Healthcare costs in the US are a major concern for many families. Americans spend more on healthcare than people in any other country. However, this high spending does not always lead to better health outcomes.[A]U.S. Health Care from a Global Perspective, 2022: Accelerating Spending, Worsening Outcomes..
In fact, many people struggle to afford the care they need. For example, nearly half of American adults say they have had problems paying medical bills in the past year.[B]Nearly half of American adults faced medical bill issues in last year – survey Moreover, about one in four Americans report skipping care due to the cost.[C]Americans’ Challenges with Health Care Costs
These issues make healthcare costs in the US a critical topic that affects individuals, families, and businesses alike.
In this article, we will explain why healthcare is so expensive in the United States. We will look at the main causes of high costs – such as administrative expenses and pricey medications – using recent data from 2023 and 2024.
We will also compare healthcare costs in the US to those in other developed countries like the UK, Canada, Germany, Japan, and Australia. To show the real impact, we include five real-life examples of Americans (both insured and uninsured) facing high medical bills.
Additionally, we will discuss how these costs impact families, individuals, and businesses. Finally, the article offers practical tips to help you manage and reduce your own healthcare expenses.
Why Are Healthcare Costs So High in the US?
The United States spends far more on healthcare than other countries. Several key factors drive these high healthcare costs in the US:
Administrative Costs
The U.S. healthcare system has complex billing and insurance processes. Handling insurance claims, billing codes, and paperwork requires a lot of administrative work. As a result, about 25% to 30% of excess health spending in the US (compared to other nations) is due to administrative costs.[D]High U.S. Health Care Spending – Commonwealth Fund
This includes costs for insurance companies to process claims and for hospitals and clinics to deal with billing and insurance paperwork. In other words, a large chunk of healthcare costs in the US goes to bureaucracy rather than direct patient care.
High Prices for Prescription Drugs
Americans pay more for medications than people in other countries. The US spends roughly twice as much per person on prescription drugs as peer nations. Brand-name drugs, in particular, often cost two to three times more in the US than elsewhere.[E]High U.S. Health Care Spending – Commonwealth Fund
Furthermore, until recently the government could not negotiate drug prices for Medicare, which kept prices high. Expensive medications raise overall healthcare costs in the US by driving up insurance premiums and out-of-pocket expenses for patients.
Expensive Hospital and Doctor Services
Healthcare costs in the US are pushed up by the high prices charged for hospital stays, surgeries, and doctor visits. Doctors (especially specialists) and nurses in the US earn higher salaries than those in many other countries.
Hospitals also charge more for procedures and tests. For instance, an MRI scan or a surgery often costs significantly more in the US than in other nations. These higher prices contribute significantly to healthcare costs in the US, accounting for about 15% of the excess spending compared to other countries.
Insurance Structure and Lack of Price Controls
The US relies on a mix of private insurance and public programs, which leads to fragmented pricing. Unlike countries where the government sets or negotiates prices, in the US each insurance company negotiates separately with providers. Consequently, there is no single buyer to keep prices down.
Moreover, many prices are not transparent, and patients often do not know the cost of a service until after they receive the bill. This can lead to higher prices, since there is less pressure to keep costs competitive. As a result, healthcare costs in the US remain high.
Greater Use of Costly Tests and Treatments
Americans don’t necessarily visit the doctor more often than people in other countries, but the intensity of care can be higher, adding to healthcare costs in the US. For example, patients in the US are more likely to get advanced scans or procedures during a hospital visit. Some of this extra care may be helpful, but some might be unnecessary (often called “low-value care”).[F]High U.S. Health Care Spending – Commonwealth Fund
Defensive medicine – where doctors order more tests to avoid malpractice lawsuits – can also increase usage. Additionally, the US has higher rates of certain chronic illnesses (like obesity and diabetes), which means more patients needing treatments, medications, and hospitalizations in the long run.
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Figure 1:
Components of Excess U.S. Health Spending
The chart above shows research estimates of why the U.S. spends more on health care than other countries. Administrative complexities account for roughly 30% of the excess spending, making it the single largest factor.
High prices for services and goods (like medications, medical equipment, and higher salaries for healthcare workers) make up most of the rest. In short, Americans are not using vastly more health services than people elsewhere – but healthcare costs in the US end up higher because they are paying much higher prices for each service.[G]How Does the U.S. Healthcare System Compare to Other Countries?
