How Much Medical Debt Is Too Much?
Among the biggest risks to financial security are health problems that can lead to a spike in healthcare bills and medical debt.
Some people can weather those bills better than others. But for most Americans, medical debt is something you want to pay off as soon as possible.
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How much medical debt is too much? Here’s a closer look.
Debt Basics
The question of how much medical debt is too much depends on a variety of factors, most of which involve personal finances. For some people, $200 might be too much. For others, the amount could be closer to $2,000.
One of the most important factors is how much other debt you hold, and a good way to measure that is your debt-to-income ratio.
Debt-to-income ratio compares your total monthly debt obligations to your gross monthly income (before taxes). This includes mortgages, car loans, student loans, personal loans and medical debt.
A good debt-to-income ratio is less than or equal to 36%, according to a blog from Citizens Bank. This means your total debt obligations shouldn’t exceed 36% of your gross income.
Any ratio above 43% is considered to be too much debt. If medical debt pushes you above that percentage, then chances are your medical debt is too heavy as well.
Medical Debt Trends
As of 2024, Americans owed at least $220 billion in combined medical debt, according to data compiled by KFF. About 14 million Americans owed more than $1,000 in medical debt, while about 3 million people owed more than $10,000.
Earlier this year, JG Wentworth surveyed 1,507 U.S. adults to find out how prepared they are to handle medical costs, who is most vulnerable, and how quickly medical bills can turn into a long-term financial burden.
Below are some highlights from the study.
About 85% of respondents report having medical debt, with 81.3% owing between $1,000 and $10,000.
Nearly 1 in 3 people with long-term health conditions (31.8%) say their health has worsened because they could not afford medication.
Almost 97% of respondents have health insurance, yet almost 95% of the insured still worry about hospital bills.
How Much Medical Debt Is Too Much?
When asked how they would manage a $5,000 medical bill, more than one-third of JG Wentworth survey respondents (34.7%) said they would not be able to pay the bill outright.
Nearly all of those surveyed (95%) said a medical emergency would likely put them into “serious debt” even with insurance. More than 85% said medical bills have caused them to miss or make late payments on essential expenses such as mortgage payments and household bills.
When it comes to how much medical debt is too much, below are a couple of key findings from the survey.
When it comes to medical debt, $4,354 is the average "breaking point."
One doctor’s visit costing up to $600 could put more than three-quarters (76.5%) of uninsured Americans into financial hardship.
Those numbers align fairly closely with data compiled by ChatGPT. Below is what it had to say about medical debt.
Less than $500: Often manageable for middle-income households if paid over time.
From $1,000 to $5,000: Can cause “serious financial stress” for many Americans, especially those without savings.
More than $10,000: Generally considered a “major debt burden” that can lead to collections, damaged credit, delayed care or bankruptcy risk.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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