steps to respond to medical debt.
Congress passed the No Surprises Act to help protect Americans from certain unexpected medical bills, including surprise medical bills for emergency services from out-of-network providers.
♦ In April, the three major credit bureaus — Equifax, Experian and TransUnion — announced that medical collections with balances of $500 or less would no longer appear on consumer credit reports. This took effect on April 11, 2023.
While the CFPB federal ban failed, 15 individual states (such as California, New York, and Colorado) have successfully passed their own state-level laws completely banning medical debt from credit reports regardless of the amount.
• It should be understood that while credit bureaus may not be reporting debt under $500, hospitals and other healthcare providers can still pursue collecting this small debt.
Policy intervention
A majority of Americans say they support the government setting limits on how much patients with health insurance can be asked to pay out-of-pocket for medical care.
• Government regulation of health care is generally less popular among Republicans than Democrats.
♦ Health insurance deductibles are patients’ biggest struggle. But the government has actually encouraged high deductibles.
The Affordable Care Act allowed insurers to set deductibles significantly higher than those typically faced by Americans who get health insurance at work. This was done to keep the cost down for the entire program.
As a result, plans sold through Healthcare.gov have some very high deductibles and unreasonable maximum out-of-pocket limits.
Due to premium cost even with a subsidy, most people will be forced into a silver plan at best or a bronze at worst.
• In 2026, the average individual annual deductible sits at nearly $7,500 for bronze plans and ranges up to $6,000 for silver plans, while the legal maximum out-of-pocket ceiling is capped at $10,600 for an individual and $21,200 for a family.
• Looking ahead to the 2027 plan year, CMS has authorized a historic 13.2% jump to out-of-pocket ceilings, driving further increases in deductibles that create severe financial exposure for middle-class families
There is a lot of public support for some form of government intervention to bring down deductibles and maximum out-of-pocket limits. But no one wants to address the trade-offs related to doing this.
