Has Health Care become More Exspensive Since Obamacare?

photorandy2023

4 months ago

I have written or posted several articles on healthcare issues. A series of links has been provided at the bottom of these articles for your convenience.

Overall healthcare costs have continued to rise since the Affordable Care Act (ACA) was passed, but they have done so at a slower rate than before the law. However, the effect on individuals varies. While many have seen a significant reduction in their out-of-pocket expenses due to subsidies, others in the unsubsidized individual market have faced substantial premium increases.

For subsidized individuals

The ACA has made health insurance more affordable for millions of low- and middle-income Americans through premium tax credits and cost-sharing reductions.

Subsidies lower net costs: In 2024 and 2025, enhanced subsidies from the Inflation Reduction Act kept average annual premium payments steady at around $888 for subsidized enrollees. The Congressional Budget Office (CBO) estimates that without these enhanced credits, which are set to expire at the end of 2025, average annual premium payments would more than double in 2026.
Lower out-of-pocket expenses: Cost-sharing reductions help low-income enrollees by lowering deductibles, copayments, and coinsurance.
Increased enrollment: Thanks to these subsidies, ACA Marketplace enrollment has reached record highs, with much of the recent growth coming from lower-income individuals.

For unsubsidized individuals

Not all consumers have benefited from the ACA’s cost protections.

Higher individual market premiums: Average premiums for individual market plans grew significantly after the ACA’s implementation. Some analyses attribute this to regulations and mandates in the individual market, which created a more comprehensive but more expensive type of coverage.
“Sticker price” increases: If enhanced subsidies are not extended, many middle-income consumers with incomes above 400% of the federal poverty level could see their premiums rise significantly, as they would lose all eligibility for premium assistance.

For employer-sponsored insurance

Most Americans get their health coverage through an employer, and for these plans, the ACA’s effect has been different.

Slower cost growth: Some studies show that overall healthcare spending growth slowed after the ACA’s passage, partly due to the law’s focus on value-based payment initiatives.
Compliance costs: Certain provisions, such as the employer mandate, have increased some administrative and regulatory costs for applicable large employers (those with 50 or more full-time equivalent employees).

Reduced uncompensated care costs

By expanding coverage through the marketplace and Medicaid, the ACA has significantly reduced the amount of uncompensated care that hospitals and other providers must provide.

Fewer uninsured: As the number of uninsured Americans fell, the aggregate cost of uncompensated care for the uninsured dropped by a third between 2011–2013 and 2015–2017.
Cost shifting: This reduces the burden on hospitals and, in some cases, can mitigate cost-shifting that might have led to higher premiums for the insured.

Summary: A mixed outcome

In summary, whether healthcare has become more expensive since Obamacare largely depends on a person’s income and insurance source.

Overall Spending: The rate of growth in healthcare spending has slowed since the ACA was passed, though spending continues to rise.
Subsidized Market: The ACA has made health insurance dramatically more affordable for millions of low- and middle-income individuals through subsidies.
Unsubsidized Market: Those who don’t qualify for subsidies in the individual market have often experienced significant premium increases.
Employer Coverage: The law’s impact on employer-sponsored insurance has been less dramatic, with slower overall cost growth but some increased administrative costs.
Risk of Future Hikes: A significant risk for subsidized individuals is the expiration of enhanced tax credits at the end of 2025, which would cause premiums to increase substantially for millions.

Trends in Out-of-Pocket Healthcare Expenses Before and After Passage of the Patient Protection and Affordable Care Act

Introduction

One goal of the 2010 Patient Protection and Affordable Care Act (ACA) was to limit patient out-of-pocket (OOP) health expenses. This cross-sectional study aimed to analyze trends in OOP health expenses in the United States during the last 2 decades and compare the distribution of services that most contribute to OOP spending.

Methods

This study followed the Strengthening the Reporting of Observational Studies in Epidemiology (STROBE) reporting guideline for cross-sectional studies. Institutional review board approval and informed consent were waived because the data were publicly available. Data from the National Health Expenditures (NHE) Accounts from 2000 to 2018 were analyzed. OOP expenditures represent total payments made in the form of deductibles, coinsurance, and health and flexible savings accounts and by individuals who are uninsured. Expenditure estimates were converted to per capita estimates, and the Consumer Price Index was used to adjust all values to 2018 US dollars. Significance was determined using linear regression with gamma error distribution and log link. Significant changes in trends between pre-ACA (2000-2009) and post-ACA (2010-2018) OOP health expenses were determined using an interaction term between ACA and calendar year within the regression. Statistical analyses were 2-tailed (α < .05) and performed using Stata version 15.0 (StataCorp).

Results

From 2000 to 2018, total OOP per capita health expenses increased from $1028 to $1148. The average annual growth rate (AAGR) of OOP spending significantly decreased following the ACA (mean [SD], 0.2% [1.1%] vs 1.0% [2.3%]; linear regression P = .001; quadratic P = .001) (Figure). Mean (SD) AAGR for OOP spending increased for physician services from pre-ACA to post-ACA periods (0.5% [2.1] to 0.8% [2.2]) but decreased for other components of health care cost (Table). Total per capita health expenditures increased from $6649 to $10 627 from 2000 to 2018, with a pre-ACA AAGR (SD) of 3.4% (2.2%) and post-ACA AAGR (SD) of 1.9% (1.6%) (P for trend < .001).

