Why is Healthcare So Expensive?

Why is Healthcare So Expensive – Overview

Reports on health insurance availability show that the life expectancy in the US is around 76.1 years, and around 91.4% of the population has health insurance. This starkly contrasts to other industrialized countries where health insurance is available to 99% to 100% of the population.

High Cost of Healthcare in the US

The US healthcare system is complex, and the market drives most expenses. Unregulated, high costs of prescription drugs, along with the healthcare providers’ high salaries, are higher in the United States than in most Western countries.

For instance, hospital care accounts for 31% of US national healthcare expenditures. In addition, administrative expenses, such as billing and coding, also tend to increase the overall cost of healthcare in the US.

Besides this, numerous other factors affect the overall cost of healthcare in the US. As the basic salary of Americans increases, the net pay has remained the same due to the rising cost of health insurance.

In short, the complex medical billing and coding systems compel healthcare providers to hire costly administrative help for invoice management. This makes Americans pay around 4 times as much for prescription drugs as compared to other similarly developed nations.

Additionally, hospitals, doctors, and nurses in the US tend to charge significantly more, and hospital costs are increasing faster than healthcare professionals’ salaries. Besides this, the federal government partially controls the cost of healthcare and medicines. Still, prescription drug prices in the US are not regulated and depend on market factors.

Reasons for Costly Healthcare in the United States

Why Is Healthcare So Expensive

Why Is Healthcare So Expensive – Reasons for Costly Healthcare

Let’s check out the most prominent reasons why healthcare is so expensive in the United States:

1 – Complex Administrative Regulations

Administrative costs are mainly the common reason cited for excess spending on healthcare in the US. According to reports, the US spends around 8% of its overall healthcare budget on administrative costs compared to 1% to 3% in other top 10 developed countries.

The healthcare system in the United States is quite complex. It has several different sets of rules, funding enrollment dates, out-of-pocket expenses for employer-sponsored health insurance plans, and government-sponsored health insurance, such as Medicaid and Medicare.

In every one of these sectors, the consumer must choose from several coverage tiers, managed care plans (PPOs and HMOs), high-deductible plans, and free-for-service systems. These insurance plans may or may not include coverage for prescription drugs.

For healthcare providers, this results in them dealing with numerous different regulations regarding coding, usage, and billing.

2 – Rising Costs of Medicine

Generally, US citizens tend to pay twice as much for prescription drugs as compared to citizens from other industrialized countries. Higher prescription medicine costs are the single most prominent area of overspending by the US government, as compared to European nations, where the government strictly regulates drug costs. Prescription drug prices in other countries depend on the specific medication’s clinical benefit.

With the least control over drug prices, the US government spends around US$ 1,443 per person compared to US$ 749 per person spent by other industrialized nations. Also, the drug prices in the US are over 250% of those in other developed nations.

The US government allows private insurance companies to negotiate and determine drug prices with the manufacturers. Still, Medicare pays a hefty percentage of the national drug costs and is not allowed a say in determining prescription drug prices.

3 – Healthcare Providers Get Paid More

On average, a certified physician in the United States in 2023 earned around US$ 294,000 per year, while specialists can earn as much as US$ 316,000 annually. This is way over the average salary of healthcare providers in other countries.

Nurses in the US tend to make more than others, too. For instance, a nurse in the United States can earn an average of US$ 74,250 per year, compared to around US$ 58,040 in Switzerland.

4 – Hospitals Are Focused On Profit More Than Healthcare

Hospital care costs cover around 31% of the nation’s healthcare costs. There has been a remarkable increase in inpatient and outpatient hospital care in the US in the past decade or so. Generally, the cost of a surgical procedure in the United States also greatly exceeds those of other similarly developed nations.

For instance, a typical angioplasty to reopen a blocked blood vessel in the US costs around 32,230 in the United States, whereas the same surgical procedure is done for as low as US$ 7,370 in Switzerland. This incredibly high difference in the costs of surgeries in the US is also true for other surgical procedures.

Currently, most hospitals need help to make ends meet financially. In addition, the cessation of elective surgery and the drastic decline in provider visits also add to healthcare providers’ woes.


Due to the complexity of the healthcare system in the United States and the lack of regulations regarding the price determination of prescription drugs, healthcare providers have an almost free hand in determining what they charge patients.

The same type of treatment can cost drastically different prices, even within the different states of the US. There is a stark need for stricter regulations and some laxity in administrative costs to reduce healthcare costs to more acceptable levels.

See Also

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Is Medical Insurance Tax Deductible

Are Medical Expenses Tax Deductible?

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