Health care is expensive. It’s time to treat the cause.

America Is Spending More Without Getting Enough Health

U.S. health care spending reached approximately $5.3 trillion in 2024, equal to $15,474 per person and 18 percent of the nation’s gross domestic product. Federal projections indicate that health spending could reach 20.6 percent of GDP by 2034 if current trends continue. That is not a rounding error. It is an enormous share of the economy devoted to keeping people healthyor, too often, managing illnesses after they have become severe.

The financial pressure is visible in household budgets. In 2025, the average annual premium for employer-sponsored family coverage reached $26,993, with workers contributing an average of $6,850 directly from their paychecks. Employers may write the larger check, but employees ultimately feel health costs through premium contributions, deductibles, reduced wage growth, and fewer resources available for other benefits.

Insurance does not guarantee affordability, either. Recent KFF polling found that 36 percent of adults had skipped or postponed needed health care because of cost. Forty-three percent reported at least one form of medication nonadherence related to cost, such as not filling a prescription, substituting an over-the-counter product, cutting pills, or skipping doses. Saving money by avoiding treatment may work for this month’s budget, but the untreated condition often returns later wearing a hospital gown and carrying a much larger invoice.

The Real Causes of High Health Care Costs

1. The United States Often Pays Higher Prices

Americans do not necessarily use dramatically more health care than residents of every comparable country. A large portion of the spending difference comes from the prices attached to hospital care, physician services, prescription drugs, administration, medical equipment, and other inputs.

The Commonwealth Fund has found that the United States spends roughly twice as much per person on health care as peer nations. More than half of the excess spending is associated with categories that largely reflect higher prices, including insurance administration, provider administration, prescription drugs, professional compensation, and medical equipment. In other words, the country is not merely buying more care. It is frequently paying more for each slice.

Commercial insurers commonly pay hospitals far more than Medicare pays for comparable services. The Congressional Budget Office has concluded that prices paid by commercial insurers are a major driver of premium growth and that provider market power plays an important role. Its review found that commercial prices averaged more than twice Medicare rates for hospital services, although the exact difference varies by service, provider, insurer, and region. RAND separately reported that private plans paid hospitals about 254 percent of Medicare prices in 2022 across its studied claims.

2. Consolidation Weakens Competition

Hospital systems have purchased competing hospitals, physician practices, surgery centers, and other facilities at a rapid pace. Some integration can improve coordination. It can also give a dominant system enough bargaining power to tell an insurer, essentially, “Accept our prices or explain to your customers why half the doctors in town disappeared from the network.”

According to CBO testimony, the share of hospitals affiliated with health systems rose from 53 percent in 2005 to 68 percent in 2022. The share of physicians employed by hospitals or health systems increased from 29 percent in 2012 to 41 percent in 2022. Consolidation can raise commercial prices and may shift routine services into more expensive hospital-owned settings where facility fees are added. The building has a hospital logo, so apparently the blood draw develops a taste for luxury.

3. Administrative Complexity Consumes Clinical Resources

The American health system maintains a maze of insurers, networks, billing rules, formularies, coding requirements, authorization processes, quality measures, and contract terms. Each participant creates paperwork to manage the paperwork created by the other participants.

A widely cited study published in 2020, using 2017 data, estimated that insurers and health care providers spent about $812 billion on administration, representing roughly one-third of national health expenditures in that analysis. Not every administrative task is wasteful; fraud prevention, patient safety, scheduling, and quality oversight are necessary. The waste appears when clinicians and patients repeat the same information, fight inconsistent coverage rules, correct avoidable billing errors, or wait while one organization asks another organization for permission to follow a physician’s treatment plan.

4. Chronic Diseases Are Managed Too Late

Chronic conditions such as heart disease, diabetes, cancer, chronic lung disease, kidney disease, and obesity drive a substantial portion of long-term medical spending. These conditions cannot all be prevented, and patients should never be blamed for becoming ill. However, many complications can be delayed or reduced through earlier diagnosis, continuous treatment, medication access, nutrition support, physical activity, tobacco prevention, and effective control of risk factors.

The Centers for Disease Control and Prevention identifies chronic diseases as leading causes of death, disability, and health care costs in the United States. Heart disease and stroke alone cost the health system hundreds of billions of dollars annually when direct and indirect costs are considered. Controlling a risk factor such as high blood pressure is less dramatic than performing emergency cardiac surgery, but boring victories are still victories.

5. Primary Care Receives Too Little Investment

A strong primary care system detects problems early, coordinates specialists, manages medications, supports behavioral health, and helps patients avoid unnecessary emergency visits and hospital admissions. Yet the United States devotes a relatively small share of health spending to this foundation.

