Medical Debt and Credit in Canada: How Healthcare Costs Affect Your Score

Life Situations & Credit

Medical Debt and Credit in Canada: How Healthcare Costs Affect Your Score

Mar 20, 202621 min read

The Hidden Reality of Medical Debt in Canada’s Universal Healthcare System

Canadians often assume that universal healthcare means freedom from medical debt. The reality is far more complicated. While provincial health insurance plans cover physician visits, hospital stays, and medically necessary procedures, a wide range of healthcare costs fall outside public coverage — and when those bills go unpaid, they can end up in collections and on your credit report.

Dental care, vision care, prescription medications, physiotherapy, mental health counselling, ambulance fees, and medical devices are just some of the expenses that can generate medical debt for Canadian families. A 2024 report from the Canadian Institute for Health Information (CIHI) found that approximately 30 percent of total health spending in Canada comes from private sources, including out-of-pocket payments and private insurance. For Canadians without employer benefits or adequate private coverage, these costs can quickly become overwhelming.

Unlike the United States, where medical debt has become a distinct category in credit reporting with special protections, Canada has no specific rules differentiating medical collections from other types of debt on credit reports. A dental bill in collections is treated identically to an unpaid credit card or utility bill by Equifax Canada and TransUnion Canada.

Which Medical Costs Are Not Covered by Provincial Health Insurance

Understanding the gaps in provincial coverage is the first step to avoiding unexpected medical debt. While each province administers its own health plan, the gaps are broadly similar across Canada.

Dental Care

Dental services are the largest category of uncovered healthcare in Canada. Routine cleanings, fillings, crowns, root canals, orthodontics, and dentures are not covered under any provincial health plan for adults. A basic dental cleaning costs $200 to $350 in most Canadian cities. A single crown ranges from $900 to $1,500. Orthodontic treatment (braces) averages $5,000 to $8,000. A single dental emergency — an abscess, broken tooth, or extraction — can easily cost $500 to $2,000 out of pocket.

The federal Canadian Dental Care Plan (CDCP), which began phased enrollment in 2024, provides some coverage for Canadians with family income below $90,000 who lack private dental insurance. However, the program covers a limited range of services and co-payments apply for families earning between $70,000 and $90,000.

Vision Care

Eye examinations and corrective lenses (glasses and contacts) are generally not covered by provincial plans for adults between ages 18 and 65. Ontario covers one eye exam every 12 months for those 19 and under or 65 and over, and for those with specific medical conditions. A comprehensive eye exam costs $75 to $150 in most provinces. Prescription eyeglasses range from $200 to $800 depending on the lens type and frames.

Prescription Medications

While some provinces provide prescription drug coverage for certain populations, most working-age adults must pay for prescriptions out of pocket or through private insurance. The average Canadian household spends approximately $1,300 per year on prescription medications. For those with chronic conditions — diabetes, heart disease, autoimmune disorders — annual prescription costs can reach $5,000 to $15,000 or more.

Ambulance Services

Ambulance fees vary dramatically by province and can create unexpected medical debt:

Physiotherapy, Chiropractic, and Paramedical Services

Physiotherapy, chiropractic care, massage therapy, naturopathy, and other paramedical services are generally not covered under provincial health plans (with limited exceptions). A physiotherapy session typically costs $80 to $120. Patients recovering from surgery or injury may need 10 to 20 sessions, resulting in bills of $800 to $2,400. Chiropractic visits range from $60 to $100 per session.

Mental Health Services

While psychiatrists (medical doctors) are covered under provincial plans, psychologists and psychotherapists are not in most provinces. A one-hour session with a registered psychologist costs $180 to $250 in most Canadian cities. For individuals requiring weekly therapy, annual costs can reach $9,000 to $13,000 — a significant financial burden that can lead to debt if not covered by private insurance.

How Medical Debt Ends Up on Your Credit Report

Medical providers — dentists, optometrists, pharmacies, private clinics, hospitals (for non-covered services), and ambulance services — follow a typical collection process when bills go unpaid:

1. Initial Billing and Payment Reminders

   After treatment, the provider issues a bill (either at the point of service or by mail). Most providers send two to three payment reminders over a 30- to 90-day period. During this stage, the debt is not reported to credit bureaus.



2. Internal Collections Efforts

   If the bill remains unpaid after initial reminders, the provider’s billing department may intensify collection efforts — phone calls, additional letters, and possible offers of payment plans. This stage typically lasts 60 to 120 days. The debt is still not reported to credit bureaus.



