The Millennial Guide to Medical Debt

How to avoid it and what to do if you have too much of it

Many Millennials, already burdened with student debt, are now finding another unwelcome envelope in their mailboxes: past-due bills for their medical debts. Though younger people tend to be healthier than their older peers, they are as likely—or even more likely—to have such debt.

For example, an analysis by the Consumer Financial Protection Bureau found that 32.7% of those age 25 to 34 reported having medical debt, as did 30.1% of those 35 to 44. Other age groups had significantly less debt: 22.6% in the 18 to 24 group, for instance, and 8.5% among those 65 and over.

Here's what Millennials need to know about medical debt and how to handle it.

Key Takeaways

  • People between 25 and 45 are more likely to have medical debt than those who are younger or older.
  • Health insurance is no guarantee against medical debt, but it can cover many expenses that would otherwise add to your debt load.
  • An emergency fund can also come in handy for unexpected medical bills.
  • If you accumulate more debt than you can pay, bear in mind that you still have rights under the law.

Why Millennials Face Medical Debt—and What They Can Do About It

There are several reasons younger people may find themselves struggling with medical debt. For one, they are less likely to have health insurance. Older workers may have settled into jobs with employer-paid health plans, and most Americans over 65 are eligible for the federal government's Medicare program.

For another, younger people may not have had time to build up enough savings to pay off a big medical bill, should they ever face one. If you're in that situation, there are a few things you can do to keep medical debt from adding financial insult to injury.

Nearly 1 in 10

Portion of Americans with at least $250 in medical debt, according to KFF. That translates to some 23 million people.

Get Health Insurance if You Don't Have It

While a health insurance policy is no guarantee against medical debt, it can make a significant difference. An Urban Institute study, for example, found that 22.8% of people with health insurance reported past-due medical debts, compared to 30.5% of people without it.

Many people obtain health coverage through their employer's group plan. If the employer's coverage is in the form of a high-deductible health plan, the employee also has the option of opening a tax-deductible health savings account (HSA) to pay medical bills that aren't covered by insurance.

If your employer provides a different kind of health insurance plan, you may be able to set money aside for medical expenses through a health Flexible Spending Arrangement (FSA) if your employer offers one. It also has tax advantages.

Another option is buying a policy through the federal government's Affordable Care Act (ACA) Health Insurance Marketplace. The regular window for signing up, known as the open enrollment period, runs from November 1 to January 15 each year. However, it's possible to join at other times if you qualify for a special enrollment period due to a major life event, such as losing your existing health coverage, moving, getting married, having a baby, or adopting a child.

People with low incomes, who also meet other requirements, may be eligible for the joint federal-state health insurance program Medicaid. For information, visit the website of your state Medicaid office or

Start an Emergency Fund

The traditional advice to stash away three to six months' worth of living expenses in an emergency fund may be unrealistic for many younger Millennials, but it's still a worthy goal to build toward. One way to make it a little easier is to earmark any extra income beyond your regular paycheck for that purpose. This might include a bonus at work, a tax refund, income from a side gig, or at least a portion of your birthday money. If you need to draw on the account for a medical bill or other expense, try to start replenishing it as soon as you are able. 

Know Your Rights

It may be tempting to let medical bills pile up, unopened, on your kitchen counter. However, that will only lead to bigger problems, including serious damage to your credit score. Therefore, if you receive one, try these steps:

  • First, make sure you really owe the debt. Busy hospitals and doctor's offices are known to make billing mistakes. Check your bill and question any charges for services you don't remember receiving.
  • Call your insurer. Your insurance company, if you have one, may have denied all or part of your claim in error. That can happen, for example, if the provider used the wrong billing code for a service. If you disagree with your insurer's decision, you have a right to appeal it.
  • Try to work it out with the provider. If you can't pay the bill in full, see if you can negotiate a lower fee or ask if you can spread your payments out over a series of months. Some providers would rather accept less money now than alienate a patient or have to turn your account over to a collection agency.

If you do find yourself dealing with a collection agency, bear in mind that you have rights under the federal Fair Debt Collection Practices Act, one of which is not to be harassed. You can learn more about this law, which covers medical and other kinds of personal debts, on the Federal Trade Commission (FTC) website.

The Consumer Financial Protection Bureau (CFPB) also has sample letters on its website that you can use to deal with debt collectors. Finally, be wary of companies that promise—for a fee, of course —to make your debts disappear. This is an area that is rife with scams, the FTC warns.

Does Medical Debt Appear on Your Credit Report?

Yes, medical debt can be included in your credit report if the provider reports it to the credit bureaus (not all do). However, as of July 1, 2022, if your medical debt was turned over to a collection agency and you paid it off, that will no longer appear on your credit report. In addition, unpaid medical collection debt won't appear on your credit reports until one year has elapsed. Also, beginning in 2023, medical collections debt under $500 will no longer be included on credit reports.

How Much Can You Contribute to a Health Savings Account (HSA)?

The maximum Health Savings Account (HSA) contribution for 2023 is $3,850 if you are insured as an individual and $7,750 if you have family coverage. Bear in mind that HSAs are only available to people with high-deductible health plans and who also meet other qualifications.

How Much Can You Contribute to a Health Flexible Spending Account (FSA)?

For 2023, the maximum you can contribute to a Health Flexible Spending Account (FSA) is $3,050. You may also be able to carry over up to $610 from previous years.

Is Medical Debt Tax Deductible?

In some limited cases you may be able to get a tax deduction if you've paid high medical bills that were not reimbursed by insurance. To qualify, you must itemize your deductions on your tax return (rather than taking the standard deduction), and you can deduct only the amount of your medical expenses that exceeded 7.5% of your adjusted gross income (AGI).

The Bottom Line

Anyone can experience a costly medical emergency, and plenty of Millennials do each year. In today's American health-care system, it doesn't take much to generate significant debt. So no matter how healthy you feel it's smart to get health insurance and to start putting money away in an emergency fund just in case.

Article Sources
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  2. KFF. "1 in 10 Adults Owe Medical Debt, With Millions Owing More Than $10,000."

  3. Urban Institute. "Past-Due Medical Debt Among Nonelderly Adults, 2012–15," Page 9.

  4. "Find Out if You Can Still Get Health Coverage."

  5. "Medicaid and CHIP, How-to Information."

  6. Federal Trade Commission, Consumer Advice. "Debt Collection FAQs."

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  8. Equifax. "Can Medical Collection Debt Impact Credit Scores?"

  9. Internal Revenue Service. "Publication 969 (2022), Health Savings Accounts and Other Tax-Favored Health Plans."

  10. Internal Revenue Service. "Topic No. 502 Medical and Dental Expenses."