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Elijah Hernandez
Elijah Hernandez

Why Health Care Costs In This Country Are skyrocketing


The United States has one of the highest costs of healthcare in the world. In 2021, U.S. healthcare spending reached $4.3 trillion, which averages to about $12,900 per person. By comparison, the average cost of healthcare per person in other wealthy countries is only about half as much. While the COVID-19 pandemic exacerbated the trend in rising healthcare costs, such spending has been increasing long before COVID-19 began. Relative to the size of the economy, healthcare costs have increased over the past few decades, from 5 percent of GDP in 1960 to 18 percent in 2021.




Why health care costs in this country are skyrocketing



Generally, healthcare spending can be thought of as a function of price (dollars charged for healthcare services) and utilization (the amount of services used). There are several underlying factors that can increase price and utilization, thereby boosting spending on healthcare. The most notable of those factors are an aging population and healthcare prices.


It would be one thing if our high healthcare spending led to better health outcomes. However, that is not the case in the United States. When evaluating common health metrics, the United States lags behind other countries despite spending more on such goods and services.


The average American spends a considerable amount of money on healthcare each year. Premium increases, higher deductibles and copays, and soaring prescription drug prices result in spikes in healthcare costs.


According to the Centers for Medicare & Medicaid Services1, in 2021, healthcare costs skyrocketed to $4.3 trillion. Despite the decrease in health services accessed in 2020 due to the COVID-19 pandemic, national health expenditures are expected to reach $6.8 trillion by 20302.


According to the Center for Disease Control and Prevention4 (CDC), more than half of the U.S. population has at least one chronic disease, such as asthma, heart disease, high blood pressure, or diabetes, which all drive up health insurance costs.


A staggering 85% of healthcare costs5 in the U.S. are for the care of chronic health conditions. Moreover, recent data6 finds that nearly 40% of adults over 20 in the U.S. are either overweight or obese, which can lead to chronic diseases and inflated healthcare spending.


Organizations are incentivized to purchase more expensive health insurance plans because the amount employers pay toward coverage is tax-deductible for the organization and tax-exempt to the employee. In addition, low deductibles or small office co-payments can encourage overuse of care, driving demand and cost.


The Act aims to reduce surprise medical bills under private health insurance plans and create better pricing transparency to improve the patient experience and control costs of expensive health conditions.


This is no surprise given that our current regulatory system is structured to support the fee-for-service healthcare delivery and payment model. The Commonwealth Fund15 reports that the fear that healthcare providers will withhold important clinical services to stay under budget is a more significant concern to Americans than the overutilization of services.


Employers and employees can save more money on their monthly premiums with an HDHP, and the HRA will cover out-of-pocket costs and health condition services that the lower-tier health plan may not cover.


Disclaimer: The information provided on this website is general in nature and does not apply to any specific U.S. state except where noted. Health insurance regulations differ in each state. See a licensed agent for detailed information on your state. PeopleKeep, Inc., does not sell health insurance.


"Health care almost always outpaces inflation, and so health-care costs grow faster than the economy," said Cynthia Cox, vice president at the Kaiser Family Foundation. "That's why it's representing a larger and larger share of the economy."


Americans aren't using more health care than people in other nations that spend less. Instead, U.S. residents pay more for each interaction. Hospitals, physicians and clinical care made up more than half of the total health-care spending in 2019.


Instead of focusing on measures that will actually lower costs for Floridians, DeSantis has spent his energy spouting dangerous rhetoric on lifesaving COVID-19 vaccines and signaling his plan to prosecute health care providers.


In addition to the long-term trend for increasing healthcare costs, short-term factors can also make a big difference. Many people will see the cost of their health insurance increase faster than the average in 2021. This is primarily due to the cost of COVID-19 testing and treatments.