What Do Healthcare Costs Look Like? Recent Data and Trends
Healthcare costs in the US reached a total of $4.9 trillion in 2023[H]US healthcare spending neared $5 trillion in 2023, government report says, driven by higher use of services and new treatments. This was a 7.5% increase from the previous year, outpacing general economic growth.
Healthcare spending also continues to consume a large share of the economy. In 2023, it accounted for 17.6% of the U.S. economy, slightly up from 17.4% in 2022 and among the highest percentages on record.
In practical terms, healthcare costs in the US averaged about $13,400 per person in 2023.[I]How does health spending in the U.S. compare to other countries? (This figure includes all health spending – from doctor visits and hospital care to medications and insurance administration.) That per-person amount has risen from roughly $12,500 in 2022.
Specific areas of spending have seen especially sharp jumps recently. For instance, spending on prescription drugs rose by 11.4% in 2023, largely due to the use of expensive new medications for diabetes and weight loss. Hospital care costs also surged by over 10% in 2023 – the highest increase in nearly three decades.
These increases drive up insurance premiums and out-of-pocket expenses, further raising healthcare costs in the US for everyone. Meanwhile, health insurance coverage has slightly improved. Enrollment in private health plans grew, partly due to expanded Affordable Care Act subsidies.
By 2023, about 92.5% of Americans had some form of health insurance, leaving roughly 7.5% of the population uninsured. Having insurance helps protect people from catastrophic expenses, but as we will see, even insured Americans can face high out-of-pocket costs.
Healthcare Costs in the US vs. Other Developed Countries
The United States spends far more on healthcare than other large developed nations, both in absolute terms and as a share of the economy. To illustrate, U.S. health spending was nearly 18% of GDP in 2021, whereas other high-income countries spent around 9% to 12% of their GDP on health.
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Figure 2:
Health Expenditure per Person in G7 Countries (2021)
The chart above compares healthcare costs in the US to several other rich countries. The US (at about $12,000 per person) greatly outpaces the next highest spender, Germany (~$7,600 per person). Canada, France, and the UK each spent roughly $6,000 to $6,600 per person, about half of the U.S. level.[J]The United States spends a lot more on healthcare per person than other G7 nations
Japan’s spending was around $4,700, and Italy’s about $4,400 – only one-third of what the US spends. In other words, Americans pay tens of thousands more each year for healthcare compared to people in other advanced nations.
If we look at the countries often compared with the U.S. (such as the UK, Canada, Germany, Japan, and Australia), the pattern is similar. For example, in 2022 the US spent about $12,500 per person, while Germany spent around $8,000 per person. Canada and Australia each spent roughly $6,300–$6,600 per person. The UK’s health spending was about $5,500 per person, and Japan about $5,250 per person.[K]List of countries by total health expenditure per capita
Despite spending less, these countries often have health outcomes as good as or better than the United States. In fact, Americans have a lower average life expectancy than people in all those nations, despite the higher spending. This suggests that healthcare costs in the US are not giving a good return on investment in terms of public health.
There are a few reasons other countries spend less. Many of these countries have some form of universal health coverage and negotiate prices centrally (whether through government or non-profit insurers). Consequently, drug prices and hospital fees are often capped or standardized.
Administrative costs are also lower in systems with one or few insurers. By contrast, the U.S. system’s multiple payers and providers lead to higher administrative overhead and less bargaining power to lower prices. The end result is that the U.S. spends more money for similar or even fewer services.
Real-Life Examples of Americans Burdened by Healthcare Costs in the US
To understand the human impact of high healthcare costs in the US, consider these five real-life examples. These cases show how both insured and uninsured Americans can face severe financial strain from medical expenses:
Insured Mother Facing a $550,000 Hospital Bill[L]‘Bill of the Month’ exposes years of outrageous medical charges
Bisi Bennett had health insurance when she gave birth, but complications meant her newborn son needed nearly two months in a neonatal intensive care unit (NICU). Later, she was shocked to receive bills totaling $550,124 for the NICU stay – even though she was insured. Bennett spent almost a year fighting with the insurance and hospital over the charges.
Teacher Hit with a $109,000 Heart Attack Bill
Drew Calver, a high school teacher in Texas, had a heart attack and was rushed to an emergency room. He had insurance through his job. However, the hospital that treated him was not in his insurance network, leading to a huge “surprise bill.”
