Why Is Health Insurance So Expensive in the United States?

Why Is Health Insurance So Expensive in the United States?

Why Is Health Insurance So Expensive in the United States?

In the United States, health insurance costs are constantly rising, leaving many people wondering: why is health insurance so expensive? There are several factors contributing to this phenomenon, including an inefficient system, rising drug costs, medical professional salaries, profit-oriented health centers, types of medical practices, and health-related pricing.


A Diverse and Complex System

One of the primary reasons is the complexity of the healthcare system itself. In the U.S., there are various rules, funding sources, enrollment dates, and out-of-pocket costs associated with different forms of health insurance, such as employer-based insurance, private insurance, or government-provided plans like Medicaid and Medicare. This creates a need for expensive administrative support for billing and reimbursement.

High Drug Costs

Americans pay nearly four times as much for pharmaceutical drugs compared to citizens of other developed countries. In other nations, the government partially controls the prices for medications and healthcare services, but in the U.S., prices are driven by market forces.

Medical Professional Salaries

Hospitals, doctors, and nurses all charge higher fees in the U.S. compared to other countries, with hospital costs increasing much faster than professional salaries.

Expensive Medical Technology

The use of expensive medical technology also contributes to high healthcare costs. In the U.S., there is a tendency to use the latest and most advanced technology, which often comes with a premium price tag.

Potential Solutions

To address these issues, some possible solutions include stricter price regulation by the government, increased transparency in pricing, and administrative system reforms to reduce unnecessary costs.

How Does It Compare to Other Countries?

Comparing health insurance costs between the United States and other countries reveals significant differences. Here are some key points from the comparison:

  • Per Capita Spending: In the U.S., health spending per capita was $12,555 in 2022, which is more than $4,000 higher than other high-income countries. The average health expenditure per capita in comparable countries is $6,651, about half of what the U.S. spends per person.
  • Expenditure Growth: In nearly all peer countries, health expenditure per capita increased between 2021 and 2022, except in the Netherlands, where spending decreased by 0.1%. In the U.S., health expenditure per capita increased by 2.9%, a smaller increase compared to most peer countries.
  • Expenditure as a Percentage of GDP: Over the past five decades, the gap between health expenditure as a share of the economy in the U.S. and comparable OECD countries has widened. In 1970, the U.S. spent about 6.2% of its GDP on health, similar to the spending in some comparable countries (the average for comparable wealthy countries was about 4.9% of GDP in 1970).
  • Quality of Services: Although the U.S. leads the world in health research and cancer treatment, there are several health indicators where the U.S. does not compare favorably with other OECD countries. For example, the number of doctors per capita in the U.S. is lower than the OECD average, and life expectancy at birth in the U.S. is lower than the average.

Overall, the U.S. spends more on health per person compared to other high-income countries, but the health outcomes do not always reflect the high spending. This indicates there is room for efficiency and improvement in the U.S. healthcare system.

How Are Health Insurance Systems in Other Countries?

Health insurance systems vary worldwide, and some countries have different approaches to providing healthcare to their citizens. Here are comparisons of several health insurance systems in specific countries:

  • Italy: Italy has a highly rated healthcare system with a score of 72.15 on the CEOWorld Magazine Health Care Index. The country offers quality healthcare services, including good healthcare infrastructure and the availability of quality medicines.
  • Singapore: Singapore ranks first in the Legatum Institute Foundation's assessment of healthcare systems in 167 countries. Singapore's healthcare system excels in access to healthcare services and community well-being.
  • Iceland: Iceland also has a good healthcare system with a score of 65.15 on the CEOWorld Magazine index. The country offers good access to healthcare services and medications.
  • Norway: Norway ranks first among high-income countries in the Commonwealth Fund's rankings. Factors assessed include access to care, administrative efficiency, equity, and health outcomes.
  • Netherlands: The Netherlands also has an efficient healthcare system with limited personal costs, such as a deductible of 385 Euros per year.
  • Australia: Australia offers good access to healthcare and has good health outcomes. The country ranks third in the Commonwealth Fund's rankings.
  • Switzerland, Canada, and the United States: Switzerland has a good healthcare system, while Canada and the United States rank lower in some rankings. Despite spending more on health, the U.S. has lower health outcomes and lacks universal health coverage.

Overall, many high-income countries offer universal health coverage with more affordable costs and better health outcomes than the United States. However, each system has its own strengths and weaknesses, and these comparisons provide a general overview of global differences.

How Are Health Insurance Systems in Developing Countries?

Health insurance systems in developing countries often differ from those in developed countries, with unique challenges and approaches to achieving universal health coverage. Here are some examples of health insurance systems in developing countries:

  • Thailand: Thailand has a health insurance program that covers nearly all citizens. This program is non-contributory for those not covered by formal sector schemes, with near-universal enrollment. The scheme has increased healthcare utilization, reduced out-of-pocket expenses, and improved health outcomes.
  • Ghana: In Ghana, all pregnant women are universally exempted from paying premiums, significantly expanding coverage for the poor. The largest enrollment increase has been among the poorest segments of the population.
  • South Africa: South Africa recently signed the National Health Insurance (NHI) Bill into law, aiming to ensure that everyone living in South Africa has access to quality healthcare services, regardless of socioeconomic status, through the establishment of the National Health Insurance Fund (NHIF).
  • World Bank Study: A World Bank study highlights how 24 developing countries have embarked on the journey toward universal health coverage, focusing on expanding coverage for the poor.

Health insurance systems in developing countries often face challenges such as limited funding, underdeveloped healthcare infrastructure, and unequal access to healthcare services. However, many developing countries have made significant progress in providing broader and more equitable health coverage for their populations. Global initiatives like the One Health Field Epidemiology Competencies (COHFE) framework also play a role in strengthening global health systems by training frontline workers in human, animal, and environmental health. This demonstrates a global commitment to improving health and well-being worldwide, especially in resource-limited countries.


The high cost of health insurance in the United States stems from several factors, including the complexity of the healthcare system, high drug prices, expensive medical professional salaries, and the extensive use of costly medical technology. These elements collectively create a healthcare environment where administrative expenses and market-driven pricing significantly increase the overall cost.

Comparatively, other high-income countries offer more affordable and efficient healthcare systems, often with universal coverage and better health outcomes. These countries benefit from regulated drug prices, streamlined administrative processes, and less reliance on high-cost technology.

In developing countries, health insurance systems are evolving to provide broader coverage despite limited resources. Successful programs in nations like Thailand and Ghana demonstrate that universal health coverage can be achieved with innovative approaches tailored to local needs and conditions.

Ultimately, addressing the high cost of health insurance in the U.S. requires comprehensive reforms aimed at increasing transparency, regulating prices, and improving the efficiency of the healthcare system. Learning from both developed and developing countries' experiences can guide the U.S. toward a more sustainable and equitable healthcare model.



  • CEOWorld Magazine Health Care Index
  • Legatum Institute Foundation Health Rankings
  • Commonwealth Fund Health System Rankings
  • OECD Health Expenditure Data
  • World Bank Study on Health Expenditure Growth
  • Thailand Health Insurance Program
  • Ghana Health Insurance Scheme
  • South Africa National Health Insurance Bill
  • One Health Field Epidemiology Competencies (COHFE) Framework
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