Discussion

Compared with the pre-ACA period, OOP spending increased at a slower rate for almost all health care services during the post-ACA period. Tax legislation in 2003 encouraged employers to provide high deductible health plans (HDHPs) to their employees; however, HDHPs do not reduce OOP spending because of the high upfront cost of care. The ACA implemented OOP spending maximums and increased access to preventive care services, which may have counteracted high OOP spending in HDHP plans. However, ACA-mandated price ceilings are still significant—$7900 in 2019—which may explain why OOP spending is still increasing annually. We speculate that ACA-imposed spending limits for HDHPs account for substantial OOP savings. Furthermore, access to coverage for individuals who were previously uninsured may account for additional OOP savings.

AAGRs for OOP health expenses have increased for physician services since the introduction of the ACA, possibly because of increased use of out-of-network care. Cooper et al demonstrated that at in-network hospitals, some services provided by anesthesiologists, pathologists, or assistant surgeons were billed as out-of-network services, with patients held responsible for additional costs. These costs may come under control with the passage of recent federal legislation to limit surprise billing.

OOP health expenses for prescription medications decreased rapidly from 2010 to 2018. Reasons for these findings include increased prevalence of prescription to nonprescription switches for medications, increased number of clinicians using nonprescription medications as first-line management, loss of patent protection for name-brand drugs, and increased use of prior authorization for prescriptions.

Although the ACA may provide a partial explanation for OOP spending trends, we cannot definitively attribute these changes to the ACA alone. Coinciding economic events, such as the Great Recession, likely decreased consumer willingness to pay OOP for health-associated costs. In the current study, we were unable to determine whether these decreases were secondary to disproportionately high rates of Baby Boomers becoming eligible for Medicare. Moreover, savings in OOP health spending may be nullified by increased taxpayer spending on Medicaid. Access to coverage for individuals who were previously uninsured through Medicaid expansion may account for the greatest OOP savings.

Health insurance premiums before and after the Affordable Care Act

The studies and analyses below were conducted by various organizations to examine premiums for health insurance plans in the individual market, where most of the ACA’s changes took place. Different studies using similar data may find varying results due to variances in the methodologies used by the organizations conducting the studies.

2016 to 2017

The Kaiser Family Foundation (KFF) analyzed the change from 2016 to 2017 in average premiums for benchmark plans offered in major cities in each state, as estimated for a 40-year-old non-smoker earning $30,000 per year. According to KFF, premiums were “expected to increase faster in 2017 than in previous years due to a combination of factors, including substantial losses experienced by many insurers … and the phasing out of the ACA’s reinsurance program.” While the organization did not provide a nationwide average of the change in average premiums, it did note the states with the largest and smallest changes:

“The places with the largest increases in the unsubsidized second-lowest silver plan were Phoenix, AZ (up 145% from $207 to $507 per month for a 40-year-old non-smoker), Birmingham, AL (up 71% from $288 to $492) and Oklahoma City, OK (up 67% from $295 to $493). Meanwhile, unsubsidized premiums for the second-lowest silver premiums will decrease in Indianapolis, IN (down -4% from $298 to $286 for a 40-year-old non-smoker), Cleveland, OH (down -2% from $234 to $229), Boston, MA (down -1% from $250 to $247), and Providence, RI (down -1% from $263 to $261) and increase just 1% in Little Rock, AR (from $310 to $314).”

The table below provides data on the change in monthly premiums and tax credits for major cities in each state.

2015 to 2016

Kaiser Family Foundation

For premium changes from 2015 to 2016, the Henry J. Kaiser Family Foundation conducted an analysis of benchmark plans in major metropolitan areas in each state. The analysis found an average increase of 10.1 percent on the exchanges. Many states saw double-digit increases, and five states experienced rate increases of at least 30 percent. The largest rate increase was in Nashville, Tennessee at 38.4 percent. The largest decrease was found in Seattle, Washington at 10.6 percent.

PricewaterhouseCoopers

An analysis from PricewaterhouseCoopers of premium changes from 2015 to 2016 found that average premiums for benchmark plans offered on the exchanges rose by 4.2 percent. The state-by-state changes in premiums ranged from a 35 percent increase in Oklahoma to 10 percent decreases in Indiana and Washington.

2014 to 2015

PricewaterhouseCoopers

PricewaterhouseCoopers also analyzed premiums for benchmark plans offered on the exchanges and found a nationwide decrease of 0.2 percent from 2014 to 2015. The state-by-state changes ranged from a 26 percent increase in Alaska to a 26 percent decrease in Mississippi.

