Medical bills pushed more Americans into poverty last year than either of the two largest taxes withheld from a paycheck, according to the Census Bureau’s Supplemental Poverty Measure for 2025. Out-of-pocket medical spending moved 7.7 million people below the poverty line, compared with 4.5 million pushed there by FICA payroll taxes and 4.0 million by the federal income tax. The measure treats medical costs as an expense working against income, a design choice that ranks health spending ahead of any single tax as a driver of poverty in the Bureau’s own year-end accounting.
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How the Supplemental Poverty Measure counts medical costs
The official poverty measure compares only pretax cash income against one national threshold that does not vary by geography. The Supplemental Poverty Measure starts from a broader definition of resources, adding noncash benefits such as SNAP and housing subsidies to cash income, then subtracts necessary expenses, including medical out-of-pocket spending, taxes, and work-related costs, before comparing the result to a threshold adjusted for geography and housing costs.
That subtraction step is what lets medical bills function the same way a tax does inside the calculation. A dollar spent on a hospital deductible reduces a household’s counted resources exactly as a dollar withheld for FICA does, which is why the Census Bureau’s September 15 presentation could rank the two side by side on a single slide, listing which expense categories moved the most people below the poverty line nationally in 2025.
Nationally, the Supplemental Poverty Measure put the overall 2025 poverty rate at 13.1 percent, above the official rate of 10.2 percent, or 34.5 million people. The gap between the two measures exists for the same structural reason it exists in the medical-spending comparison: the SPM subtracts real household expenses the official measure ignores, so any expense category large enough, medical bills included, can widen the difference between the two national rates.
Medical bills outweigh FICA and the income tax bill
The Bureau’s presentation put medical out-of-pocket expenses at the top of the list of factors moving people into poverty in 2025, crediting them with pushing 7.7 million people below the line. FICA payroll taxes accounted for 4.5 million, and the federal income tax accounted for 4.0 million, according to the same slide. Work expenses, a fourth and smaller category, moved 1.4 million people into poverty, rounding out the four factors Census singled out as poverty-inducing for the year.
None of those four categories approaches the scale of the antipoverty side of the same measure. The presentation credits Social Security with moving 28.8 million people out of poverty in 2025, refundable tax credits with 6.1 million, SNAP with 3.1 million, SSI with 2.2 million and housing subsidies with 2.1 million, each larger than the number of people pushed into poverty by medical bills or either tax alone.
The same release reported that median household income rose 2.6 percent to $87,460 in 2025, the highest level on record in data going back to 1967. Rising income at the top of the distribution did not prevent medical out-of-pocket spending from remaining the single largest expense category pushing people into poverty at the bottom of it, a split the Bureau’s report does not attempt to reconcile.
Social Security’s much larger pull in the opposite direction
Social Security’s antipoverty effect, the largest of any single resource Census tracked, is calculated the same way as the medical-expense effect: by comparing how many people fall above or below the poverty line with and without that particular resource counted as part of household income. The presentation applies that same counterfactual method across every category on both sides of the ledger, from Social Security and SNAP on the antipoverty side to medical costs, FICA and the income tax on the other.
The comparison does not make medical costs a minor factor. Being the largest of the four expense categories that pushed people into poverty in 2025, ahead of two federal taxes, is itself notable in a year when the Bureau also reported that the poverty rate for people 65 and older runs nearly six percentage points higher under the Supplemental Poverty Measure than under the official measure, a gap the presentation partly attributes to exactly this kind of medical spending.
The official poverty threshold for a family of four was $32,970 in 2025, the income level Census uses before the Supplemental Poverty Measure’s additional adjustments for medical spending, taxes and geography come into play. A family whose income sits above that line under the official measure can still fall below the Supplemental Poverty Measure’s threshold once its medical bills are subtracted from its counted resources.
Census’s presentation does not break the 7.7 million figure down by type of medical expense, so it does not separately quantify how much of that total reflects insurance premiums, deductibles, copays or costs for care that insurance did not cover. The ranking against FICA and the federal income tax stands as reported for 2025, based on the Bureau’s own counterfactual method, without that additional expense-type detail published.
Where medical costs land in a poverty count that also counts taxes
The Supplemental Poverty Measure’s decision to subtract medical out-of-pocket spending from income, the same treatment it gives payroll and income taxes, is why health costs can outrank a federal tax as a driver of poverty in a single year’s data. That subtraction happens the same way whether a household’s medical spending went toward a routine prescription refill or a hospital stay, and the Census Bureau’s presentation does not separate the 7.7 million figure by expense type.
The Medicare Cost & Coverage Protection Kit organizes the new Part D out-of-pocket cap, the prior-authorization appeal steps for a denied claim and a medication and cost tracker in one place for comparing recurring medical expenses against a household budget.
Review the Part D out-of-pocket cap in The Medicare Cost & Coverage Protection Kit.
This article was researched and drafted with the assistance of AI and reviewed by The Money Overview editorial team.
