Most of you know that health insurance is expensive. Although we are all waiting for the day when the costs will come down, there are several factors to go into health insurance that make it expensive. In fact, the United States spends more per capita on health care ($9,892 in 2016) than any other nation. Our health care as a nation increased by about $933.5 billion between 1996 and 2013, making United States healthcare the most expensive in the world.

Naturally, you may assume that is because our health care is better quality than any other country. Unfortunately, that’s not the case. Healthcare in the U.S. costs about twice as much as it does in any other developed country, but the country is ranked the 37th in healthcare systems.

If our healthcare system doesn’t even make the top 10 list, what are we paying for? Why are we failing to provide adequate healthcare at reasonable prices?


  1. High administrative costs

The administrative costs of healthcare account for over 25 percent of all health care spending. Part of the reason for this is because the U.S. has so many payers. This ranges from hundreds of private health insurance companies to government programs that hospitals and physicians have to work with in the regular course of business.

  1. Technology

Americans love their technology, and our healthcare is no exception. Medical innovation is getting better and better (and more and more expensive), and we want the newest and latest technology available. But quality comes at a cost and the most expensive treatments aren’t always better.

  1. Malpractice

It is easier to sue doctors in the U.S. than in almost any other countries. Therefore, doctors will often order more tests and explore more options than necessary so they aren’t at risk for malpractice. A 2010 study published in the peer-reviewed Archives of Internal Medicine found 90 percent of the 1,231 physicians surveyed said doctors order more tests and procedures than patients actually need to protect themselves from litigation. A Gallup survey estimated that $650 billion annually could be attributed to this now called, “defensive medicine” rather than actual treatment.

  1. Obesity

The condition with the greatest increase in spending between 1996 and 2013 was diabetes. The single most important risk factor for type 2 diabetes is obesity. Obesity also contributes to the other high spenders including hypertension ($47.6 billion), hyperlipidemia or high (“bad”) cholesterol ($41.9 billion), and depressive disorders ($30.8 billion).

  1. Pharmaceuticals

Part of the high price paid for pharmaceuticals is because of the astronomical expenses involved in the FDA approval process. In most countries the government negotiates drug prices with the drug makers. The EU actually uses private entities for pharmaceutical approval rather than a single agency, which lends itself to competition an increased efficiency. When Congress created Medicare Part D though, it specifically denied Medicare the right to use its power to negotiate drug prices.

  1. Misuse of specialists

In the United States, more people are treated by specialists than primary care physicians. A specialist doctor charges higher fees for the same types of treatments done at the primary-care level in other countries. Specialists are often used because of referral decision-making, which drives the costs up in the U.S. for everyone.

  1. There is no price tag

In most industries, there is a price tag associated with any type of good or service. With health care, you don’t know what you’re paying for weeks or even months. During that time, rates are negotiated by insurance companies and providers without the consumer even knowing. Because there’s no price tag, the service provider has little incentive to lower costs.

These are just a few of the factors that drive the American healthcare system to be the most expensive in the world.

So, what do we do?

Some believe that the first step to lowering health care costs is to get everyone in the country insured, others believe the government should have a stronger role in negotiating prices. Whatever the correct answer may be, legislatures have yet to come to a resolution that makes everyone happy.

Take Charge

Regardless of what happens on Capitol Hill, every American can be responsible for their own health. Each of us can maintain a healthy weight through diet and exercise. We can get yearly checkups and stay responsible for our own wellbeing. By using preventative healthcare measures now perhaps we can avoid expensive treatments later. However, be aware that as long as there is competition between insurers and healthcare providers, multiple payers for similar services, and less control over pricing, there’s a good chance your medical bills will continue to rise and health insurance will continue to be expensive.

why health insurance is expensive