Healthcare Costs and Medical Debt: What Members and Families Need to Know
Medical debt isn’t a personal failure—it’s a system problem, and AFT members have tools to fight back.
Medical debt is one of the most common, and least understood, forms of debt in the United States. It affects people across income levels, including millions who have health insurance. For many families, medical bills arrive unexpectedly, with little explanation and few clear options for relief.
At a recent AFT Vital Lessons webinar, Dr. Monica Soni, chief medical officer of Covered California, along with AFT President Randi Weingarten and AFT members, joined me to unpack why medical debt happens, who is most affected, and what members can do when bills arrive. The message was clear: Medical debt is not the result of overspending. It’s a byproduct of how healthcare works in the U.S.
What Is Medical Debt?
Medical debt refers to unpaid bills for healthcare services such as hospital stays, emergency room visits, surgeries, imaging, prescriptions and ambulance rides. Unlike other types of debt, medical costs are rarely known upfront. Care happens first, and bills arrive later—often weeks or months after treatment.
Patients usually cannot choose when care is needed or fully control where it happens, especially in emergencies. Insurance decisions—what is covered, what is denied, and how much a patient owes—often come after the fact. As Dr. Soni emphasized, medical debt is not about making poor financial choices; it is a reflection of a fragmented and opaque billing system.
Common causes of medical debt include high deductibles, out‑of‑network charges (even at in‑network hospitals), surprise bills, billing errors, delayed claims, and insurance denials. In many cases, medical debt stems from one major health event, not long‑term spending.
Why Being Insured Isn’t Enough
One of the most striking realities discussed during the webinar is that having insurance does not guarantee protection from medical debt. Nationwide, medical debt totals roughly $220 billion, and insured individuals make up a significant share of those affected.
A February 2026 survey of AFT members found that 74 percent are living paycheck to paycheck, and 8 in 10 described healthcare costs as a major source of financial stress. Nearly one‑third of respondents said they delayed or avoided medical care because of financial concerns.
Even in programs like Medicaid, where co-pays are limited or eliminated, medical debt still occurs due to uncovered services, billing mistakes, or care received in emergency situations. Serious illnesses or injuries—such as cancer treatment, surgery or car accidents—often trigger the largest bills.
Why Healthcare Costs Feel So Unpredictable
Healthcare prices in the U.S. lack stability and transparency. As Dr. Soni explained, the same patient can receive the same procedure at the same hospital and be charged very different amounts depending on who is paying: Medicare, Medicaid or a commercial insurance plan.
Hospital consolidation plays a major role. As large hospital systems acquire independent clinics and practices, they gain market power and are able to charge higher prices with little oversight. In many cases, hospitals charge three to six times the Medicare rate, even though the underlying service has not changed.
Rising premiums compound the problem. Affordable Care Act marketplace plans are grouped into four “metal levels”: bronze, silver, gold and platinum, with catastrophe plans available to some people in certain areas. These categories describe how costs are split—not by the quality of care offered. As premiums rise, many families are pushed into bronze‑tier plans, which have lower monthly premiums but high deductibles and out‑of‑pocket costs. When care is needed, those costs can be overwhelming, and research shows high‑deductible plans are linked to higher medical debt and less use of necessary care.
Affordability Gains Can Disappear Quickly
California offers a real‑world example of both progress and risk. In 2025, enhanced federal subsidies and state investments allowed over 1million people to enroll in plans with no deductibles, improving access to preventive care and reducing emergency room use.
But in 2026, the loss of $2.5 billion in federal subsidies reversed many of those gains. Premiums rose, and more people were pushed back into plans with higher out‑of‑pocket costs. The lesson is clear: Affordability depends on stable policy support, not temporary fixes.
Know Your Rights Under the Affordable Care Act
The ACA made several practices illegal and provided important consumer protections. One of the most significant is that many preventive services must be covered at no cost, including recommended cancer screenings, vaccines and preventive counseling.
If you are billed for a covered preventive service, you should appeal the charge. Many people pay bills assuming they are correct, but errors are common—and patients have more leverage than they think.
What Happens When Bills Go Unpaid
Once a medical bill goes unpaid, the consequences can escalate quickly. Bills may be sent to collections, patients may receive repeated payment demands, and in some states, hospitals or collectors can pursue lawsuits or wage garnishment.
Medical debt is treated differently than other debt, but it can still harm credit scores. Lower credit scores affect housing, loan terms, and even employment opportunities. Fear of credit damage often drives people to make difficult choices, such as using credit cards to pay medical bills or skipping follow‑up care to avoid additional costs.
What States—and the AFT—Are Doing About Medical Debt
States across the country are increasingly recognizing medical debt as a system failure rather than an individual one. Approaches include forgiving existing medical debt, limiting aggressive collection practices, keeping medical debt off credit reports, and requiring hospitals to provide financial assistance.
North Carolina has emerged as a leading example. By tying additional Medicaid funding to hospital actions, such as automatically screening patients for financial assistance and limiting collections, the state helped hospitals erase more than $6.5 billion in medical debt for over 2.5 million people in about one year.
At the same time, the AFT is lobbying Congress and state legislatures to expand patient protections and tools to directly support members facing medical bills and debt.
Resources Available to AFT Members
The AFT is rolling out a coordinated effort to help members navigate medical bills and debt, including:
- Medical debt clinics (virtual and in‑person);
- A new Debt Navigator tool to guide next steps; and
- Short, practical videos on appeals, billing errors and negotiation.
Members who receive a bill are encouraged to request an itemized statement, question charges that do not make sense, and ask about charity care or financial assistance. Most important, members should not assume medical bills are final—or that they have to face them alone.
Medical debt is common, confusing and stressful—but it is also challengeable. With the right information and support, AFT members can protect themselves, their families and their communities.
Learn more and access help:
Vital Lessons on Medical Debt and Healthcare Affordability: Solutions You Can Use Now
Join Dr. Vin Gupta, a leading public health expert and pulmonologist, in conversation with AFT President Randi Weingarten and special guests Dr. Monica Soni, Chief Medical Officer at Covered California, and an AFT member for a timely discussion on healthcare affordability in America.
Fight for Affordability
The Fight for Affordability community brings together resources, videos, and guidance to help people navigate these challenges.
Dr. Vin Gupta, MD, MPA, is a public health physician, professor, and health policy expert. As a Harvard-trained lung specialist, Vin has spent the past 15 years working worldwide to improve public health for organizations including the US Centers for Disease Control, the Institute for Health... See More
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