Average costs and how to finance them

• Americans owe a total of $220 billion in medical debt.

• 14.3 million people, or nearly 6 percent of adults, owe more than $1,000.

• Approximately 3 million people owe more than $10,000.

Many Americans, even those with employer-sponsored healthcare coverage, are subject to out-of-pocket costs. Most of these costs are incurred to meet their plan deductible, which is a set amount the employee must pay before coverage kicks in.

Bankrate insight

“For many people, it is not uncommon to have a large amount of medical debt. In fact, about 70 percent of U.S. adults with medical debt owe more than $1,000 — on top of premiums and copays.”

Understanding how out-of-pocket healthcare expenses work and what they mean for your wallet can be confusing. We’ve broken down the most common terms that you can expect on your next medical bill:

The percentage of the medical costs you pay after meeting your deductible.

A fixed fee you pay when getting in-network healthcare care or prescription medication.

The amount you need to pay in covered healthcare services out-of-pocket before your insurance begins to pay.

The amount deducted monthly from your paycheck to pay for your insurance. The amount you pay will depend on your employer and the health insurance plan you choose.

Coinsurance, copays and deductibles typically make up the bulk of out-of-pocket costs you’ll be responsible for. Although premiums are also a big expense in your monthly budget, they are not considered out-of-pocket expenses.

According to findings from the KFF healthcare debt survey, 24 percent of adults surveyed said they currently have medical or dental debt that they are unable to pay off. The situation is even worse for uninsured Americans, who often use personal loans or credit cards, which can have interest rates upwards of 20 percent, to finance their expenses.

However, how people finance their medical debt is nuanced and based on factors such as gender, socioeconomic status and race. The KFF survey found that those with a higher income are more likely to take out a personal loan, while those with lower incomes are more likely to borrow the funds from family members or friends.

When it comes to Americans with health insurance — both public and private — those aged 65 and over are the population with the most insurance coverage. In contrast, those between the ages of 26 and 34 have the least coverage.

Here are the percentages of Americans with health insurance in 2023, the most recent data available, by age:

When the American Cares Act (ACA) was signed into law in 2010, it helped narrow the disparities in health insurance coverage; however, it didn’t eliminate it completely. The latest report by the State Health Access Data Assistance Center (SHADAC) found that people of color are more likely to remain uninsured when compared to their white counterparts.

Here’s how health coverage disparities play out in the country by race:

People can be uninsured for many reasons, but some of the most common include:

• They don’t think they can afford health insurance, even with subsidies.

• Their employer does not offer health insurance and they do not know how to find it from another source.

• Signing up for insurance can be difficult or confusing.

• They don’t think they need insurance.

• They can’t find an insurance plan that meets their needs.

The share of healthcare spending in the country is greatly dependent on age and health status. A KFF analysis found that only two percent of people in the U.S. reported being in poor health; however, the numbers change drastically as people age, with 20 percent of those over 65 reporting their health as “fair” or “poor.”

Peterson-KFF’s Health System Tracker found that individuals aged 55 and older hold the largest share of the amount spent on healthcare. Despite only making up 30 percent of the population, this age group accounted for 56 percent of the total health spending in recent years.

Out-of-pocket spending and costs fell dramatically during the COVID-19 pandemic. However, recent studies have found that the average out-of-pocket costs are increasing as people begin seeking regular healthcare again. According to Third Way, millions of working-age American families spend over 5 percent of their household income on out-of-pocket healthcare costs each year. Given that the average household income in the U.S. is $87,864, as of 2023, that means the average American family spends at least $4,393 in these expenses each year.

You can take steps to reduce your bills or avoid unnecessary medical expenses. Consider these tips to lower your healthcare costs over time.

• Get to know your PCP: Regular contact and visits to your primary care physician (PCP) may help you avoid a panicked trip to the ER. Because the doctor knows your medical history, you’re less likely to end up with extra test costs or urgent care bills that could have been resolved with a phone call to a doctor familiar with your health.

• Avoid emergency room visits if possible: A trip to the ER is one of the most expensive ways to get medical help because doctors have to start from scratch without the benefit of knowing your medical history. Always start with a call to your PCP’s after-hours number before you head to the hospital or urgent care.

• Switch to generic drugs: Insurers typically have lower copays for generic drugs, so ask your doctor if you can swap a brand-name drug for its generic match. The savings could be substantial, especially if you have several monthly prescriptions. You may also want to consider opting for a 90-day supply or mail-order delivery to further cut costs.

If you need to finance out-of-pocket medical expenses, there are several strategies to consider.

The best place to start with financing options is to ask your provider if payment plans are available. These usually involve splitting the payment up over a number of weeks or months in regular installments.

Personalized payment plans are common among doctors and other medical providers. In addition, hospitals with nonprofit status are required to provide a financial assistance program or charity care.

The biggest benefit is you won’t have to pay interest on the balance like you do with other financing options. You can explore options for free or low-cost help through the Consumer Financial Protection Bureau. In addition, check your state laws to see if there are other assistance plans or options available.

If you get hit with a smaller bill that you need immediate funds for, turning to a credit card could be a good way to pay off your medical bills. You can choose to make minimum payments if you’re healing from an injury or illness — although this will result in owing more over time.

You can also look out for credit cards with introductory zero-interest offers that let you pay down medical debt without any interest payments for a limited time. However, these offers require good to excellent credit, so not everyone can qualify.

Some lenders offer medical credit cards to help you cover costs. Just remember that a maxed-out credit card could tank your credit score, so pay the balance off as quickly as possible.

A personal loan is a good choice to finance medical bills if you want a fixed payment over several years and need money quickly. Most personal loans can be funded in just a few business days and can spread your payment out over terms of up to seven years.

You will need an excellent credit score to qualify for the competitive personal loan rates under 10 percent. If you don’t have excellent credit, you may want to choose a different option, since personal loan rates for bad credit can run as high as 36 percent. You’ll need to prove you have a steady income to qualify, so if your injury or illness requires you to be out of work, skip this option.

Learn more: Check out Bankrate’s personal loan calculator

If you own a home with and have significant equity, a home equity line of credit (HELOC) may be worth a look if you don’t need funds immediately. The application process can take several weeks and requires more paperwork than a personal loan. However, rates are lower and you can make minimum payments on the balance with terms as long as 30 years.

A HELOC — or home equity loan, depending on your needs — should be a last resort since you risk losing your home if you default.

Medical debt is far from uncommon. Even with insurance, people can be saddled with thousands of dollars in debt from routine procedures and emergencies.

While advocating for yourself and seeking payment plans can help lower your debt, there are times when you may need to seek outside financing. Even then, you should review your rights and negotiate with every medical provider to ensure you are receiving a fair price for your healthcare.