Medical debt is money owed for health care costs not covered by provincial health insurance, including prescription drugs, dental care, physiotherapy, vision care and ambulance fees.
Canada’s universal health care system covers hospital stays and doctor visits, but it stops there.
Dental work, prescription drugs, vision care, physiotherapy, and ambulance rides all come out of your pocket or your private insurance. As of 2023, the average Canadian household spent $3,087 per year on these uncovered health costs.
Source: Statistics Canada – Survey of Household Spending, 2023
That $3,087 is manageable for most households. The problem starts when illness also takes away your ability to earn.
What is the real financial risk of getting sick in Canada?
Medical debt in Canada differs from that in the United States. Canadians don’t face six-figure hospital bills. But illness still causes serious financial damage, and the route is less obvious.
The biggest financial risk from getting sick isn’t the medical bills themselves. It’s the income you lose while you’re off work. When your income drops and your regular bills stay the same, uncovered health costs like prescriptions and physiotherapy become the extra weight that tips things over.
How illness leads to insolvency
The Office of the Superintendent of Bankruptcy’s 2024 Canadian Consumer Debtor Profile reports these top reasons for insolvency filings:
| Reason for financial difficulty | % of filings |
|---|---|
| Loss of income | 45% |
| Medical reasons | 20% |
| Relationship breakdown | 11% |
| Financial support of others | 7% |
| Business failure | 6% |
Source: Government of Canada – Canadian Consumer Debtor Profile, 2024
That 20% “medical reasons” figure needs context. The OSB defines it broadly as an illness or injury that contributed to financial difficulty. In most cases, the primary loss is income, not medical bills. A person gets sick, goes on reduced pay or disability, and can no longer service the credit card debt, car payment, and mortgage they were already carrying.
The uncovered health costs, maybe $200 a month in prescriptions or $150 for physiotherapy, make a bad situation worse, but aren’t usually the primary debt.
Most people I see who got into trouble after an illness aren’t carrying large medical bills. They’re carrying the same debts as everyone else, credit cards, car loans, lines of credit, but they lost the income to service them. The prescriptions and dental work just added to the pressure.
In Canada, the financial threat from illness is primarily income loss, compounded by uncovered health costs, not medical bills alone.
What medical costs does provincial health insurance not cover?
Medical debt in Canada builds up from the gap between what your provincial plan covers and what you actually need.
| Covered by provincial health plans | Not covered (your responsibility) |
|---|---|
| Doctor visits | Prescription drugs |
| Hospital stays | Dental care |
| Medically necessary surgery | Vision care and eyeglasses |
| Diagnostic tests ordered by a doctor | Physiotherapy |
| Ambulance fees (varies by province) | |
| Chiropractors, psychologists | |
| Medical devices and equipment |
Out-of-pocket costs account for roughly 14% of total health spending in Canada. The private sector covers the remaining 15% through employer benefits and private insurance.
Source: Canadian Institute for Health Information – National Health Expenditure Trends, 2025
If you have employer-sponsored benefits, they typically cover a portion of prescription, dental, and vision costs, but most plans have annual limits, copays, and exclusions.
If you don’t have employer coverage, an extended health plan is worth looking at, especially if you have ongoing prescriptions or regular dental needs. Without any private coverage, every uncovered health cost comes directly out of your household budget.
How does illness compound existing debt?
Medical debt on its own is usually manageable. The problem is what happens when it arrives alongside income loss.
A 2014 study in the International Journal of Health Services surveyed 5,000 Canadian insolvency filers and found that 40% had lost at least two weeks of work-related income due to illness or injury in the two years before filing. Only 6.9% reported medical bills over $5,000.
The study’s authors concluded that while universal health insurance protects Canadians from ruinous hospital bills, “inadequate coverage for prescription drugs and dental care leaves some with unaffordable out-of-pocket costs,” and that “illness is a frequent indirect cause of bankruptcy through loss of work-related income.”
The pattern
In my experience, it almost always works the same way. Someone gets sick and their income drops. They start using credit cards to cover groceries, gas and rent. The prescriptions and physio appointments add $300 to $500 a month, which they didn’t have before.
By the time they recover, they’re carrying $20,000 to $30,000 in unsecured debt, and their monthly payments no longer fit their income. Among insolvency filers in 2024, 89% carried credit card debt with a median balance of $13,359, and the median debtor household spent $175 per month more than it earned.