Calver was charged $109,000 for the emergency heart procedure and hospital stay. Such a bill was devastating on a teacher’s salary. He and his family were extremely worried about how to pay it. This kind of surprise billing illustrates how even an insured person can face a huge bill due to insurance gaps.
A $18,000 Charge for a Routine Urine Test
Elizabeth Moreno went to the doctor for back pain and, as part of her care, a urine drug test was done. Later, she and her father were astonished to find that the lab charged $17,850 for this urine test. Her insurance initially left her with the bill. This “surprise bill” was far above what such a test should cost.
In fact, she took her case public and even to the White House, highlighting the absurdity of a routine test costing so much. Stories like this helped push lawmakers to ban many types of surprise billing. Still, they show that without oversight, some providers charged extremely high prices for simple procedures.
Cancer Patient Billed $74,000 for Two Drug Shots
Paul Hinds, who was being treated for prostate cancer, received two injections of an older drug called Lupron. He later received a bill for nearly $74,000 for just those two shots. Lupron is not a new drug, and in other countries it costs only a few hundred dollars.
The exorbitant charge in the U.S. highlights how prescription drug prices can be drastically higher. Hinds’s case shows how even patients with insurance can face outrageous costs for medications if those drugs are billed at inflated rates by providers.
Uninsured Traveler Owes $34,000 After Emergency Surgery
Leslie “Jay” Comfort, a 66-year-old American, lived abroad in Switzerland and had Swiss health insurance. When he came to Pennsylvania to attend his daughter’s wedding, he suddenly developed acute appendicitis. He underwent an emergency appendectomy at a local hospital.
Because his Swiss insurance had no agreement with the U.S. hospital, he was treated essentially as an uninsured patient. The total bill was $42,156 for the surgery and care.[M]Appendix emergency saddles American expat with huge hospital bill : Shots His Swiss insurer reimbursed what the surgery would have cost in Switzerland – about $8,000 – leaving Jay with roughly a $34,000 balance to pay out-of-pocket.
This real-life story underscores what an uninsured American might face for an emergency: tens of thousands of dollars in debt for a single urgent procedure. It also shows how U.S. prices (in this case, over $42k for an appendix surgery) are many times higher than elsewhere.
These examples are not isolated. Every year, millions of Americans, insured and uninsured, struggle with medical bills. About four in ten adults in the US have some form of medical debt. Furthermore, an estimated 100 million people in America have had to set up payment plans or owe money for healthcare costs in the US.[N]Healthcare Insights: How Medical Debt Is Crushing 100 Million..
Some people resort to crowdfunding sites like GoFundMe to ask strangers for help paying medical bills. In 2020, there were around 200,000 GoFundMe campaigns for medical expenses in the U.S., which is 25 times more such campaigns than a decade earlier.[O]GoFundMe Has Become a Health Care Utility – KFF Health News
In short, high healthcare costs in the US are causing real financial hardship, leading families to deplete savings, incur debt, or even declare bankruptcy due to medical bills.
Impact of High Healthcare Costs in the US on Families and Businesses
For families and individuals, the rising healthcare costs in the US can be financially crushing. When people can’t afford care, they may delay or skip treatments, often getting sicker as a result. Surveys show that in the past year about 25% of U.S. adults delayed medical care they needed because they couldn’t afford it.
Among uninsured adults, about 61% skipped care due to cost in the last year. Even insured people often face high deductibles and co-pays that strain their budgets. Many families have to make tough choices between paying medical bills and other necessities like rent or education.
Consequently, medical issues are a leading cause of personal debt. Around 41% of adults – including those with insurance – have some debt from medical or dental bills.[P]Americans’ Challenges with Health Care Costs This debt can damage credit scores and cause stress, affecting mental health and family stability.
High healthcare costs in the US also take an emotional toll. People worried about bills may experience anxiety or delay seeking care for serious symptoms. Families with sick members might face not only illness but also collection calls and potential bankruptcy.
For instance, parents of a sick child might find themselves arguing with insurance companies or racing to raise funds, rather than focusing on caregiving. This financial stress from high healthcare costs in the US can affect work performance and personal relationships.
