It might be easier to make sense of the recent fatal shooting of an insurance CEO, an act with ominous overtones about health care costs and insurance coverage, if any one aspect of health-care finance in America had gotten dramatically worse.
But what if there is no one thing?
Everything in American health care seems to cost more, across the board, year after year. Millions of insurance claims get denied. Medical debt routinely drives patients into bankruptcy. And patients see no relief in sight.
“Americans forgo necessary health care every single day, because they can’t afford it,” said Caroline Pearson, executive director of the nonprofit Peterson Center on Healthcare.
The average American spent $1,425 out of pocket on health care in 2022, according to the Peterson-KFF Health System Tracker. Out-of-pocket expenses are the ones not covered by insurance.
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Americans spend more out of pocket on health care than people in most comparable countries, the health policy nonprofit KFF found. In the United Kingdom, for example, out-of-pocket health care costs totaled $764 per person in 2022.
“We don’t consume a lot more health care than other countries,” said Dr. Atul Grover, executive director of the nonprofit AAMC Research and Action Institute. “We just pay a lot more for each thing.”
How much does health care cost today?
The United States spent $4.87 trillion on health care in 2023, according to an analysis by KFF. That’s $14,570 per person.
How much does the typical American family spend on health care? That’s harder to say, especially in the world of private insurance.
One report, from the nonprofit Health Care Cost Institute, found that the average person with employer-sponsored insurance spent $6,710 on health care in 2022.
For a family, the average health insurance premium cost $25,572 in 2024, combining employer and family contributions, according to KFF. Premiums have increased by half since 2014.
Only a fraction of that premium comes out of the employee’s pay. “The vast majority is getting picked up by the employer,” Pearson said, “as a benefit in lieu of wages.”
It is easy to think of the premium as lost wages.
“Every month, your paycheck is smaller than it would be, because your premium costs are higher,” she said. “Every year, your wages go up by less because your employer is paying more for health care.”
Are health care costs rising?
Health care spending has spiraled upward for decades.
Total national health spending has more than doubled since 2000, after inflation, from $2.2 trillion to $4.9 trillion, as of 2023, according to the Peterson-KFF tracker.
Health spending per person has nearly doubled in those years, from an inflation-adjusted $7,908 in 2000 to $14,570 in 2023.
“It goes up every year, and it generally goes up a little bit faster than inflation,” said Pearson of the Peterson Center.
The United States spends more on health care now than 20, 30 or 50 years ago. In 1970, health care made up 7% of the nation’s Gross Domestic Product. In 2023, it ate up nearly 18%.
Americans are spending more of their paycheck on health care. Health care spending consumed 8.2% of the average household budget in 2019, up from 5.4% in 2000, according to KFF.
“People are paying more out of pocket,” Grover said. “And that’s certainly felt more severely for people at the middle- and low-income levels than for people who can afford great health insurance and can also afford to pay more of a share of their health care costs.”
One big trend in health care costs is the rise of “high-deductible” insurance plans: You pay lower premiums, but, in exchange, you pay more out of pocket before your coverage kicks in.
The idea behind high-deductible plans is “that if you give people control of their dollars, they’ll make more cost-conscious decisions,” Grover said.
But higher deductibles can trigger financial meltdowns for families with lower incomes. And it's very hard to "shop around" for lower priced medical care because of a lack of transparency on costs.
“Even if you’ve got a $1,500 deductible, coming up with $1,500 in one month if you’ve got surgery or a procedure is really challenging for a lot of families,” Pearson said.
How big a problem is medical debt?
Twenty million Americans owed medical debt in 2021, according to a Census Bureau analysis. Three million people owed more than $10,000. Collectively, Americans owed at least $220 billion.
Not surprisingly, lower-income Americans are more likely to carry medical debt. So are rural Americans, and people living in the South.
More surprising, perhaps, is the medical debt burden on seniors.
A 2023 watchdog report found that seniors face more than $50 billion in unpaid medical bills, many of which they should not have to pay ‒ Medicare should.
Nearly four million seniors reported unpaid medical bills in 2020, the Consumer Financial Protection Bureau found, even though nearly all of them had health insurance. In many cases, debt collectors pursued seniors for money they didn't actually owe. Medicare, the federal program, was created to protect older Americans from medical debt.
Medical debt drives many Americans into bankruptcy. One 2019 scholarly paper found that more than half of bankruptcy filers cited medical expenses as a contributing cause.
Will health care costs continue to rise?
Total health spending is projected to climb from $14,423 per person in 2023 to $21,927 per person in 2032, according to a report from the nonprofit Peter G. Peterson Foundation.
At that pace, health care spending is on track to consume one-fifth of the American economy by 2032.
What’s driving up the cost of care?
One big reason for rising health care costs is that America is aging: Older people use more health care.
The American population is the oldest it has ever been and getting older. And medical spending rises rapidly with age.