3. Assignment to a Collection Agency

   After internal efforts fail (typically 90 to 180 days after the original bill), the provider assigns or sells the debt to a third-party collection agency. Collection agencies commonly used by Canadian medical providers include CBV Collection Services, NCO Financial, and various regional agencies. Once assigned to collections, the debt is reported to Equifax Canada and TransUnion Canada.



4. Credit Report Impact

   The collection account appears on your credit report as a separate trade line with a rating of “9” (indicating a bad debt placed for collection). This single entry can lower your credit score by 80 to 150 points, depending on your overall credit profile. The collection remains on your report for six to seven years from the date of last activity in most provinces.



5. Potential Legal Action

   For larger debts (typically above $2,000 to $5,000), collection agencies may pursue legal action, including filing a statement of claim in small claims court (for debts up to $35,000 in Ontario) or superior court. A judgment against you adds another negative entry to your credit report and can lead to wage garnishment.

Many Canadians are surprised to learn that medical providers can send accounts to collections in as little as 90 days. Unlike credit card companies, which may wait six months or more before charging off an account, medical offices — particularly dental practices and smaller clinics — often have tighter collection timelines. If you receive a medical bill you cannot pay, contact the provider immediately to arrange a payment plan before the account reaches collections.

The Credit Score Impact of Medical Collections

Medical collections on a Canadian credit report carry the same weight as any other collection account. There is no distinction in the credit scoring algorithms used by Equifax and TransUnion between medical and non-medical collections.

Score Impact by Credit Profile

The irony is that people with the highest credit scores suffer the most significant point drops from a single collection. Someone with an otherwise perfect 780 score who has a $350 dental bill go to collections could see their score plummet to the low 600s — making them ineligible for prime-rate credit products.

Provincial Prescription Drug Coverage Programs

Prescription drug costs are one of the most common sources of medical debt in Canada. Understanding available provincial programs can help prevent these costs from spiralling into collections.

Many Canadians qualify for provincial drug benefit programs but have never enrolled. In British Columbia, for example, Fair PharmaCare requires annual registration — families earning under $30,000 pay no deductible. In Ontario, the Trillium Drug Program caps drug costs at approximately 4 percent of household income. These programs can eliminate or dramatically reduce prescription costs that might otherwise become unmanageable debt. Contact your provincial health ministry or visit their website to check eligibility.

The Canadian Dental Care Plan (CDCP): Reducing Dental Debt

The federal Canadian Dental Care Plan, which began phased rollout in 2024, represents the most significant expansion of dental coverage in Canadian history. Understanding this program is essential for avoiding dental debt.

Eligibility Requirements

• Adjusted family net income below $90,000
• No access to private dental insurance (including through an employer, spouse, or parent)
• Canadian resident and tax filer
• Must have filed a tax return in the previous year

Coverage and Co-Pays

• Income under $70,000: No co-pay required
• Income $70,000 to $79,999: 40 percent co-pay
• Income $80,000 to $89,999: 60 percent co-pay

Services Covered

The CDCP covers preventive services (cleanings, examinations, X-rays), restorative services (fillings, crowns), endodontic services (root canals), prosthodontic services (dentures), periodontal services, and oral surgery. However, cosmetic procedures are excluded, and coverage amounts are set at established fee guides which may not cover the full cost charged by all dental offices.

For Canadians who qualify, the CDCP can eliminate or significantly reduce one of the largest sources of medical debt. If you have been avoiding dental care due to cost, check your eligibility at the Government of Canada website.

Strategies to Prevent Medical Debt From Reaching Collections

Prevention is far more effective than trying to repair credit after medical collections have been reported. Here are actionable strategies for managing medical costs in Canada.

1. Negotiate Payment Plans Before the Due Date

   Most medical providers — dental offices, optometrists, physiotherapy clinics, and hospitals — will arrange payment plans if asked before the bill becomes overdue. A typical arrangement might be $50 to $100 per month on a $1,200 dental bill. As long as you are making regular payments, most providers will not send the account to collections. Ask for the arrangement in writing, including confirmation that no interest will be charged and that the account will not be reported to credit bureaus while payments are current.



2. Request Itemized Bills and Check for Errors

   Medical billing errors are more common than most Canadians realize. Request an itemized bill from any medical provider and review it carefully. Check for duplicate charges, services not received, incorrect procedure codes, or fees that should have been covered by your provincial plan or private insurance. Disputing errors before the bill goes to collections can eliminate the debt entirely.