For businesses, especially employers, the high cost of healthcare is a major challenge. In the United States, many people get health insurance through their employer. Providing health benefits has become increasingly expensive for companies.
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In 2023, the average annual premium for a typical employer-sponsored family health insurance plan was about $23,968.[Q]Employers Seek Strategies to Combat Rising Health Care Costs Employers usually pay most of that premium, but workers still contribute an average of around $6,500 a year toward the cost.
Additionally, many plans have high deductibles, meaning employees must pay thousands more out-of-pocket before insurance fully kicks in. Because employers spend so much on health insurance, that leaves less money for salaries and business investments. In fact, 74% of employers say that increasing health care costs often lead to reduced or smaller raises for employees.
In other words, money that could have gone to wage increases is instead absorbed by insurance premiums. Small businesses are hit especially hard, and many cannot afford to offer health benefits at all, making it tough to attract and retain workers.
High health costs can also impact business competitiveness. Companies must account for healthcare in their budgets, which can raise the cost of doing business in the US compared to countries with cheaper healthcare.
According to a national coalition of employers, nearly half of businesses feel that healthcare costs in the US hurt their ability to compete for talent. Moreover, some businesses may hesitate to hire new workers if it means significantly higher insurance costs, potentially affecting job growth. In extreme cases, businesses facing financial strain might cut jobs or reduce benefits due to steep health expenses.
Tips for Managing and Reducing Your Healthcare Expenses
While systemic solutions are needed to truly lower healthcare costs in the US, individuals can take steps to lessen the burden on themselves. Here are some practical strategies to help manage personal healthcare expenses:
Choose In-Network Providers
If you have insurance, try to use doctors, hospitals, and pharmacies within your insurance network. In-network providers have pre-negotiated lower prices with your insurer. By contrast, going out-of-network can lead to very high bills that your insurance might not fully cover.
Ask for Generic Medications
When you need a prescription, ask if a generic version is available. Generic drugs have the same effect as brand-name drugs and are approved by the FDA, but they often cost much less. Additionally, many big-box retailers and pharmacies offer discount generic drug programs. Using generic medicines whenever possible can save a lot on pharmacy bills.
Shop Around for Non-Emergency Care
Prices for the same medical service can vary widely between providers. For planned procedures or imaging tests (like blood work, X-rays, or MRIs), compare prices from different facilities if you can.
Some states have websites for price transparency, and independent imaging centers or clinics might charge less than hospitals. For example, an MRI at an outpatient imaging center might cost a fraction of what a hospital charges.
Use Preventive Care and Lifestyle Measures
Preventing health problems or catching them early can reduce costs in the long run. Take advantage of preventive services that are often covered at no cost by insurance (such as annual checkups, vaccines, blood pressure screenings, and cancer screenings).
Furthermore, maintaining a healthy lifestyle by exercising, eating well, and not smoking can help prevent chronic diseases that are expensive to manage (like diabetes or heart disease). While not all health issues are preventable, healthy habits can lower your risk and thereby potentially lower future medical bills.
Understand Your Insurance Benefits
Take time to learn what your health plan covers and what it doesn’t. Knowing your deductible, co-payments, and out-of-pocket maximum can help you plan. For instance, if you know you have a high deductible, you might set aside money in a Health Savings Account (HSA) if you have access to one. HSAs and Flexible Spending Accounts (FSAs) let you save pre-tax dollars for healthcare costs in the US, which can stretch your budget further.
Negotiate Bills and Ask for Assistance
If you receive a medical bill that you cannot afford, do not hesitate to call the billing department and discuss it. Sometimes hospitals have financial assistance or charity care programs, especially for uninsured or low-income patients.
You can also request a payment plan to spread out payments interest-free. Moreover, review all medical bills for errors – billing mistakes are common. If something looks wrong (like a charge for a service you didn’t receive), contact your provider to have it corrected.
Use Urgent Care or Telehealth When Appropriate
For non-life-threatening issues, consider visiting an urgent care clinic instead of an emergency room. Urgent care centers often charge much less than ERs and can handle things like minor injuries, flu symptoms, or infections.
Telehealth (virtual doctor visits) can also be a lower-cost option for consultations and has become more widely available. Using these alternatives can save money and still get you timely care.
Remarks
By being proactive and informed, individuals can reduce some of their personal healthcare costs in the US. These steps won’t solve the larger problem of high healthcare costs in the US, but they can provide some relief.