Source: Government of Canada – Canadian Consumer Debtor Profile, 2024
The financial risk from illness in Canada is the combination of income loss, uncovered health costs, and existing debt. Any one of those on its own might be survivable. Together, they’re often not.
What are the warning signs of medical financial hardship?
Financial trouble from illness doesn’t announce itself. It builds while you’re focused on getting well. If any of these sound familiar, you’re already in it:
You’re using credit cards or lines of credit to cover everyday expenses like groceries and utilities. You’re avoiding conversations about money because you don’t have good answers. You’re losing sleep over how to pay for treatment and keep the lights on. You’re missing payments on rent, your car, or other bills because health costs have stretched your budget past the limit.
These warning signs apply whether the financial strain is coming from medical bills, lost income, or both. The distinction matters less than the result: your outgoings exceed your income, and credit is covering the gap.
If you’re borrowing to cover daily expenses while dealing with a health issue, that’s the clearest sign you need help.
What happens if you don’t pay medical bills in Canada?
Medical debt in Canada follows the same collection path as any other unpaid bill.
A dental office, pharmacy, or physiotherapy clinic will send reminders for a few months. If you don’t pay, the provider sells or assigns the debt to a collection agency. The collection agency then reports the unpaid account to Equifax and TransUnion, Canada’s two credit bureaus.
Once a medical collection hits your credit report, it stays there for six years from the date you first missed the payment. Paying the debt marks the entry as “paid,” but it doesn’t remove it from your report until the six-year period is up.
Canada has no special exemption for medical debt. Unlike recent changes in the United States, unpaid medical bills in Canada are treated the same as any other collection on your credit file.
Source: Government of Canada – How Long Information Stays on Your Credit Report
If the amount is large enough, a collection agency can also sue you and obtain a court judgment, which could lead to wage garnishment. The longer medical debt goes unaddressed, the harder it becomes to resolve without formal help.
How do you apply for public health insurance in Canada?
Gaps in provincial health insurance are one reason medical debt builds up in Canada.
Every province and territory runs its own health plan, and you need to be enrolled to access publicly funded care. If you’re new to a province, some have a waiting period before your coverage kicks in.
British Columbia, for example, has a three-month wait, while Ontario covers you from day one. Contact your provincial Ministry of Health to find out what applies in your area.
Source: Government of British Columbia – Medical Services Plan
During any waiting period, you’ll want private health insurance to cover you. Without it, even a routine doctor’s visit or a trip to the emergency room could leave you with a bill you weren’t expecting.
Provincial health insurance covers the essentials, but it won’t cover prescriptions, dental care, or physiotherapy, which generate most medical debt in Canada.
Can you reduce medical costs before they become debt?
If medical bills are building up but you’re not yet in a debt crisis, there are steps worth trying before you look at a consumer proposal or bankruptcy.
Ask your provider for a payment plan
Most dental offices, pharmacies, and physiotherapy clinics will agree to a payment plan if you ask. Spreading the cost over several months keeps the bill from going to collections and protects your credit.
Some providers will also reduce the total if you can pay a lump sum upfront. The key is to contact them before you miss a payment.
Check provincial drug benefit programs
Every province runs a drug benefit program for residents with high prescription costs relative to their income.
Ontario’s Trillium Drug Program, for example, covers about 5,000 prescription drugs once you’ve spent roughly 4% of your household income on medications.
British Columbia’s Fair PharmaCare works on a similar income-based model. Visit the Government of Canada’s list of provincial drug programs to find out what’s available where you live.
Source: Government of Canada – Provincial and Territorial Public Drug Benefit Programs
The Canadian Dental Care Plan may also help if you have a household income under $90,000 and no private dental coverage.
Source: Government of Canada – Canadian Dental Care Plan
These programs won’t solve the problem if illness has already caused significant income loss and debt. But they can reduce the ongoing costs that worsen each month. If the debt is already unmanageable, a Licensed Insolvency Trustee can help you deal with the full picture.
What can you do if illness has left you in debt?
If a combination of medical costs and lost income has pushed you into debt you can’t manage, you have options.
The key is understanding that your medical bills are unsecured debt, legally the same as credit card balances and personal loans, and they can be dealt with the same way.
A consumer proposal is a legally binding agreement, filed through a Licensed Insolvency Trustee, to repay a portion of your unsecured debts over a fixed period of up to five years. It covers all unsecured debt, including medical bills, credit cards, and lines of credit.