The Commonwealth Fund reported that primary care represented about 4.7 percent of U.S. health spending in 2021, compared with an average of 14 percent in the other high-income countries studied. The Agency for Healthcare Research and Quality describes strong primary care as necessary for improving population health, raising quality, and reducing costs. We have built a health care skyscraper while economizing on the ground floor.

6. Social Conditions Become Medical Emergencies

Medical care is only one influence on health. Safe housing, transportation, income, nutritious food, education, clean air, working conditions, and community support can affect whether a person develops an illness, obtains treatment, or recovers successfully.

A patient who lacks reliable transportation may miss dialysis. A person choosing between groceries and insulin may ration medication. A child living with mold may repeatedly return to the emergency department with asthma symptoms. Healthy People 2030 emphasizes that these social determinants affect health, quality of life, and disparitiesand that promoting “healthy choices” alone cannot overcome unsafe or unhealthy environments.

7. Payment Often Rewards Volume Instead of Results

Traditional fee-for-service payment rewards each visit, scan, procedure, and admission. Providers are paid when services happen, not necessarily when illnesses are prevented or care is coordinated efficiently. Most clinicians do not order unnecessary care simply to generate revenue. The larger issue is that the payment architecture makes it easier to fund a procedure than a long conversation about nutrition, medication adherence, home safety, or stress.

When organizations are rewarded for improving outcomes within a responsible budget, they have stronger incentives to coordinate care and prevent avoidable complications. When payment remains disconnected from results, the system can become excellent at producing billable events.

How to Treat the Causes of Expensive Care

Invest in Accessible Primary and Behavioral Health Care

Primary care should be available before a manageable problem becomes an emergency. That means supporting team-based practices that include physicians, nurse practitioners, nurses, pharmacists, behavioral health professionals, community health workers, and care coordinators.

Payment should fund same-day appointments, after-hours access, telehealth where appropriate, medication management, home visits for high-risk patients, and communication between clinicians. AHRQ notes that primary care and care-management programs can reduce duplication, improve chronic disease management, and help prevent avoidable readmissions.

Use Prevention Strategically

Prevention is not a magic coupon that makes every future medical expense disappear. Some preventive services cost money while producing better health rather than immediate savings. The answer is to prioritize interventions supported by strong evidence: vaccinations, appropriate cancer screenings, tobacco cessation, blood pressure control, diabetes prevention, prenatal care, and early treatment of behavioral health conditions.

Coverage is only the first step. A free screening does little good when patients cannot take time off work, find transportation, locate an available clinician, or afford the follow-up treatment. Effective prevention requires access, continuity, and a plan for what happens after an abnormal result.

Address Prices and Market Power Directly

Price transparency can help employers, insurers, and patients compare options, but transparency alone cannot create competition where one health system dominates an entire region. Policymakers should examine anticompetitive mergers, restrictive contracting practices, facility fees, and payment differences that reward moving care into more expensive settings.

Possible approaches include stronger merger review, site-neutral payments for comparable services, limits on certain contracting clauses, reference pricing, and carefully designed caps on excessive commercial prices. CBO has identified competition policies, price-transparency measures, and price-growth limits as distinct tools for reducing commercial payment rates. Each involves trade-offs, but pretending prices are untouchable is also a policy choicejust a very expensive one.

Simplify Billing and Insurance Rules

The system needs common electronic standards, simpler claims, consistent prior-authorization requirements, faster decisions, and clearer explanations of benefits. A clinician should not need a graduate seminar in insurer-specific paperwork to prescribe a routine treatment.

Administrative reform must protect patients and prevent fraud while eliminating repeated data entry and conflicting rules. Savings should be redirected toward clinical staff, patient navigation, cybersecurity, and access rather than vanishing into another committee dedicated to simplifying the previous simplification committee.

Make Prescription Drugs Affordable Without Discouraging Innovation

Drug development is risky and expensive, and successful medicines can prevent hospitalization, disability, and death. At the same time, patients cannot benefit from a breakthrough they cannot afford to take.

Better use of generic and biosimilar competition, clearer pharmacy-benefit contracts, evidence-based formularies, negotiation where appropriate, and reasonable limits on patient cost sharing can improve access. The goal should be to reward meaningful innovation rather than complexity, market manipulation, or minor product changes designed mainly to extend exclusivity.

Target Intensive Support to Patients With Complex Needs

Health spending is highly concentrated among patients with serious illnesses, multiple chronic conditions, disabilities, or major acute events. That does not mean these patients are the problem. It means they stand to benefit greatly from coordinated support.

A nurse calling after discharge, a pharmacist reconciling medications, transportation to follow-up appointments, home-based care, or timely palliative care may prevent confusion and readmission. The Peterson-KFF Health System Tracker reported that 5 percent of the population accounted for nearly half of health spending in 2023, underscoring the importance of carefully designed support for people with complex needs.

