"Far too many Iraqis still have no choice but to drink dirty water and live in insalubrious conditions," said Juan-Pedro Schaerer, the head of delegation for the International Committee of the Red Cross (ICRC) in Iraq.
"This leads to more sick people seeking treatment in a health-care system already stretched to the limit," he said in a statement.
The ICRC noted that around 40 percent of Iraqis, mostly people living in suburbs and rural areas, are not connected to a water network, and must thus either buy water at a cost of around 50 US cents (40 euro cents) for 10 litres, or collect it from often polluted rivers or wells if they cannot afford it.
"Even households that do have piped water regularly experience problems owing to a chronic lack of maintenance and innumerable illegal connections to the network," the ICRC said.
These problems are compounded by a chronic shortage of medical supplies and equipment and the fact that many healthcare facilities themselves often lack proper maintenance and sanitation.
"Many Iraqis simply cannot afford the treatment they need," the ICRC said.
The conflict, ethnic strife and bloodshed that has plagued Iraq since the US-led invasion in 2003 has caused massive disruption to the country's once-renowned health system.
Earlier this month, more than 200 doctors in the city of Karbala closed their clinics in protest against death threats after unsuccessful medical procedures.
Last month the Iraqi government said it would allow doctors to carry guns in self-defence and pledged not to detain them during security operations.
The move to grant weapons permits to doctors came in the light of the killing by insurgents of a large number of professional people, especially medical experts, since the invasion.