Heritage Foundation

The Heritage Foundation found a nationwide increase of 5.3 percent for premiums only on the insurance exchanges. For their state-by-state analysis, Heritage divided groups with individual plans by age, looking at 27-year-olds and 50-year-olds. Alaska saw the highest rate increases for both age groups, 28 percent. New Hampshire saw the largest rate declines: average premiums were 4 percent lower for those age 27 and 15 percent lower for those age 50.

Commonwealth Fund

By contrast, the Commonwealth Fund (CwF) performed a study on premium costs for all plans on the exchanges and found no nationwide change between 2014 premiums and 2015 premiums. However, there was wide variation among states: Alaska saw an average premium increase of 31 percent, while Virginia saw an average premium decrease of 56 percent.

Kaiser Family Foundation

The Henry J. Kaiser Family Foundation (KFF) found a 2 percent increase in premiums for benchmark plans—used to calculate subsidy amounts—between 2014 and 2015, which the organization considered “modest.” Under the Kaiser Family Foundation analysis, Alaska saw the largest increases at 26.3 percent. Mississippi saw the largest premium decreases at 25.5 percent.

2013 to 2014

In fall of 2014, a working paper from the National Bureau of Economic Research (NBER), published by the Brookings Institution, found that 2014 premiums in the entire non-group (individual) market (on and off the exchanges) had increased by 24.4 percent more than what they would have risen without the Affordable Care Act. Additionally, the increase in insurers’ costs was 11 percent greater than without the ACA. The results indicated that premium markups increased in 41 states; a possible explanation for this is that insurers had to set premiums before open enrollment and may have set them high to safeguard the possibility of a sicker-than-expected, and thus costlier, pool of new consumers. The report references the study by the Manhattan Institute and explains that the conclusions were different likely because the Manhattan Institute’s data was not enrollment weighted, adding that individuals whose premiums rose by a high percentage “likely selected cheaper plans.”^[8]

In the table below, the label “Pre-ACA” refers to what premiums and costs would have been without the passage of the ACA. The label “Post-ACA” refers to the actual average premiums and costs in the individual market during the first half of 2014.

Estimate for 2014

In 2013, the Manhattan Institute released a report finding that under the Affordable Care Act, “the average state will face underlying premium increases of 41 percent” from pre-ACA to post-ACA rates. Specific time frames for the data were not indicated. The report estimated that premiums for males would increase the most: by 77 percent for those age 27, by 37 percent for those age 40, and by 47 percent for those age 64. The organization estimated increases for women would amount to 18 percent for those age 27, 28 percent for those age 40, and 37 percent for those age 64. The estimates were for plans purchased in the individual market by those who are not covered by employer-sponsored or public health insurance. In 2014, the institute released a revision of the report that found an average premium increase of 49 percent.

The table below displays the premium changes for each state found by the Manhattan Institute analysis.

Fast Facts: Why Are Obamacare Premiums Really Going Up?

Some are claiming that the expiration of Biden’s expanded COVID credits in December 2025 will be the cause of increased premiums for people with Affordable Care Act (ACA) plans. However, this is not the case.

In reality, health insurance companies are actually reporting ACA premiums may increase by 18% on average in 2026 primarily because of increases in medical costs, labor shortages for skilled healthcare workers, high-cost specialty drugs, tariffs and economic uncertainty, and Biden-era inflation.

Increases in Medical Care Costs

The cost of medical care has consistently outpaced the average rate of inflation for several decades, and the majority of insurers say that these costs are continuing to grow at a rapid rate. The so-called “Affordable Care Act” has not made health care affordable. There has also been an increase in demand for medical care, prescription medicine, and diagnostic imaging.

There is an ongoing labor shortage for physicians, nurses, and other skilled workers in the medical field, requiring hospitals to pay much higher wages. The demand for prescription medicine has also increased, especially recently with the rise of high-cost specialty drugs such as the GLP-1 weight loss drugs (e.g. Ozempic). The population is getting older and going to hospitals more, and utilizing more expensive and advanced diagnostic imaging services, such as getting an MRI instead of an x-ray.

All of these factors contribute to higher medical costs nationwide, including people with ACA coverage. Health System Tracker’s analysis estimates these factors account for more than half of the increase in premiums in their sample of insurers.

Tariffs and Rising Economic Uncertainty

Insurers are worried that tariffs will affect drug prices and the broader economy, leading them to request an increase in premiums preemptively. General economic uncertainty is also leading insurers to forecast a reduction in people choosing to be insured. Health System Tracker estimates these factors account for about a fifth of the increase in ACA premiums in 2026.

Biden-Era Inflation

Some insurers specifically reported that the past few years of high inflation, which occurred during the Biden Administration, have contributed to increasing labor and administrative costs, leading them to increase their premiums to cover these growing overhead expenses.

Expiration of Biden’s COVID Credits Reduces Fraudulent Payments to Insurers

Most insurers expect that Biden’s COVID Credits will expire as the law requires in December 2025. This leads to many of them forecasting a decrease in enrollment in their ACA plans, especially in “healthier” enrollees whose plans were substantially or fully subsidized by these credits. This projection assumes healthy individuals will not deem the ACA plans worth the cost of coverage without the subsidy.