Additionally, staying informed about healthcare policy changes – such as new laws that cap insulin prices or limit surprise billing – can help you take advantage of new protections as they come.
Conclusion
Healthcare in the United States is expensive, and it affects everyone in some way. In summary, the main reasons for high healthcare costs in the US include administrative complexity, high prices for drugs and services, and inefficiencies in how care is delivered.
Recent data shows that Americans pay about twice as much per person for health care as citizens of other developed countries, without enjoying better health outcomes. This reality puts a strain on family finances, forces people to make hard choices about medical care, and pressures businesses that strive to provide benefits while remaining competitive.
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Real-life stories – from insured individuals facing six-figure surprise bills to uninsured patients dealing with enormous debts – highlight the urgent need to address these costs. Nonetheless, while broader reforms are being debated, Americans can take certain steps to protect themselves: choosing in-network providers, opting for generic medications, comparing prices for services, and utilizing preventive care, among others.
Lowering healthcare costs in the US will require efforts from policymakers, healthcare providers, insurers, and patients together. Ultimately, the goal is a system where no American has to choose between their health and their financial well-being because of high healthcare costs in the US, and where quality care is affordable and accessible to all.
Some Common Questions People Ask about the Healthcare Costs in the US
Here are some common questions people ask about the Healthcare Costs in the US:
How much does healthcare cost in the US?
Healthcare costs in the US are extremely high, averaging about $13,400 per person each year. Americans pay significantly more for medical services than people in other wealthy countries. High hospital fees, costly medications, and complex insurance administration all add up quickly, making healthcare expenses challenging for many families to manage.
Why is US healthcare so expensive?
Healthcare costs in the US are high due to several reasons, including expensive administrative processes and high prescription drug prices. Additionally, hospitals charge more for services compared to other countries. The fragmented healthcare system, without standardized pricing, also contributes to higher expenses, making healthcare unaffordable for many Americans.
How much of the US budget goes to healthcare?
Healthcare costs in the US make up a significant part of the federal budget, around 26% in recent years. Programs like Medicare, Medicaid, and the Children’s Health Insurance Program consume most of this spending. As healthcare prices continue to rise, the budget allocation for these expenses also increases.
How much would universal healthcare cost in the US?
Providing universal healthcare in the US could initially cost around $3 trillion annually, depending on the coverage details. However, many experts argue it could lower overall healthcare costs in the US by simplifying administration and negotiating lower prices. Over time, savings might offset initial costs, making healthcare more affordable overall.
Why doesn’t the US have free healthcare?
The US doesn’t have free healthcare primarily because of political and economic factors, including powerful insurance and pharmaceutical industries. Concerns over higher taxes and government control of healthcare decisions also prevent universal coverage. As a result, healthcare costs in the US remain high, creating ongoing debates about possible reforms.
Which country has the best healthcare system?
Many studies rank Switzerland as having the best healthcare system due to its high quality and universal access. Unlike healthcare costs in the US, Switzerland combines private insurance with strict government regulations, ensuring affordable, efficient care. Citizens benefit from comprehensive coverage, shorter wait times, and excellent health outcomes.
Where is US ranked in healthcare?
Despite high healthcare costs in the US, the country typically ranks lower in overall healthcare performance. According to recent studies, the US often ranks around 30th globally. Factors like high costs, uneven access, and comparatively poorer health outcomes lower the country’s ranking significantly compared to other wealthy nations.
What country has free healthcare?
Several countries offer free healthcare funded by taxes, including the United Kingdom, Canada, and Australia. These countries provide universal coverage, ensuring that citizens receive necessary medical services without direct payments. Unlike healthcare costs in the US, people in these countries usually face minimal or no out-of-pocket expenses.
Is US healthcare really the best in the world?
Although healthcare costs in the US are the highest globally, it does not consistently deliver the best outcomes. Americans experience shorter average lifespans and higher disease rates compared to other developed nations. High costs and unequal access mean the US healthcare system performs poorly in overall global comparisons.
Why does the US rank so low in healthcare?
The US ranks low in healthcare because of high healthcare costs in the US, limited access to care, and uneven quality. Millions remain uninsured or underinsured, making it difficult for many people to receive timely medical attention. Additionally, high administrative expenses and costly medications further lower its global healthcare ranking.
