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 with other industrialized countries where health insurance is available to 99% to 100% of the population.

High Cost of Healthcare in the US

Compared to many other countries, the US healthcare system’s complexity contributes to high costs, including regulated but still high prices for prescription drugs and substantial healthcare providers’ salaries.

For instance, hospital care accounts for 31% of US national healthcare expenditures. 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. Americans often pay more for prescription drugs compared to other developed countries, though the exact factor varies by drug and market.

Additionally, in US hospitals, doctors and nurses charge significantly more, and hospital costs are increasing faster than healthcare professionals’ salaries. The federal government influences healthcare costs and has mechanisms to negotiate certain drug prices, particularly through Medicaid, but lacks broad regulatory control over all prescription drug prices.

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 contribute significantly to healthcare spending in the US, with the US spending a higher percentage of its healthcare budget on administration compared to some other developed countries, though exact percentages vary by study.

The healthcare system in the United States is quite complex. It has several 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 sector, 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 coding, usage, and billing regulations.

2 – Rising Costs of Medicine

US citizens often pay higher prices for prescription drugs than those in many other industrialized countries, with the difference in cost varying by medication. 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.

While private insurance companies negotiate drug prices with manufacturers, Medicare’s ability to negotiate prices is limited by federal law, impacting overall drug cost dynamics. 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

Physicians’ and specialists’ average salaries in the US are high compared to other countries, though exact figures can vary widely based on specialty, location, and data source. This is way over the average salary of healthcare providers in other countries.

Nurses in the US tend to make more than others, too. Although nurses in the US may have higher average salaries than their counterparts in many other countries, direct comparisons should consider cost of living and healthcare system differences.

4 – Hospitals Are Focused On Profit More Than Healthcare

Hospital care costs cover around 31% of the nation’s healthcare costs. Inpatient and outpatient hospital care have increased significantly in the US in the past decade or so. The cost of a surgical procedure in the US also greatly exceeds that of other similarly developed nations.

For instance, a typical angioplasty to reopen a blocked blood vessel in the US costs around US$32,230, 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.

Many hospitals face financial challenges, but the situation varies widely among institutions, with some experiencing significant financial pressures while others are more financially stable. 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. To reduce healthcare costs to more acceptable levels, stricter regulations and some laxity in administrative costs are needed.

See Also

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