If healthier people, who are less likely to file claims for medical procedures or prescriptions in any given year, leave the risk pool, the remaining participants, who are typically older and less healthy, would have to pay higher premiums to offset the increase in average morbidity (one example here).

The estimates that fewer “healthy people” enroll in the ACA only tells part of the story about the risk pool. In reality, the Biden COVID Credits have led to massive levels of fraud and improper payments. Though the insurance companies do not mention it, millions of people were fraudulently enrolled without their knowledge and are often unaware that they have ACA coverage at all. An estimated $27 billion in improper payments to insurance companies were made in 2025 alone.

In effect, the credits these health insurance companies get on behalf of the fraudulent enrollees serve as a direct subsidy to the insurance companies, boosting their bottom line. Insurance companies received at least $35 billion in subsidies for about 12 million ACA enrollees in 2024 who made zero medical claims that year, according to an analysis of HHS data by the Paragon Health Institute. About 40% of fully subsidized Biden COVID Credit enrollees did not file a claim, even for a single prescription or a checkup.

Why Obamacare Premiums Are Really Going Up

Health System Tracker estimates that all other factors, outside of Biden’s COVID Credits expiring, account for almost three-fourths of the increase in premiums.

If the credits are allowed to expire, the federal government will still continue to subsidize a significant portion of ACA participants’ medical expenses, but taxpayers would be footing the bill for fewer fraudulent and higher-income enrollees.

Given these facts, lawmakers should not misattribute rising premiums to the expiration of the Biden COVID Credits. Instead, they should allow them to expire on schedule.

Health Care Costs and Affordability

Introduction

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Health care costs in the United States have generally grown faster than inflation. The U.S. far exceeds other large and wealthy nations in per capita health spending, and health care represents a much larger share of the economy in the U.S. than in peer nations. Elevated health care expenditure in the U.S., however, does not consistently translate into superior health outcomes. Rising health care costs contribute to many people facing difficulties affording medical care and drugs, even among those with insurance. Despite substantial spending, the U.S. health system grapples with disparities and gaps in coverage.

How Has U.S. Health Care Spending Changed Over Time?

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Many people are familiar with the high and rising cost of health care in the United States from seeing how much they spend on their own health insurance premiums and out-of-pocket costs. In addition to these obvious health costs, there are also tax dollars that go to fund public programs and the amounts employers spend toward their employees’ health insurance premiums. Total national health expenditures include spending by both public programs and private health plans, as well as out-of-pocket health spending. Total health expenditures represent the amount spent on health care (such as doctor visits, hospital stays, and prescription drugs) and related activities (such as insurer overhead and profits, health research and infrastructure, and public health).

Total Health Spending Reached $4.5 Trillion in 2022

Figure 1

Note: Health spending is shown in terms of both nominal dollar values (not inflation-adjusted) and constant 2022 dollars (inflation-adjusted based on the personal consumption expenditures (PCE) annual index).

Health spending in the U.S. has risen sharply over the last several decades. The official data on national health expenditures from the Centers for Medicare and Medicaid Services (CMS) show health spending totaled $74.1 billion in 1970. By 2000, health expenditures had reached about $1.4 trillion; in 2022, the amount spent on health tripled to $4.5 trillion. In the first year of the COVID-19 pandemic, health spending accelerated by 10.6% in 2020, even as the use of health care dropped, driven largely by public health spending and financial relief provided to health care providers. Health spending grew modestly from 2021 to 2022, by 4.1%, slightly faster than the 3.2% increase from 2020 to 2021.

In Figure 1, spending is shown in terms of both nominal dollar values (not inflation-adjusted) and constant 2022 dollars (inflation-adjusted based on the personal consumption expenditures, or PCE, index). Inflation in the rest of the economy increased faster than in the health sector in 2022.

Currently, health care represents about 17% of the U.S. economy (measured as a share of gross domestic product, or GDP). In other words, almost 1 out of every 5 dollars spent in the U.S. goes toward health care. Back in 1960, health spending represented just 5% of GDP, meaning 1 in every 20 dollars in the U.S. economy was spent on health care.

Figure 2

Out-of-pocket costs have also risen over time. Out-of-pocket costs represent the amount of money spent by individuals on health care that is not paid for by a health insurance plan or public program like Medicare or Medicaid. This can include cost-sharing (i.e. copays, deductibles, coinsurance), as well as health spending by uninsured people or spending by insured people for care that is not covered at all by health insurance. Out-of-pocket spending does not include the amount spent on a person’s monthly health insurance premium.

Out-of-pocket spending per person was $115 in 1970 (or, adjusted for inflation, $677). By 2022, out-of-pocket spending had reached $1,425 per person. Despite this rise in out-of-pocket spending, health insurance now covers a larger share of total health spending (72%) than it did in 1970 (42%), in part because more people have gained coverage, especially public coverage, but also because health insurance spending per enrollee has grown.

What Factors Contribute to U.S. Health Care Spending?