Bankruptcy is another option that eliminates unsecured debt entirely. Both a consumer proposal and bankruptcy stop collection calls and wage garnishments immediately.
In 2024, 137,295 Canadians filed for insolvency, and 79% chose a consumer proposal over bankruptcy. Most people don’t know these options exist until they’re already in trouble.
Source: Government of Canada – Canadian Consumer Debtor Profile, 2024
Talk to a Licensed Insolvency Trustee for a free, confidential consultation to find out what makes sense for your situation.
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Frequently asked questions about medical debt in Canada
Is medical debt a major cause of bankruptcy in Canada?
Not directly. Canada’s universal health care system protects against ruinous hospital and doctor bills. However, the OSB’s 2024 data show that 20% of insolvency filers cited medical reasons.
In most of those cases, the primary financial damage came from income loss due to illness, not from medical bills alone. Uncovered health costs, like prescriptions and dental care, add to the pressure, but they’re usually a contributing factor rather than the main cause.
Source: Government of Canada – Canadian Consumer Debtor Profile, 2024
Can you include medical bills in a consumer proposal or bankruptcy?
Yes. Medical bills are unsecured debt, legally the same as credit card debt or personal loans. A consumer proposal or bankruptcy covers all unsecured debts, including medical bills, and stops collection activity immediately.
Only a Licensed Insolvency Trustee can file a consumer proposal in Canada.
What health care costs does provincial insurance not cover?
Provincial health plans generally do not cover prescription drugs, dental care, vision care, physiotherapy, chiropractic care, psychological care, ambulance fees, or medical devices.
These costs must be paid out of pocket or through private insurance. The average Canadian household spent $3,087 on these uncovered health costs in 2023.
Source: Statistics Canada – Survey of Household Spending, 2023
How much do Canadians spend on out-of-pocket health care?
The average Canadian household spent $3,087 on health care in 2023, according to Statistics Canada. This covers costs not paid by provincial insurance, including prescriptions, dental care, and other services. Out-of-pocket costs represent roughly 14% of total health spending in Canada.
Source: Statistics Canada – Survey of Household Spending, 2023
Does employer health insurance cover all medical costs?
No. Employer-sponsored health insurance typically covers a portion of prescription drugs, dental care, and vision care, but most plans have annual limits, copayments, and exclusions. You may still face high out-of-pocket costs even with employer coverage.
Is medical debt different from other unsecured debt?
Legally, no. Medical debt is treated the same as credit card debt, personal loans, and other unsecured debt in Canada. It can be included in a consumer proposal or eliminated through bankruptcy. Collection agencies can pursue medical debt using the same methods they use for any unsecured debt.
Does unpaid medical debt affect your credit score in Canada?
Not while you owe money directly to a health care provider.
Dental offices, pharmacies, and physiotherapy clinics don’t report to credit bureaus. But if the provider sends your unpaid bill to a collection agency, the collection agency reports it to Equifax and TransUnion. At that point, medical debt damages your credit score the same as any other unpaid collection.
The entry stays on your credit report for six years from the date of the first missed payment, whether you eventually pay it or not. Canada has no special exemption for medical collections.
Source: Government of Canada – How Long Information Stays on Your Credit Report
What about debt consolidation or credit counselling for medical debt?
Both are options, but they have limits. A debt consolidation loan rolls your debts into one payment at a lower interest rate, but you still repay the full amount, and you need to qualify for the loan.
Credit counselling agencies can set up a debt management plan with your creditors, but the plan typically requires you to repay the full balance over three to five years. Neither option reduces what you owe.
If illness has caused significant income loss on top of medical debt, and your total unsecured debt is more than you can realistically repay, a consumer proposal filed through a Licensed Insolvency Trustee may be a better fit because it reduces the amount you owe.
How do I get provincial health insurance if I just moved?
Contact the Ministry of Health in your new province or territory.
Some provinces, like British Columbia, have a waiting period of up to three months before coverage begins. Others, like Ontario, provide coverage immediately.
Private health insurance is recommended during any waiting period to avoid unexpected medical bills.
What should I do if illness has left me unable to pay my bills?
Start by separating the medical costs from the income problem. If your income has recovered and you just need to catch up on medical bills, a payment plan or provincial drug benefit program may be enough.
If illness has left you with a combination of medical debt and other debts you can’t manage, talk to a Licensed Insolvency Trustee.