Why Healthcare Costs Keep Rising in the U.S.
Why U.S. healthcare is so expensive: updated snapshot and global context
This page focuses on the “price-and-structure” story behind U.S. healthcare costs: how large the system is, how it compares internationally, and which cost drivers are repeatedly highlighted across the evidence. Update timestamp: January 2026.
National Health Expenditures (NHE), U.S.
Average spending per capita, U.S.
Health spending as a share of the economy
Growth vs. 2022 (rebound in utilization and intensity)
International comparison: health spending per capita (USD PPP, 2022)
Values are in USD purchasing power parity (PPP) to improve cross-country comparability. The OECD notes that the U.S. is far above peers; the table below shows a compact set of high-income comparators.
| Country | Per capita spending (USD PPP) | Relative to U.S. | Quick read |
|---|---|---|---|
| United States | 12,555 | 1.00× | Highest in the OECD for 2022 |
| Switzerland | 8,049 | 0.64× | High spending; compulsory insurance model |
| Germany | 8,011 | 0.64× | High spending; social insurance tradition |
| France | 6,630 | 0.53× | Strong public coverage and price regulation |
| Canada | 6,319 | 0.50× | Single-payer core for hospital/physician services |
| Japan | 5,251 | 0.42× | Fee schedule + cost controls across payers |
| Source basis: OECD “Health at a Glance 2023” country notes (2022, USD PPP). The U.S. NHE headline metrics above are from CMS (2023). | |||
Chart: per capita spending gap vs. peers (2022, USD PPP)
Where the money goes in the U.S.: payers and major services (2023)
High U.S. healthcare spending is not “one line item.” It is a system-wide total across multiple payers (private insurance, Medicare, Medicaid, households) and multiple service categories (hospital care, physician services, prescription drugs, etc.). The 2023 CMS snapshot below helps anchor the discussion in concrete magnitudes.
Payer breakdown (2023): who financed the $4.9T total
Shares are shown as percent of total NHE. (Rounded values align with the CMS fact sheet.)
| Payer | Spending (USD bn) | Share of NHE | What this implies |
|---|---|---|---|
| Private health insurance | 1,464.6 | ~30% | Largest single payer block; prices and negotiated rates matter |
| Medicare | 1,029.8 | ~21% | Ageing population increases baseline demand |
| Medicaid | 871.7 | ~18% | Large public program; eligibility and enrollment cycles matter |
| Out of pocket | 505.7 | ~10% | Direct patient burden (copays, deductibles, uncovered care) |
| Other third party + public health activity | 563.4 | ~12% | Other programs and public health; smaller but not trivial |
| Note: totals may not sum exactly to 100% due to rounding. | |||
Chart: payer spending levels (USD bn, 2023)
A simple magnitude view helps: private insurance + Medicare alone exceed $2.4T in 2023.
Major service categories (2023): hospitals, physicians, prescription drugs
These are three of the largest and most frequently discussed spending categories in the U.S. system. In 2023, hospital spending grew 10.4%, physician & clinical services grew 7.4%, and prescription drug spending grew 11.4% (per CMS).
| Service category | Spending (USD bn) | Share of NHE | Growth note (2023) |
|---|---|---|---|
| Hospital care | 1,519.7 | ~31% | Faster utilization/intensity rebound |
| Physician & clinical services | 978.0 | ~20% | Broad outpatient and clinical spending base |
| Prescription drugs | 449.7 | ~9% | Price mix and specialty drugs are key drivers |
| Source: CMS NHE Fact Sheet (2023 historical highlights). | |||
Chart: top service categories (USD bn, 2023)
Hospitals dominate the single-category picture; physicians/clinical services are second; drugs are smaller than many assume, but still large in absolute dollars.
What drives U.S. healthcare costs: prices, administration, and incentives
The U.S. does not necessarily consume dramatically more “healthcare volume” than peers across all categories. A recurring finding is that prices (what is paid per service, drug, or unit of care) plus system design (multi-payer complexity, billing overhead, negotiation dynamics) produce a much higher total.
1) Administrative complexity: overhead is large in absolute dollars
One widely cited comparison (U.S. vs Canada, 2017) estimates that U.S. insurers and providers spent $812B on administration—about $2,497 per person—representing 34.2% of national health expenditures, versus $551 per person (17.0%) in Canada.
Why this matters: even modest efficiency gains in billing/claims and insurer/provider overhead scale into very large dollars at a $4–5T system size.
- Multiple payers + multiple rulebooks increases transaction costs.
- Provider time and staffing for coding, prior authorization, and appeals compounds.
- Households also pay “time costs” navigating coverage and bills.
2) Prescription drug prices: the U.S. pays much more than other high-income countries
A federal comparison of 2022 prices reports that overall U.S. prescription drug prices were about 2.78× those in comparison countries; for brand-name drugs, the gap was about 4.22×.
Importantly, “drug spending share” can look smaller than expected in a payer table while still being a major pain point for households—because out-of-pocket exposure can be concentrated on specific therapies, formularies, and benefit designs.
3) Outlook: spending projected to outpace GDP over 2024–2033
CMS projects average NHE growth of 5.8% over 2024–2033 versus average GDP growth of 4.3%, lifting health spending from 17.6% of GDP (2023) to 20.3% (2033). CMS also notes a projected 8.2% growth rate for 2024 and a high insured share (about 92.1%) in 2024.
Policy takeaway (high level): the biggest wins typically come from aligning price signals and reducing friction across the system—not from a single “magic” cut.
- Lower administrative complexity (standardization, automation, fewer rulebooks).
- Strengthen price discipline (especially where market power is concentrated).
- Use benefit design that protects patients while discouraging low-value care.
- Improve transparency where it changes purchasing behavior (not just disclosure).
In practice, the mix of levers differs by state, payer segment, and market structure. But the consistent message is that the U.S. cost problem is largely a price-and-system design problem, not simply “Americans visit doctors too often.”
Primary sources (clickable)
Links open in a new tab. These are the sources used for the updated figures and comparisons in this page.
-
CMS — NHE Fact Sheet (Historical 2023; Projected 2024–2033)
cms.gov — NHE Fact Sheet -
OECD — Health at a Glance 2023 (country notes; 2022 USD PPP)
oecd.org — Health expenditure per capita (method + context) -
Administrative costs (U.S. vs Canada, 2017) — Annals of Internal Medicine (PubMed record)
pubmed.ncbi.nlm.nih.gov — Administrative costs study -
U.S. vs international prescription drug prices (2022)
aspe.hhs.gov — Comparing prescription drugs
rand.org — Summary (brand-name gap highlighted)
Why Healthcare Costs Keep Rising in the U.S. — Tables & Charts (ZIP)
One archive with ready-to-use tables (CSV + XLSX) and PNG charts used in this page. Handy for reuse in reports and updates.