Measure Outcomes That Matter to Patients

Health systems collect thousands of data points, but measurement should focus on meaningful outcomes: avoidable hospitalizations, complications, functional improvement, medication access, patient experience, maternal safety, healthy life expectancy, and disparities in care.

Metrics should be understandable and difficult to game. The objective is not to create a more athletic hamster wheel of reporting. It is to determine whether patients are actually healthier, safer, and financially protected.

What Different Groups Can Do

Patients and Families

Patients should ask whether a test or procedure is necessary, whether a lower-cost setting is available, whether generic medication options exist, and what the total expected cost will be. They can request itemized bills, appeal incorrect denials, use preventive benefits, and maintain a relationship with a primary care clinician when access allows.

None of these actions fixes a broken market, and patients should not be expected to become claims analysts while sick. Still, asking questions can reduce avoidable surprises and create pressure for clearer information.

Employers

Employers can examine the actual prices paid by their plans, demand transparent contracts, audit pharmacy arrangements, support primary care, and steer employees toward high-quality providers without using punitive cost sharing. They should evaluate total value rather than simply shifting more costs to workers.

Health Care Organizations

Providers can reduce low-value services, improve transitions after hospitalization, integrate behavioral health, simplify scheduling, and publish understandable prices. Leaders should protect clinical time from administrative overload and stop treating burned-out workers as an infinitely renewable natural resource.

Policymakers

Government action should address competition, excessive prices, workforce shortages, insurance complexity, public health, and social determinants together. Isolated reforms may help, but cost control will remain limited if every dollar saved in one corner reappears as a new fee in another.

A 500-Word Reality Check: What Expensive Care Feels Like

Consider a composite experience built from situations that occur throughout the American health care system. A warehouse employee named Marcus has employer-sponsored insurance, but his plan carries a large deductible. He begins experiencing persistent headaches and occasional dizziness. Because an office visit, lab work, and possible imaging could cost hundreds or thousands of dollars, he waits. He tells himself it is probably stress, dehydration, or the mysterious revenge of turning forty.

Months later, Marcus becomes ill at work and is taken to an emergency department. His blood pressure is dangerously high. The hospital performs tests, administers medication, and keeps him for observation. The immediate treatment is appropriate and potentially lifesaving. It is also far more expensive than regular primary care, early diagnosis, affordable medication, and follow-up support would have been.

After discharge, Marcus receives several bills from organizations whose names he does not recognize. One comes from the hospital, another from an emergency physician group, and another from a radiology practice. His insurer’s explanation of benefits contains multiple columns, abbreviations, adjustments, and a sentence assuring him that it is “not a bill,” which is comforting until the actual bills arrive.

His physician prescribes medication and recommends follow-up within two weeks. The first available primary care appointment is six weeks away. Marcus receives a list of in-network practices, but several are not accepting new patients. One phone number is disconnected. Another office says the online directory is outdated. The insurer and provider each suggest calling the other.

Meanwhile, his wife Elena manages diabetes. Her medication is covered, but the pharmacy tells her the preferred product has changed. The new prescription requires authorization. The clinic submits paperwork, the insurer requests additional information, and the pharmacy cannot dispense the drug. Nobody involved believes Elena should go without treatment. Nevertheless, the combined machinery produces exactly that result for several days.

The family’s employer also feels the pressure. Health premiums rise at renewal, leaving less money for wage increases. Management considers increasing the deductible because it is the fastest way to reduce the company’s immediate premium expense. Employees then delay more care, creating the possibility of larger claims later. Everyone is attempting to control costs, yet the incentives push costs downstream rather than removing them.

Now imagine a different system. Marcus has access to a nearby primary care team with evening hours. A nurse checks his blood pressure early, a clinician begins treatment, and a pharmacist helps him choose an affordable medication. Automated reminders and a community health worker support follow-up. Elena’s medication history transfers smoothly between her clinician, insurer, and pharmacy. Authorization rules are standardized, and urgent requests are answered quickly.

The alternative still costs money. Clinicians, medications, technology, and support services are not free. But the spending occurs earlier, more deliberately, and with a greater chance of preventing suffering. The lesson is not that every hospitalization can be avoided. It is that a system designed around access, continuity, and health will produce fewer expensive emergencies than one designed around delayed care and administrative obstacle courses.

The Bottom Line

Health care is expensive because the United States combines high prices, concentrated markets, administrative friction, chronic disease, weak primary care investment, uneven access, and payment incentives that often reward volume. Treating only the bill leaves these forces untouched.

Real cost control means paying fairer prices, simplifying the system, supporting clinicians, strengthening primary care, improving medication access, addressing social conditions, and intervening before manageable problems become medical crises. The country does not need cheaper illness management alone. It needs a better strategy for producing health.