3. Apply for Provincial Assistance Programs

   Before assuming you must pay full price, check whether you qualify for provincial programs that cover or subsidize the service. This includes provincial drug benefit programs, the federal CDCP for dental care, the Assistive Devices Program (Ontario) for medical equipment, and various municipal and non-profit programs for low-income residents.



4. Explore Health Spending Accounts and Tax Credits

   If you have a Health Spending Account (HSA) through your employer, use it for uncovered medical expenses. Even without an HSA, you can claim medical expenses on your federal tax return through the Medical Expense Tax Credit (METC) if they exceed the lesser of $2,635 (2025 threshold) or 3 percent of net income. Provincial medical expense credits provide additional relief.



5. Consider Low-Interest Financing Before Using High-Interest Credit

   If you must finance a medical expense, explore low-interest options before reaching for a credit card. Some dental offices offer in-house financing at 0 percent interest. Personal lines of credit from Canadian banks carry lower rates (prime plus 2 to 5 percent) than credit cards (19.99 to 22.99 percent). Avoid payday loans or high-interest installment loans to pay medical bills — the interest costs will compound the financial burden.

Disputing Medical Collections on Your Credit Report

If a medical debt has already reached your credit report, you may have grounds to dispute it. Canadian consumers have robust rights under federal and provincial consumer protection laws.

Grounds for Disputing Medical Collections

• The debt is not yours: Identity errors, incorrect patient identification, or debts belonging to a family member with a similar name
• The amount is incorrect: Billing errors, duplicate charges, or services that should have been covered by insurance
• The debt was already paid: Payments that were not properly credited or insurance payments that were applied late
• The debt is past the limitation period: In most provinces, the limitation period for collecting debts is two to six years, depending on the province. While the debt may still appear on your credit report even after the limitation period, the creditor can no longer sue you for payment.
• Proper notice was not provided: Under provincial collection laws, the collection agency must send you written notice before reporting the debt. If you never received proper notice, you may have grounds for removal.

How to File a Dispute

To dispute a medical collection with Equifax Canada, submit a dispute online through their Consumer Dispute portal or by mail to Equifax Canada Co., P.O. Box 190, Station Jean-Talon, Montreal, QC H1S 2Z2. Include your full name, date of birth, SIN (last four digits), current address, and a detailed explanation of why the collection is inaccurate, along with supporting documentation.

For TransUnion Canada, submit a dispute online through their Consumer Dispute Centre or by mail to TransUnion Consumer Relations, P.O. Box 338, LCD 1, Hamilton, ON L8L 7W2. Both bureaus are required to investigate within 30 days and notify you of the results.

Limitation Periods by Province

Dealing With Medical Collection Agencies in Canada

If a medical debt has been assigned to a collection agency, understanding your rights under Canadian collection laws is essential for protecting yourself and potentially resolving the debt without further credit damage.

Your Rights Under Provincial Collection Laws

Every province has legislation governing the behaviour of collection agencies. Key protections include:

• Written notice requirement: Collection agencies must send written notice before beginning collection activities. In Ontario, this notice must be sent within five days of receiving the account.
• Restricted contact hours: Collectors cannot contact you before 7:00 a.m. or after 9:00 p.m. local time (hours vary slightly by province).
• Prohibited harassment: Collectors cannot use threatening, profane, or intimidating language; cannot contact your employer (except to verify employment); and cannot contact you at work if you request they stop.
• Cease contact requests: You can request in writing that a collection agency stop contacting you. While this does not eliminate the debt, it stops the phone calls and letters. The agency can still report the debt to credit bureaus and pursue legal action.
• Debt validation: You have the right to request validation of the debt — proof that you owe the amount claimed and that the collection agency has the right to collect it.

Negotiating Medical Debt Settlements

Collection agencies often purchase medical debts for pennies on the dollar. A $1,000 dental bill might be purchased by the agency for $100 to $200. This means there is significant room for negotiation. When negotiating with a medical debt collector:

• Start by offering 25 to 40 percent of the total balance as a lump-sum settlement
• Get any settlement agreement in writing before making payment
• Ensure the agreement specifies that the collection account will be reported as “paid in full” or, ideally, deleted from your credit report
• Pay by certified cheque or money order — never give a collection agency direct access to your bank account
• Keep all correspondence and proof of payment for at least seven years

While not officially sanctioned by credit bureaus, some collection agencies will agree to a “pay-for-delete” arrangement where they request removal of the collection entry from your credit report in exchange for full or partial payment. This is most effective with smaller medical debts and smaller collection agencies. Larger agencies are less likely to agree. Always get a pay-for-delete agreement in writing before making payment, and verify deletion by checking your credit report 30 to 60 days afterward.