Per-capita health care spending averages $6,669 for adults ages 19 to 44, according to the Peterson Foundation. For seniors ages 65 to 84, it averages $20,503. For people 85 and over, it averages $35,995.
But other affluent nations also have aging populations, and America spends more on health care than all of them.
At least one quarter of health care spending in America “may be considered waste,” according to a 2019 article in the "Journal of the American Medical Association."
One component of waste is red tape: the United States spends $1,055 per person on healthcare administration, compared to an average of $194 in peer countries, according to a 2023 analysis by the Peterson Foundation.
Another problem is overpricing. A recent study found that an MRI scan of the lower spinal canal cost $1,311 in the commercial market, but only $269 under Medicare. Scattershot pricing seeds at least $230 billion in waste per year, the Peterson Foundation found.
The federal government tends to underpay for health care through Medicare and Medicaid, Grover said. Hospitals “lose 10 to 15 cents on the dollar” when the government is paying, he said.
“They have to figure out how to make up those costs somewhere else,” he said, which means higher prices in the private insurance market.
Health care providers sometimes allude to three Ds, “delay, deny, and don’t pay,” to critique the insurance industry, Grover said. The idea is that insurers try to get out of paying claims.
The slogan evokes “defend,” “depose” and “deny,” words reportedly etched on bullet casings found at the scene of the December murder of the UnitedHealthcare CEO.
“We have to do this dance with the insurers,” Grover said. “And I think people are getting stuck in the middle.”
But hospitals, clinics and pharmaceutical companies are charging more, too. Per-person spending on prescription drugs rose from $1,155 in 2018 to $1,563 in 2022, according to the Health Care Cost Institute. Spending on outpatient services rose from $1,596 to $1,889 in those years.
“There’s not a lot of competition, obviously, in the hospital market,” said John Hargraves, director of data strategy at the institute. “People are not looking at a price list and making their decisions based on, ‘Hospital B has a sale, so let’s go there.’”
A wave of consolidation has concentrated power in both the insurance and health-care provider industries, Pearson said.
Consolidation, she said, has pushed up prices on both sides. In some cities, dominant insurers “are really price-setters." In others, prestige hospitals wield “a tremendous amount of negotiating power.”
A 2023 analysis by the Commonwealth Fund, a health care research nonprofit, identified five key components of excess health spending in the United States, compared with other affluent nations:
- Higher administrative costs for insurers, such as claim coding and submission (15% of excess spending)
- Higher administrative costs for providers (another 15%)
- Higher costs for prescription drugs (10%)
- Higher doctor salaries (10%)
- Higher nurse salaries (5%)
But it’s hard to blame any one sector of health care for the runup in spending. In the 1970s, spending by hospitals grew at a faster rate than other sectors, according to a KFF analysis. Since 2020, by contrast, prescription drug spending has risen at a swifter pace.
“Total U.S. health care spending has increased steadily for decades,” researchers from the AAMC Research and Action Institute wrote in a 2022 brief. “Yet, no single sector’s health care cost ‒ doctors, hospitals, equipment, or any other sector ‒ has increased disproportionately enough over time to be the single cause of high costs.”
How often do insurers deny health care claims?
It’s hard to know how often private insurance companies deny claims, because they don’t generally publish the data.
A 2023 KFF analysis of insurance delivered under the Affordable Care Act found that 17% of in-network insurance claims were denied in 2021.
In a 2023 KFF survey, 18% of insured adults reported that their insurer did not pay for care that they thought was covered in the past year.
More:Seven reasons why Americans pay more for health care than any other nation
Is anyone trying to reform health care?
The landmark Obamacare health care package, enacted in 2010, is nearly 15 years old.
And not a lot of meaningful reform has happened since, health officials say.
“We have not, to date, seen a lot of leadership at the federal level on health care spending,” Pearson said.
In 2020, Congress passed the No Surprises Act. Hailed as significant reform, the act protects patients from whopping bills filed by out-of-network doctors during medical emergencies.
Patients are indeed seeing fewer surprise bills, according to industry surveys. But a ProPublica investigation found the new law may ultimately generate higher premiums.
A newer federal law enables the federal government to negotiate drug prices for older Americans, potentially slashing the cost of Medicare’s most expensive medicines.
Looking forward, President-elect Donald Trump’s penchant for unpredictability “makes it difficult to figure out his health care priorities” in his second term, KFF reports.
But other nations offer examples of potential health care reforms for the United States.
One idea: Cap out-of-pocket spending for patients, setting an upper limit on how much they are required to spend.
Other wealthy countries, including the Netherlands, the U.K. and Germany, have comparatively minimal out-of-pocket expenses for health care, according to a report by the Commonwealth Fund.
Another potential reform: Make health insurance progressive, like America’s tax system. Insurance companies and employers could charge lower premiums to people who earn less, Grover said.
Under the current system, he said, “for people who are living paycheck to paycheck, that out-of-pocket expense just feels harder and harder to be able to meet.”