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Over the last several decades, health spending has been driven higher by a number of factors, including but not limited to an aging population, rising rates of chronic conditions, advancements in medicine and new technologies, higher prices, and expansions of health insurance coverage. While there are always differences across countries, many of these factors driving health costs upward in the U.S. are also driving health costs growth in peer nations. For example, while the U.S. population is indeed aging and that is driving health costs up, many large and wealthy nations have even more rapidly aging populations.

Other factors may explain the United States’ relatively high health spending compared to its peers. The U.S. health system is fragmented, with many private and public payers, and the regulation of these payers is split between states and the federal government. However, these features are not unique to the U.S., either. Indeed, some other countries with much lower health spending have multiple private payers or differences in public programs across states or provinces. The U.S. is also not alone in having a mainly fee-for-service payment system.

The U.S. health insurance system is largely voluntary, whereas peer countries’ health systems are almost entirely compulsory. Additionally, the U.S. federal and state governments have generally done less to directly regulate or negotiate prices paid for medical services or prescription drugs than have governments of similarly large and wealthy nations. The U.S. often pays higher prices for the same brand-name prescription drugs, hospital procedures, and physician care than similarly large and wealthy countries.

There are other factors, largely outside the control of the health system, that also are likely at play, such as socioeconomic conditions (like income inequality and other social determinants of health), and differences in so-called lifestyle factors (like diet, drug use, or physical activity) that could contribute both to higher spending and worse outcomes.

Breaking total national health spending into its components can reveal the major drivers of health costs and where cost containment efforts could be most effective. The charts below show various ways of examining the key contributors of health spending. For example, the National Health Expenditure Accounts show trends in how health spending varies by type of service (e.g. hospital care vs. retail prescription drugs) or by source of funds (e.g. private health plans vs. public programs). An alternative and relatively new approach to understanding health spending is to break out total health spending into the share that goes to treat certain diseases (e.g. heart disease, cancer). Finally, health spending can also be better understood by looking at price trends (e.g. the dollar amount for a hospital stay) and utilization (e.g. the number of hospital stays).

Hospital and Physician Services Represent Half of Total Health Spending

Figure 3

Most health spending in the U.S. and peer countries is on hospital and physician care, followed by prescription drugs. In the U.S., hospital spending represented nearly a third (30.4%) of overall health spending in 2022, and physicians/clinics represented 19.8% of total spending. In comparison to other large and wealthy countries, the U.S.’s higher spending on inpatient and outpatient care explains the vast majority of higher spending on health care overall.

Spending Has Grown for Hospitals, Physicians, and Drugs

Figure 4

During the 1970s, growth in hospital expenditures outpaced other services, while prescriptions and physicians/clinics saw faster spending growth during the 1980s and 1990s. From 2020 to 2022, retail prescription drugs experienced the fastest growth in spending at 7.6%, following 3.3% average annual growth from 2010 to 2020. Average spending growth for hospitals and physicians/clinics between 2020 and 2022 was 3.4% and 4.0%, respectively.

On a Per-Enrollee Basis, Private Insurance Spending Has Typically Grown Much Faster Than Medicare and Medicaid Spending

Figure 5

Per-enrollee spending by private insurance grew by 61.6% from 2008 to 2022 – much faster than both Medicare and Medicaid spending growth per enrollee (40.8% and 21.7%, respectively). Generally speaking, private insurance pays higher prices for health care than Medicare and Medicaid.

Per-enrollee spending for Medicaid rose by 2.2% in 2022 from the previous year and also continued to increase in private insurance and Medicare (4.3% and 3.8% respectively). Medicare and private insurance per enrollee spending continued to grow faster in 2021 and 2022 after slower growth in 2020. Medicaid per-enrollee spending previously declined in 2021 as total enrollment grew, particularly among children and non-elderly adults, who generally have lower per-enrollee spending.

Figure 6

An alternative way to examine the components of health spending is to use the Bureau of Economic Analysis (BEA)’s Health Care Satellite Account, which estimates spending and price growth by disease category (e.g. cancer, infectious disease). This approach differs from the official categorization of health spending by service type (e.g. provider services). Essentially, the new satellite account redefines the “commodity” in health care as the treatment for specific diseases rather than a hospital stay or a physician visit. BEA researchers found that the largest categories of medical services spending include the treatment of circulatory diseases (10.4% of health spending in 2021), musculoskeletal conditions (9.4%) and infectious diseases (9.0%). Another large share of health spending (15.1%) is for “ill-defined conditions,” which can include routine check-ups and follow-up care that is not easily designated for a particular illness.

Health Spending is a Function of Prices and Use

Figure 7

Health services spending is generally a function of prices (e.g. the dollar amount charged for a hospital stay) and utilization (e.g. the number of hospital stays).

People and health plans in the U.S. often pay higher prices for the same prescription drugs or hospital procedures than those in other large and wealthy nations. Meanwhile, there is not much evidence that people in the U.S. use more health care. In fact, Americans generally have shorter average hospital stays and fewer physician visits per capita. Therefore, a large part of the difference in health spending between the U.S. and its peers can be explained by higher prices, more so than higher utilization.