  • The Medicare tax withheld from employee paychecks supports the cost of Medicare coverage for retirees. Employees and employers split the tax, and they each pay 1.45%. Self-employed individuals pay the full 2.9% Medicare tax themselves."}},"@type": "Question","name": "How do fraud and abuse impact the cost of healthcare?","acceptedAnswer": "@type": "Answer","text": "Federal authorities have estimated that fraud accounts for between 3% and 10% of total healthcare spending. In 2017, for example, an audit found roughly $95 billion in improper Medicare and Medicaid spending. That's about 8% of the $1.1 trillion the government spent on health coverage programs."]}]}] .cls-1fill:#999.cls-6fill:#6d6e71 Skip to contentThe BalanceSearchSearchPlease fill out this field.NewsletterSearchSearchPlease fill out this field.BudgetingBudgeting Budgeting Calculator Financial Planning Managing Your Debt Best Budgeting Apps View All InvestingInvesting Find an Advisor Stocks Retirement Planning Cryptocurrency Best Online Stock Brokers Best Investment Apps View All MortgagesMortgages Homeowner Guide First-Time Homebuyers Home Financing Managing Your Loan Mortgage Refinancing Using Your Home Equity Today's Mortgage Rates View All EconomicsEconomics US Economy Economic Terms Unemployment Fiscal Policy Monetary Policy View All BankingBanking Banking Basics Compound Interest Calculator Best Savings Account Interest Rates Best CD Rates Best Banks for Checking Accounts Best Personal Loans Best Auto Loan Rates View All Small BusinessSmall Business Entrepreneurship Business Banking Business Financing Business Taxes Business Tools Becoming an Owner Operations & Success View All Career PlanningCareer Planning Finding a Job Getting a Raise Work Benefits Top Jobs Cover Letters Resumes View All MoreMore Credit Cards Insurance Taxes Credit Reports & Scores Loans Personal Stories About UsAbout Us The Balance Financial Review Board Diversity & Inclusion Pledge View All NewsletterFollow Us

Budgeting Budgeting Calculator Financial Planning Managing Your Debt Best Budgeting Apps Investing Find an Advisor Stocks Retirement Planning Cryptocurrency Best Online Stock Brokers Best Investment Apps Mortgages Homeowner Guide First-Time Homebuyers Home Financing Managing Your Loan Mortgage Refinancing Using Your Home Equity Today's Mortgage Rates Economics US Economy Economic Terms Unemployment Fiscal Policy Monetary Policy Banking Banking Basics Compound Interest Calculator Best Savings Account Interest Rates Best CD Rates Best Banks for Checking Accounts Best Personal Loans Best Auto Loan Rates Small Business Entrepreneurship Business Banking Business Financing Business Taxes Business Tools Becoming an Owner Operations & Success Career Planning Finding a Job Getting a Raise Work Benefits Top Jobs Cover Letters Resumes More Credit Cards Insurance Taxes Credit Reports & Scores Loans Financial Terms Dictionary About Us The Balance Financial Review Board Diversity & Inclusion Pledge US & World EconomiesUS EconomyGDP Growth & RecessionsThe Rising Cost of Health Care by Year and Its CausesSee for yourself whether Obamacare increased health care costsByKimberly AmadeoUpdated on October 21, 2022Reviewed byMichael J Boyle Reviewed byMichael J BoyleMichael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics.learn about our financial review boardFact checked byDavid RubinIn This ArticleView AllIn This ArticleWhat Caused This Increase?Government PolicyPreventable Chronic DiseasesHealth Care Costs and the ACAInflation Reduction ActHealthcare Costs by YearFrequently Asked Questions (FAQs) Photo: Sam Edwards / Getty Images


The Emergency Medical Treatment and Labor Act required hospitals to treat anyone who showed up in the emergency room. Uncompensated care costs hospitals more than $38 billion per year, some of which are passed on to the government.


Federal authorities have estimated that fraud accounts for between 3% and 10% of total healthcare spending. In 2017, for example, an audit found roughly $95 billion in improper Medicare and Medicaid spending. That's about 8% of the $1.1 trillion the government spent on health coverage programs.


At age 65, Americans become eligible to enroll in the Medicare federal health insurance program. In 2021, Medicare had almost 64 million beneficiaries. The total number of Medicare beneficiaries will dramatically increase in 2030. By then, all Baby Boomers will be age 65 or older.


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