Insurance Options to Prevent Medical Debt

For Canadians without employer-provided benefits, several insurance options can help prevent medical debt from accumulating.

Individual Health Insurance Plans

Major Canadian insurers — Sun Life, Manulife, Canada Life, Blue Cross, and Green Shield — offer individual health insurance plans that cover dental, vision, prescription drugs, and paramedical services. Monthly premiums typically range from $75 to $250 per person depending on age, coverage level, and health status.

Health Spending Accounts (HSAs)

Self-employed Canadians and small business owners can set up Health Spending Accounts that allow them to pay for medical expenses with pre-tax dollars. Through companies like Olympia Benefits, Blendable, or Benecaid, individuals can deposit funds into an HSA and use them for any CRA-eligible medical expense, effectively reducing the cost by their marginal tax rate.

Association and Group Plans

Professional associations, alumni groups, and organizations like Freelancers Union or the Canadian Federation of Independent Business (CFIB) sometimes offer group benefit plans to members at lower rates than individual plans. These can be particularly valuable for self-employed individuals or those working in the gig economy.

Medical Debt and Insolvency Options in Canada

When medical debt becomes truly unmanageable — particularly when combined with other debts — Canadians have formal insolvency options available through Licensed Insolvency Trustees (LITs).

Consumer Proposals

A consumer proposal is a legal agreement between you and your creditors to repay a portion of your debts over a period of up to five years. Medical debts, including those in collections, can be included. In a typical consumer proposal, you might repay 20 to 50 percent of the total debt with no interest. The consumer proposal appears on your credit report for three years after completion or six years after filing, whichever comes first.

Personal Bankruptcy

As a last resort, personal bankruptcy discharges most unsecured debts, including medical debts. A first-time bankruptcy for someone with no surplus income is automatically discharged after nine months. However, bankruptcy remains on your credit report for six to seven years after discharge and has severe implications for credit access, employment in certain fields, and professional licensing.

The cost of a consumer proposal varies based on the total debt but typically involves a filing fee of approximately $1,500 plus a percentage of the proposed payments. Bankruptcy costs include a base contribution of approximately $1,800 (for a first-time bankruptcy without surplus income) plus potential surplus income payments.

Rebuilding Credit After Medical Collections

If medical collections have already damaged your credit, rebuilding is a process that requires patience and consistency.

1. Resolve the Outstanding Medical Debt

   Whether through full payment, a negotiated settlement, or a pay-for-delete arrangement, resolving the underlying debt is the first step. A paid collection is better than an unpaid one on your credit report, even though the initial score damage from the collection entry remains.



2. Open New Positive Trade Lines

   Apply for a secured credit card from a Canadian issuer such as Home Trust Secured Visa, Capital One Secured Mastercard, or Neo Financial Secured Card. Use the card for small purchases and pay the full balance each month. After 6 to 12 months of perfect payment history, you will see your score begin to recover.



3. Keep Utilization Below 30 Percent on All Accounts

   Credit utilization is the second most important scoring factor. On a secured card with a $500 limit, keep your balance below $150 at all times. As your credit improves and you qualify for higher limits, maintain the same discipline.



4. Monitor Your Reports and Dispute Remaining Errors

   Check your credit reports quarterly through Borrowell (Equifax) and Credit Karma Canada (TransUnion). Dispute any inaccuracies, outdated information, or collection entries that should have aged off your report. In most provinces, collection entries should be removed six years after the date of last activity.

Frequently Asked Questions About Medical Debt and Credit in Canada

Taking Control of Medical Costs Before They Become Credit Problems

Medical debt in Canada is a growing concern that receives far too little attention. The assumption that universal healthcare protects Canadians from medical financial hardship is outdated and incomplete. Dental care, prescription drugs, vision care, mental health services, physiotherapy, ambulance fees, and medical devices all represent potential sources of debt that can devastate a credit score.

The most effective approach combines prevention — enrolling in available provincial programs, maintaining appropriate insurance coverage, and negotiating payment plans — with proactive management if debts do arise. By understanding how medical costs flow through the collection process and onto your credit report, you can intervene at the right time to protect your financial health alongside your physical health.

If medical collections are already on your credit report, know that recovery is possible through dispute resolution, settlement negotiations, and disciplined credit rebuilding. Your health should never be a choice between physical well-being and financial well-being — but in the current Canadian system, protecting both requires awareness and action.