Nonetheless, over time within the U.S., prices and utilization have driven health cost growth to varying degrees. In the 1980s and early 1990s, growth in health care prices far exceeded growth in use. Faster growth in health prices in the U.S. during this time drove the divergence in per capita health spending between the U.S. and other large, wealthy OECD countries. While U.S. health care prices have grown more moderately in recent decades, health services prices continue to exceed what other countries pay.

More recently, the COVID-19 pandemic has led to fluctuations in health care use. Early in the pandemic, many health services, such as elective surgeries, were postponed or canceled and many people elected not to get care to avoid infections at health care sites. In 2021, health services use increased by 8.6%. This increase in health care use in 2021 followed a sharp decrease in health utilization in 2020. Health care prices increased moderately in 2021 by 2.9%. A rebound in utilization and labor pressures are expected to put upward pressure on prices in recent years.

How Does Health Care Spending Vary Across the Population?

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A small portion of the population accounts for a large share of health spending in a given year. Although we tend to focus on averages, few people spend around the average since individual health needs vary over the life course. Some portions of the population (older adults and those with serious or chronic illnesses) require more and higher-cost health services than those who are younger, healthier, or otherwise in need of fewer or less costly services.

Older People and People with Significant Health Needs Account for Most Health Expenditures

Figure 8

While there are people with high spending at all ages, in 2021, people 55 and over accounted for 56% of total health spending despite making up only 31% of the population. In contrast, people under age 35 comprised 44% of the population but were responsible for only 21% of spending.

People with significant health needs account for a large portion of total health spending. People reporting fair or poor health status account for 10% of the population and 29% of the total health spending.

Figure 9

In 2021, the 5% of people with the highest health spending accounted for just over half of total health spending and had an average of around $71,100 in health expenditures annually; people with health spending in the top 1% had average spending of over $160,000 per year. At the other end of the spectrum, the 50% of the population with total health spending below or equal to the 50th percentile accounted for only 3% of all health spending; the average spending for this group was $385. Roughly 14% of the population had $0 in health expenditures in 2021.

Out-of-pocket spending on health services is concentrated similarly to overall health spending. In Figure 9, out-of-pocket spending includes direct payments to providers and cost-sharing but does not include monthly premium payments or contributions towards health coverage. Out-of-pocket health spending is similarly concentrated among high-health-need individuals. This small portion of the population accounts for a substantial share of total out-of-pocket health spending in a year.

In 2021, people in the top 1% of out-of-pocket spending paid an average of about $24,490 out-of-pocket for health services per year, and people in the top 10% spent an average of around $6,190 out-of-pocket per year. People who are in the bottom 50% of out-of-pocket spending spent an average of $24 out-of-pocket.

How Do High Health Costs Affect Affordability of Care?

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In addition to being expensive for the nation as a whole, health care is often expensive for individuals. High health costs pose a particular hardship for people who are in worse health, and people with lower incomes. However, challenges with affording health care are not limited to certain groups — these challenges are pervasive across the U.S. Even people with private health insurance through their employers are often exposed to high deductibles and can therefore face affordability challenges. A substantial share of the population does not have enough savings or other liquid assets to afford the deductible or annual out-of-pocket maximum common in private health plans.

When health care is unaffordable, it can lead to cost-related access barriers for individuals, like forgoing or delaying needed medical care. For those who do receive care, this care can lead to medical debt and other forms of financial instability. Some people experience both affordability challenges, missing some needed care and incurring medical debt for other care.

Half of Adults Say it is Difficult to Afford Health Care Costs

Figure 10

About half of U.S. adults say it is difficult to afford health care costs (Figure 10), and one in four say they or a family member in their household had problems paying for health care in the past 12 months (Figure 11). People with lower incomes, people in fair or poor health, and the uninsured are particularly likely to report problems affording health care in the past year.

Among those under age 65, uninsured adults are more likely to say affording health care costs is difficult (85%) compared to those with health insurance coverage (47%).

Those who have health insurance coverage are not immune to the burden of health care costs. About 4 in 10 insured adults worry about affording their monthly health insurance premium, and 48% worry about affording their deductible before health insurance kicks in. Large shares of adults with employer-sponsored insurance (ESI), and those with Marketplace coverage, rate their insurance as “fair” or “poor” when it comes to their monthly premium and out-of-pocket costs to see a doctor.

1 in 4 Adults Report Putting Off Health Care Because of Cost

Figure 11

Cost-related barriers to accessing health care are more common for some demographic groups than others. For example, people who are Hispanic, lower-income, in worse health, or uninsured tend to have higher rates of self-reported cost-related access barriers.

One-quarter of adults say that in the past 12 months, they have skipped or postponed getting health care they needed because of the cost, according to KFF polling. Women are more likely than men to say they have skipped or postponed getting care (28% vs. 21%). People aged 65 and older, most of whom are eligible for health care coverage through Medicare, are much less likely than younger age groups to say they have not gotten health care they needed because of cost. Six in 10 uninsured adults (61%) say they have skipped or postponed care for cost reasons. Additionally, insured people are not immune from cost-related barriers to accessing care, as 1 in 5 adults with insurance (21%) still report not getting health care they needed due to cost.

