Medical Debt & Bankruptcy: Hospitalization Risks for Working Americans

Even with health insurance, a hospital stay following an injury can leave Americans vulnerable to significant medical debt and even bankruptcy, according to a new study from the University of Washington (UW). The research, published this month, reveals a surprising trend: it’s not necessarily the lowest-income individuals who are most at risk, but rather working-class and working-age families.

“We weren’t surprised to see that an injury like a car crash or a fall that gets hospitalized results in increases in medical debt and bankruptcy,” explained Dr. John W. Scott, a surgeon at UW Medicine, and co-author of the study. However, he noted the unexpected finding that those with private insurance face a disproportionate risk compared to those covered by Medicaid.

The reason, Dr. Scott explained, lies in the protections offered by Medicaid. “Medicaid does its job protecting people from high out-of-pocket payments,” he said. Private insurance, however, often leaves policyholders exposed to substantial out-of-pocket expenses – potentially hundreds or even thousands of dollars – even after insurance coverage has been applied.

The UW study examined the financial repercussions of hospitalization for traumatic injuries. Researchers analyzed credit reports of nearly 13,000 patients over an 18-month period, spanning from one year before hospitalization to 18 months after. The data, collected between 2018 and 2021, showed a 5.2 percentage point increase in the share of patients with medical debt in collections following a hospital stay for injury – a 24% relative increase. The average balance in collections also rose by $290, and 1 in 10 patients found themselves owing more than $4,480.

The financial strain doesn’t end with debt accumulation. The study also found a 6% relative increase in bankruptcy filings – 3.2 per 1,000 patients – approximately 15 months after the initial injury. This highlights the long-term financial consequences that can stem from a single medical event.

The implications extend beyond financial hardship. Dr. Scott emphasized the impact on patients’ overall health. “It’s bad to have medical debt, it’s bad for bankruptcy,” he stated. “But what gets me interested as a physician is the impact on people’s health.” He explained that individuals already burdened with medical debt are three times more likely to delay seeking necessary care, fearing they cannot afford it. This delay can lead to worsening health outcomes.

This issue isn’t limited to those without prior health conditions. A separate report from CNBC highlights that even insured Americans can face lasting financial scars after medical emergencies. The confluence of these findings underscores a systemic vulnerability within the U.S. Healthcare system.

The problem of healthcare debt in the United States is not new. Research published in 2025, as detailed in the journal Annals of Medical Surgery, highlights the profound consequences of healthcare debt on physical and mental well-being, contributing to increased stress and anxiety. The issue is described as a “silent fight” impacting individuals and families across the country.

Recognizing the urgency of the situation, lawmakers in Washington state are currently working on legislation to address the issue of medical debt interest rates. A bill is under consideration to reduce the permissible interest rate on medical debt from 9% to 1%. This proposed change aims to alleviate some of the financial burden faced by individuals struggling with medical expenses.

The UW study and ongoing legislative efforts bring into sharp focus the need for broader systemic changes to protect Americans from the financial devastation that can accompany medical emergencies. While Medicaid provides a safety net for some, the findings suggest that those with private insurance require additional safeguards to prevent crippling debt and ensure access to ongoing care. The long-term health consequences of delaying care due to financial concerns represent a significant public health challenge that demands attention and innovative solutions.