<p>Public debt is widely assumed to constrain social spending by shrinking fiscal space, yet empirical evidence from advanced economies shows little consistent association between debt levels and public health expenditure. This study revisits the debt–health nexus by distinguishing between two analytically separate fiscal constraints: long-term solvency, captured by public debt stock, and short-term liquidity, captured by debt service obligations. Using an unbalanced panel of 26 OECD European countries from 2000 to 2022, the analysis combines data from the World Bank, the International Monetary Fund, and the OECD and employs a dynamic panel framework estimated with bias-corrected least squares dummy variable methods. The empirical strategy explicitly separates stock and flow effects, controls for total government expenditure to identify compositional crowding-out, and tests whether fiscal constraints vary across macroeconomic conditions. The results indicate that public debt stock does not exert a robust negative effect on health expenditure, suggesting a form of “stock neutrality” in mature welfare states. By contrast, interest payments are associated with significantly lower public health expenditure, even conditional on total government expenditure, indicating compositional crowding-out. Moreover, this liquidity-based crowding-out is shaped by macro-fiscal context, with its strength varying across periods of fiscal stress and more stable economic conditions. These findings highlight the importance of debt-service costs, rather than debt accumulation per se, as a key fiscal mechanism shaping health system financing in advanced economies.</p>