What Impact Do Health Care Costs Have on Financial Vulnerability?

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Despite the vast majority of the United States population having health insurance, medical debt is common. Different ways of measuring medical debt result in different estimates of prevalence, but regardless of the method, there is consensus that medical debt is a persistent and pervasive problem in the United States, including for people with insurance.

One way to examine medical debt is through credit reporting, but medical debt is often disguised as other forms of debt when people pay for medical bills on their credit cards or choose to pay off their medical bills while falling behind on other payments.

Another way to measure medical debt is with surveys, which can allow respondents to describe their debt in more detail, with nuance. Questions about medical debt and other financial matters can be difficult to compare across surveys. For example, it is not always clear whether respondents are answering about their personal experiences or about their broader family or household. Surveys may also differ in the way they define medical debt or describe what forms of debt to include.

The KFF Health Care Debt Survey asked respondents to think about money that they currently owe for their own health or dental care or someone else’s, such as a family member or dependent. The KFF Health Care Debt Survey finds that 41% of adults currently have some form of debt caused by their own or a family member’s medical or dental bills.

Figure 12

The U.S. Survey of Income and Program Participation (SIPP) asks whether money was owed for a medical bill and not paid in full during the past year for each person in the sample household. SIPP results, therefore, can be looked at on the individual level or for an overall household. This survey shows that about 1 in 12 adults have medical debt they owe for their own medical care in the past year.

Regardless of the survey used to examine medical debt, some common themes emerge when looking at differences across demographic groups. People who are Black, uninsured, lower-income, and in worse health are more likely to have medical debt. In particular, people with disabilities are much more likely to have significant medical debt, which, in addition to the burden of medical costs, could also reflect inadequate supplemental income for people who are unable to work due to disability or illness.

Nationally, Medical Debt Totals at Least $220 Billion

Figure 13

The Consumer Financial Protection Bureau (CFPB) estimates that $88 billion in medical debt is reflected on Americans’ credit reports. However, credit reports may not capture all forms of medical debt. For example, medical debt disguised as credit card debt or money owed to family or friends may not be captured. Surveys may capture medical debt that is not visible on credit reports or is otherwise disguised as another form of debt. The 2021 Survey of Income and Program Participation suggests that total medical debt owed was at least $220 billion at the end of 2021.

Medical Debt is Associated with Financial Vulnerability Across a Range of Indicators

Figure 14

The National Financial Capabilities Survey (NFCS) is a triennial survey sponsored by the FINRA Foundation that provides information on the financial security, experiences, and vulnerabilities of people and households.

People with medical debt are much more likely to have other forms of financial distress than those without medical debt. Indicators of financial vulnerability—such as spending more money than one’s income, having no “rainy day” fund, or agreeing with the statement “I am just getting by financially”—are more common among adults with medical debt than those without. Additionally, people with medical debt are more likely to overdraw their checking account, have a credit card balance that exposes them to interest payments, take a cash advance on their credit card, or report being contacted by debt collectors. People with medical debt are also much more likely to use payday loans or other costly loans than those without medical debt.

How Much is Health Care Spending Expected to Grow?

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Each year, actuaries from the Centers for Medicare and Medicaid Services (CMS) project future spending on health. With utilization continuing to return to pre-pandemic levels and price inflation in the health sector, per-person health spending is projected to rebound to an annual rate of 4.8% per capita on average from 2022 to 2031, which is slightly above pre-pandemic growth rates (average of 3.9% from 2014 to 2019).

Figure 15

An aging population, labor pressure driving higher prices, and new high-cost prescription drugs coming to market are expected to contribute to a growth in health spending. Health spending was 17.4% of the U.S. economy in 2022 and is expected to reach 19.6% by the end of the decade.

The pandemic has had direct and indirect effects on the health system that can make projections difficult. COVID-19 has led to new costs for vaccination, testing, and treatment and has also caused other shifts in health utilization and spending. Some people avoided medical settings out of concern of contracting COVID and thus missed or delayed routine care or cancer screenings earlier in the pandemic. This could lead to pent-up demand, worsening health conditions, or more complex disease management going forward. Increased use of telemedicine could also shift spending patterns in the future. Additionally, the recent broad-based inflation trends in the economy and health sector employment trends also add to the uncertainty of these projections.

Federal Government Infusion of Public Health Funding Has Subsided Since Early in the COVID-19 Pandemic

Figure 16

Total national health spending includes spending on direct patient care, as well as spending on public health or prevention. After a sharp increase in 2020 driven by the federal response to the COVID-19 pandemic, spending on public health has fallen. Federal public health spending decreased by 27% from $139.3 billion in 2020 to $101.1 billion in 2021. In 2022, federal public health spending also decreased slightly (dropping $9 billion or 9%). Meanwhile, state and local public health spending grew by 6.3%, in line with previous years. Total public health spending is expected to continue to decline over the next couple of years.

