Medical debt and subsequent use of alternative financial services among US adults

Medical debt is persistent among adults in the United States, challenging an individual's ability to meet other financial obligations. However, less is known about financial wellbeing impacts beyond the traditional banking system.

We conducted a prospective longitudinal study to investigate the association between medical debt and subsequent use of alternative financial services, including buy now, pay later loans, payday loans, and cash advance products, using a nationally representative sample of 2021 adults from the Cumulative Life Stressors Impact on Mental Health and Well Being Study 2023-2025.

Of the analytic sample, 451 (22.3% weighted) had ever reported medical debt, and 477 individuals (23.9% weighted) reported subsequent alternative financial service use. Having any medical debt in the baseline year was associated with a 11.9% point [95% CI: 7.3, 16.6] increase in the probability of subsequent alternative financial service use. This finding was significant for those with $500 to $999, $1000 to $2,499, and more than $5000 in medical debt at baseline.

Individuals with medical debt are more likely to report using alternative financial services, reflecting a broader cycle in which health challenges and costly medical care are associated with financial precarity and poorer health.