Why Americans Pay More for Healthcare and Still Can’t Afford It
Every day, Americans ration insulin, skip follow-up appointments, and choose between groceries and prescriptions — not because they are uninsured, but because even insured care has become unaffordable. The United States spends more than $5 trillion a year on healthcare, more than any nation on earth, and still, millions of families cannot keep up with the bills.
In the most expensive healthcare system on earth, that contradiction should not exist. (RELATED: Is Healthcare ‘Burning’ Yet?)
America does not suffer from a shortage of medical talent or innovation. It suffers from too many layers standing between patients and care. Until those layers shrink, no amount of spending will deliver the system that Americans are paying for. (RELATED: Empowering Patients in a Broken System)
In 2024, U.S. healthcare spending reached about $5.3 trillion, roughly 18 percent of the nation’s economy. At the same time, new research from the West Health-Gallup Center on Healthcare in America found that roughly one-third of American adults have had to cut back on basic household expenses to pay for care, and nearly one in 10 say healthcare costs have forced them to postpone retirement. Those are not signs of a system under temporary strain. They are signs of a system failing the people financing it.
One of the clearest drivers of rising costs still receives too little attention: the extraordinary amount of money the system burns on middlemen and paperwork before a patient ever receives real care.
For years, the healthcare debate has focused on premiums, drug prices, hospital consolidation, and government spending. All of that matters. But one of the clearest drivers of rising costs still receives too little attention: the extraordinary amount of money the system burns on middlemen and paperwork before a patient ever receives real care.
Americans are not paying only for doctors, nurses, medicine, surgery, and treatment. They are also paying for a sprawling middleman economy of insurers, pharmacy benefit managers, billing vendors, prior-authorization systems, coding specialists, utilization reviewers, claims processors, and opaque contracting structures that separate patients from physicians and drive up costs at nearly every step. (RELATED: The Race to Fix America’s Healthcare System)
The scale of this burden is staggering. A widely cited estimate published in JAMA found that the United States spent about $950 billion in 2019 on nonclinical administrative functions alone. Other analyses estimate that administrative costs account for roughly 15 percent to 25 percent of total healthcare spending. In plain terms, an enormous share of what Americans spend on healthcare never reaches the exam room. It is absorbed by the machinery surrounding care.
Patients experience that machinery as confusion, delay, and financial risk. They often do not know what a visit will cost before they walk in. They may not know whether a physician is in network, whether a test will be covered, or what bill will arrive weeks later. Even insured patients find themselves trapped between deductibles, coinsurance, facility fees, and benefit designs they barely understand. Coverage is supposed to provide security. Too often, it delivers paperwork and surprise bills instead.
Doctors experience the same problem from the other side. They spend more time navigating coding requirements, insurer rules, and reimbursement processes — and less time with patients. The system rewards transaction management as much as, and sometimes more than, care itself. That is one reason the patient-doctor relationship feels so strained. Too much now stands between the person seeking care and the person trying to provide it.
None of this means insurance itself is the problem. Insurance is essential for protecting families from catastrophic illness and major medical events.
But routine healthcare should not require this many gatekeepers, handoffs, and administrative tollbooths. Models such as direct primary care, along with other approaches that connect patients more directly to physicians, point in the right direction: simpler routine care, clearer pricing, and far less billing complexity between doctor and patient.
Price transparency has to be part of that change. Healthcare remains one of the few sectors in American life where consumers are expected to buy first and learn the price later. That would be unacceptable in almost any other market. It should be unacceptable here too. People cannot make disciplined decisions when they are blindfolded. Real transparency would not solve every problem, but it would make competition more honest and expose some of the waste that opacity now protects.
Health literacy also matters more than policymakers usually admit. Americans are asked to make some of the most important financial decisions of their lives with very little practical guidance. Many do not fully understand the tradeoffs within their insurance plans, the likely downstream costs of care, or how to compare value across providers. Better tools for navigation, clearer benefit explanations, and real price information would not eliminate high costs, but they would leave families far less vulnerable to costly surprises.
The financial side of healthcare also needs a serious rethink. Medical spending is not a single event. It unfolds across a lifetime through preventive care, primary care visits, prescriptions, chronic disease, and aging. Families need better ways to prepare for those costs over time, not simply scramble after the bill arrives.
Health Savings Accounts were designed to play that role, but they remain underused and poorly integrated into the healthcare system. Expanding their flexibility, broadening eligibility, and raising contribution limits could help families build dedicated reserves for care the way they save for retirement — gradually, predictably, and before the crisis arrives.
But none of these reforms will matter unless policymakers and industry leaders confront the cost of the middle layers themselves. Administrative simplification is not a side issue. It is central to affordability. If reform does not reduce friction, overhead, confusion, or delay, it is unlikely to produce durable savings for patients.
Americans do not expect healthcare to be cheap. They understand that modern medicine is advanced and expensive. What they do expect is that after paying thousands of dollars each year in premiums, deductibles, and taxes, care will be understandable and within reach when they need it.
The wealthiest healthcare system in history should not leave its patients afraid to open their bills. It should not force a choice between a prescription and a mortgage payment. That it does — routinely, for millions — is not a market failure. It is a policy failure, and it has a remedy.
Remove the layers. Show the prices. Let patients reach their doctors. The talent is here. The resources are here. What has been missing is the will to clear the path.
READ MORE from Gary D. Alexander:
Medicaid’s 30-Year Refusal to Stop Funding the Dead
The ACA’s Unraveling: Fifteen Years of Unintended Consequences
Gary D. Alexander served as secretary of health and human services in Rhode Island and Pennsylvania and has advised on healthcare policy and administration at the state and federal levels.