Future Outlook

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Key policy issues will shape future health spending and affordability:

Evolution of State Cost Controls: States implementing measures to control health cost growth, including those potentially supported by the Biden Administration’s new AHEAD model, may prompt further experimentation. However, states can only regulate a subset of private health insurance plans.
Price Transparency Requirements: Federal price transparency requirements aim to illuminate prices paid to hospitals and providers. However, there are challenges with the quality of the data and the Congressional Budget Office expects minimal impact on health care prices.
Prescription Drug Pricing: The Inflation Reduction Act of 2022, targeting Medicare drug spending through government negotiation of drug prices, is expected to reduce Medicare costs, but potential effects on the private market remain uncertain. While CBO expects minimal effects on the availability of new treatments, there is considerable uncertainty surrounding those estimates.
Expansion of Virtual Care: The COVID-19-induced rise in telehealth, with expanded reimbursement and access, has uncertain impacts on care coordination, quality, health outcomes, and costs.
Market Dynamics and Anticompetitive Practices: Consolidation among providers, insurers, and drug manufacturers has elevated health care prices, leading to regulatory actions against anticompetitive practices, aiming to protect consumers from rising costs.
Provider Payment Reforms: Bipartisan efforts in site-neutral payment reform, addressing concerns about higher payments in outpatient settings, have led to Medicare implementing site-neutral payments in some settings and additional legislative proposals. However, challenges in provider charging practices and facility fees persist.
Value-Based Payment Models: The proliferation of value-based payments aims to transfer some of the cost risks from payers to providers, but concerns remain about the effectiveness of these approaches, limited quality improvement, administrative burdens, and reduced physician participation incentives.
Changes in Coverage: Despite reduced uninsured rates through continuous Medicaid enrollment and expanded Affordable Care Act Marketplace subsidies during the pandemic, affordability challenges persist among the insured. Renewed disenrollments from Medicaid and the expiration of Marketplace subsidies after 2025 may increase uninsured rates and affordability issues.
Addressing Medical Debt: Ongoing efforts to address medical debt involve planned credit reporting agency requirements and regulatory actions. However, the root causes of high health costs and underinsurance remain untouched by most efforts to mitigate the negative effects of medical debt.

Conclusion

I don’t know what all the economists are saying about health insurance. All I know is that I am paying more each month in health insurance for my wife and I than I used to make in a month. I am paying over $1,100 a month, which does not include dental and life insurance, not to mention there are co-pays. Over half my paycheck is gone before I even get it. This is insane.

Resources

-jamanetwork.com, “Trends in Out-of-Pocket Healthcare Expenses Before and After Passage of the Patient Protection and Affordable Care Act.” By Krishna Vangipuram Suresh, Kevin Wang, and Adam Margalit;

-ballotpedia.org, “Health insurance premiums before and after the Affordable Care Act.”;

-epicforamerica.org, “Fast Facts: Why Are Obamacare Premiums Really Going Up?” By Gadai Bulgac;

-kff.org, “Health Care Costs and Affordability.” By Cynthia Cox,Jared Ortaliza,Emma Wager,andKrutika Amin;

2016 to 2017

2015 to 2016

Kaiser Family Foundation

PricewaterhouseCoopers

2014 to 2015

PricewaterhouseCoopers

Heritage Foundation

Commonwealth Fund

Kaiser Family Foundation

2013 to 2014

Estimate for 2014

Increases in Medical Care Costs

Tariffs and Rising Economic Uncertainty

Biden-Era Inflation

Expiration of Biden’s COVID Credits Reduces Fraudulent Payments to Insurers

Why Obamacare Premiums Are Really Going Up

Introduction

How Has U.S. Health Care Spending Changed Over Time?

Total Health Spending Reached $4.5 Trillion in 2022

What Factors Contribute to U.S. Health Care Spending?

Hospital and Physician Services Represent Half of Total Health Spending

Spending Has Grown for Hospitals, Physicians, and Drugs

On a Per-Enrollee Basis, Private Insurance Spending Has Typically Grown Much Faster Than Medicare and Medicaid Spending

A Substantial Share of Health Spending Goes Toward the Treatment of Circulatory and Musculoskeletal Conditions

Health Spending is a Function of Prices and Use

How Does Health Care Spending Vary Across the Population?

Older People and People with Significant Health Needs Account for Most Health Expenditures

A Small Share of the Population Incurs Most of Health Spending

How Do High Health Costs Affect Affordability of Care?

Half of Adults Say it is Difficult to Afford Health Care Costs

1 in 4 Adults Report Putting Off Health Care Because of Cost

What Impact Do Health Care Costs Have on Financial Vulnerability?

Nationally, Medical Debt Totals at Least $220 Billion

Medical Debt is Associated with Financial Vulnerability Across a Range of Indicators

How Much is Health Care Spending Expected to Grow?

Federal Government Infusion of Public Health Funding Has Subsided Since Early in the COVID-19 Pandemic

Future Outlook

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