What Medicare doesn’t pay for becomes hefty debt for millions of seniors

Connie Morton’s husband died last November. The cause: complications from Parkinson’s disease, which he had been living with for 18 years.

“During that time, there were multiple medical costs not covered by Medicare,” the Colonial Beach, Va., resident told Yahoo Finance. “We paid what we could. For the last nine years of his life, he could no longer work. I became his caretaker, and we survived on Social Security and some help from his kids.”

A growing number of retirees, like Morton, are grappling with healthcare debt due to medical bills. Medicare, which provides health insurance coverage to more than 66 million people, covers the lion’s share of the cost of medical care, but not all.

On average, a 65-year-old who left the workforce last year may need $165,000 in savings to cover out-of-pocket healthcare expenses throughout retirement.

Earlier this year, Morton broke her ankle. “That also added up to significant hospital bills,” she said.

The combination of medical bills not covered by Medicare for the retired couple: roughly $90,000.

“I’m at a point now where I can’t keep my house because the bills are much too high,” Morton said. “I’m trying to decide what I’m going to do.”

One in 10 people age 65 or older with healthcare debt owe $10,000 or more, according to a KFF study.

“That is a shocking number,” said Tricia Neuman, senior vice president of KFF. “Some of it is credit card debt, some of it is just debt owed to a healthcare provider or a hospital. Some of it is debt to other family members.”

Consider that half of all people on Medicare live on about $35,000 or less, Neuman added. “So a $10,000 bill, or $10,000 worth of medical debt, can really be unaffordable for people and have serious consequences.”

The bills that lead to the debt typically include routine healthcare services such as lab fees and diagnostic tests, dental care, and visits to the doctor, and long-term care services not covered by Medicare, according to KFF. Medicare often requires patients to pay out of pocket around 20% of their doctor bills.

“In-home care for people who are unable to take care of themselves and don’t have family members that can drop everything to be there 24/7, is particularly big,” she added. “It’s a variety of healthcare expenses that can pile up and lead to medical debt.”

One of the biggest culprits of credit card debt is out-of-pocket medical costs. The amount that people borrow increases dramatically with age. Half of adults 50 and older who report borrowing money to pay for healthcare in the past 12 months borrowed approximately $3,000 or more, according to a new West Health-Gallup healthcare survey. In contrast, the median amount was $750 for adults aged 30-49 and $300 for young adults aged 18-29.

“People often have higher healthcare expenses as they age, for things like dental, vision care, prescription medication, and doctor visits,” said Lori Trawinski, AARP’s senior director of finance and employment.

“In many cases, healthcare costs are often charged on credit cards, which can lead to carrying that debt from month to month,” she said.

That’s real trouble. Anyone who has rolled over credit card balances is keenly aware of the debt that accrues when you can only pay the minimum on credit cards with interest rates topping 20%.

Troubling, too, is that many people on Medicare say that they or another member of their household have delayed, skipped, or sought alternatives to needed healthcare or prescription medications due to costs, KFF found.

Read more: The best ways to pay off credit card debt

Anqi Chen, co-author of a brief from the Center for Retirement Research at Boston College, recently surveyed retirees with $100,000 in investable assets.

“They were largely unprepared for a medical shock,” she learned.

One driver is that traditional Medicare and Medicare Advantage do not cover the cost of long-term care in nursing homes and assisted-living facilities.

An apartment in an assisted-living facility had an average rate of $74,148 a year in 2024, according to the National Investment Center for Seniors Housing & Care — and costs go up as residents age and need more care. Units for dementia patients can run more than $94,000.

“If these shocks are big enough, they can devastate a household’s finances,” Chen said. “About 80% of those ages 65 and over will require some long-term care, with nearly 20% requiring high-intensity care for more than three years.”

Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.

Here are some moves that can help you manage your money and avoid medical debt.

Plan for healthcare expenses

It’s important to make healthcare costs a part of your budget and factor potential unexpected healthcare costs in your emergency fund, said Carolyn McClanahan, a certified financial planner and physician.

Medicare’s online searchable Plan Finder on the Medicare.gov site allows you to review plan options. If you have a limited income, you might be eligible for Medicare’s Extra Help, which covers Part D premiums and deductibles and caps drug costs.

And for now, free one-on-one counseling is available through state Health Insurance Assistance Programs.

Read more: What is an emergency savings fund?

Don’t be shy

If you’re having issues affording your care, ask your doctor if there is anything more cost-effective, such as changing medications or going to other facilities for testing, McClanahan said.

“And make sure you understand why your doctor is ordering tests and what they plan to do with the information. Sometimes they order tests based on ‘protocol’ and aren’t really needed,” she added.

Consult a financial adviser

If you have a health shock, your financial adviser can help with a plan by reviewing your overall assets, cash flow, liquidity, and where you can rebalance investments to free up cash to cover future bills.

Build a health savings account (HSA)

If you’re retiring soon, maximizing HSA contributions can be a smart move. An HSA lets you put money in on a tax-free basis, lets that money build up tax-free, and lets it come out tax-free for qualified healthcare expenses. (Some states assess state taxes.)

In order to put money into an HSA, you must be enrolled in a high-deductible health plan. In those plans, you pay a lower premium per month than other types of health insurance plans, but a heftier annual deductible.

Read more: HSA contribution limits for 2025: Here’s how much you can save

Check your credit report

Get a free copy of your credit reports from Annualcreditreport.com.

In January, the Consumer Financial Protection Bureau (CFPB) finalized a rule that bans the inclusion of medical bills on credit reports used by lenders and prohibits lenders from using medical information in their lending decisions

Each of the three big credit bureaus — Equifax, Experian, and Transunion — provides these free once a year. Check for accuracy and be certain that it does not include medical debt. If you see a mistake, contact the credit bureau to report it and get it removed.

Read more: 6 benefits of a good credit score

Scrutinize medical bills and negotiate if need be

Ask for a line-item list of charges from your providers. Mistakes happen. It might be possible to set up a low-interest payment plan with the hospital or medical provider. Credit card issuers might also lower your interest rate if you have a good track record of timely payments before the medical crisis.

Tap retirement accounts

If you’re over 59½, you can pull from your tax-deferred accounts penalty-free, although you will pay tax on the amount you withdraw.

For many people, this is a speedy way to eliminate debt. However, it comes with a red-light caveat: Using your retirement accounts to whittle down debt depletes your retirement savings, and you miss out on the possibility of returns on those invested dollars.

Work with a counselor

A nonprofit credit counselor may also be able to negotiate with your credit card issuers if your medical debt is part of a credit card balance. You will pay a fee for the service. The Justice Department website provides a list of approved credit counseling agencies. One source to get started: National Foundation for Credit Counseling

Declare bankruptcy

No one really wants to go there. But if there’s no relief in sight for your medical debt, this can be a do-over. A bankruptcy attorney can walk through the details with you.

In general, retirement accounts are off the table during bankruptcies under federal law. Pensions, 401(k)s, 403(b)s, SEP-IRAs, and qualified profit-sharing plans are exempt from creditors.

Traditional and Roth individual retirement accounts worth up to roughly $1.7 million are also protected. Social Security payments are also exempt.

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work” and “Never Too Old to Get Rich.” Follow her on Bluesky.

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