Medicare's unpaid money becomes huge debt for millions of seniors

Connie Morton's husband died last November. The reason is: complications of Parkinson's disease, he has lived for 18 years.

“During this period, Medicare did not cover multiple medical expenses,” the resident told Yahoo Finance. “We paid what we could. He could no longer work for the last nine years of his life. I became his caretaker and we survived with the help of Social Security and his children.”

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More and more retirees, such as Morton, are struggling to deal with health care debt due to medical expenses. Medicare provides health insurance to more than 66 million people, covering the cost of the lion’s medical care, but not all.

On average, a 65-year-old left the workforce last year and could have to save $165,000 to cover medical expenses for out-of-pocket medical expenses throughout the retirement period.

Morton broke his ankle earlier this year. “It also adds up a lot of hospital bills,” she said.

Medical expenses for retired couples not covered by Medicare combine: approximately $90,000.

"I'm in a moment when I can't keep my house because the bills are too high," Morton said. "I'm trying to decide what to do."

According to a study by KFF, one in 10 people aged 10,000 or more. According to a study by KFF.

"It's a shocking number," said KFF senior vice president Tricia Neuman. "Some of them are credit card debts, some of them are just debts to health care providers or hospitals. Some of them are debts to other family members."

Neuman added that considering that half of Medicare's owners live about $35,000 or less. “So a $10,000 bill or a $10,000 medical debt is really unbearable for people and has serious consequences.”

According to KFF, bills that lead to debt often include routine health care services such as laboratory fees and diagnostic tests, dental care and visits to doctors and long-term care services not covered by Medicare. Medicare usually requires patients to pay about 20% of their doctor’s bill from their pockets.

"It's especially big for people who can't take care of themselves and don't have families who can get there 24/7," she added. "It's all kinds of medical expenses that can pile up and lead to medical debt."

One of the biggest culprits of credit card debt is out of pocket expenses. The amount of borrowing people increases greatly with age. In the past 12 months, adults aged 50 and older have reported borrowing money to pay for health care costs about $3,000 or more, according to a new Western Health-Galip Health Care Survey. By comparison, the median for adults aged 30-49 is $750, and for young people aged 18-29 is $300.

"People usually have higher medical expenses like vision care, prescription medications, and doctor visits as they age," said Lori Trawinski, senior director of finance and employment at AARP.

“In many cases, health care costs are usually collected on credit cards, which can result in monthly debt taking place,” she said.

That's real trouble. When you can only pay a minimum credit card on a credit card with interest rates above 20%, anyone who has exceeded the credit card balance is keenly aware of the debt incurred.

KFF found that due to the cost, many people on many health insurance said they or another member of their family delayed, skipped or sought alternatives, resulting in the need of health care or prescription medication due to the cost.

Read more: The best way to pay off your credit card debt

Anqi Chen, co-author of the Boston College Center for Retirement Research briefing, recently conducted a survey of retirees with $100,000 in investable assets.

“They are largely not preparing for the medical shock,” she learned.

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

Apartments with assisted living facilities average $74,148 per year in 2024, and as residents age, more care costs are needed, and costs increase. Units for dementia patients can run over $94,000.

"If these shocks are big enough, they can damage the family's financial situation," Chen said. "About 80% of age 65 and older require some long-term care, and nearly 20% require high-intensity care for more than three years."

Any questions about retirement? Personal finance? Is there anything related to career? Click here to drop Kerry Hannon's notes.

Here are some actions to help you manage your money and avoid medical debt.

Medical expense plan

Carolyn McClanahan, a certified financial planner and physician, says making health care costs a part of your budget and making potential unexpected medical expenses costs in your emergency fund.

Medicare's online search plan finder on the Medicare.gov website allows you to view plan options. If you have limited income, you may be eligible for additional help from Medicare, which covers Part D premiums and deductibles and limits on drug costs.

Currently, free one-to-one consultation is available through the state health insurance assistance program.

Read more: What is an emergency savings fund?

Don't be shy

If you have problems with providing care, ask your doctor if there is something more cost-effective, such as changing medications or going to another facility for testing, McClanahan said.

She added: "And make sure you understand why your doctor orders the tests and how they intend to handle this information. Sometimes they order the tests under the 'protocol' rather than what they really need."

Consult a financial consultant

If you have a healthy shock, your financial adviser can help make plans by reviewing your total assets, cash flow, liquidity, and the ability to rebalance investments to free up cash to pay future bills.

Create a Health Savings Account (HSA)

If you are about to retire, maximizing your HSA contribution may be a smart move. HSA allows you to invest tax-free money, keeping this money tax-free and making it tax-free for qualified healthcare expenses. (Some states evaluate state taxes.)

In order to put your money into the HSA, you must join a high deduction health plan. In these plans, you pay less monthly premiums than other types of health insurance plans, but are deductible annually.

Read more: HSA Contribution Limit 2025: Here is how much you can save

Check your credit report

Get a free copy of your credit report from AncomleCreditReport.com.

In January, the Consumer Financial Protection Bureau (CFPB) finalized a rule that prohibited the inclusion of medical expenses in credit reports used by lenders and prohibited lenders from using medical information in their loan decisions.

Each of the three large credit bureaus (Equifax, Experian and Transunion) is available for free every year. Check for accuracy and make sure it does not include medical debt. If you see an error, please contact the Credit Bureau to report and delete it.

Read more: 6 Benefits of Good Credit Scores

High angle view of Japanese female caregiver doing home financing online at home with her worried elderly person on computer.
Review medical expenses to capture potential errors. (Getty Creative) · Mini Series by Getty Images

Review medical expenses and negotiate when needed

A list of charges for the provider is required. An error occurred. A low-interest payment plan can be developed with a hospital or medical provider. Credit card issuers may also lower your interest rates if you have a timely payment history before the medical crisis.

Click on Retirement Account

If you exceed 59½, you can get tax-free accounts, although you will pay taxes on the withdrawn amount.

For many, this is a quick way to eliminate debt. However, it comes with a red light warning: using a retirement account to reduce debt and reduce your retirement savings, and you miss out on the possibility of those returns from investing in dollars.

Work with counselors

If your medical debt is part of your credit card balance, a nonprofit credit consultant can also negotiate with your credit card issuer. You will pay for the service. The Ministry of Justice website provides a list of approved credit advisory agencies. A source for getting started: National Credit Consulting Foundation

Declare bankruptcy

No one really wants to go there. However, if your medical debt is out of sight, this can be a thing. Bankruptcy lawyers can browse the details with you.

Overall, during bankruptcy under federal law, retirement accounts are not on the table. Pensions, 401(k)S, 403(b)S, Sep-Iras and qualified profit sharing programs are exempt from creditors.

Traditional and Rose’s IRA is also protected by approximately $1.7 million. Social Security payments are also tax-free.

Kerry Hannon is a senior columnist at Yahoo Finance. She is a professional and retirement strategist and the author of 14 books, including the upcoming “Retirement Bites: X Gen X’s Guide to Securing Your Financial Future,“ “In control over 50: How to succeed in the new world of work” and “never be too old to get rich”. Follow her Brusky.

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