US Health Care Costs Up 143 Percent From 25 Years Ago

Doctors perform open-heart surgery on a young patient at Children's Hospital in Los Angeles on March 24, 2008. Bob Riha, Jr./Children's Hospital Los Angeles via Getty Images

Medical care in the monthly consumer price index (CPI) report has risen by 143 percent since January 2000, according to data from the Bureau of Labor Statistics. Medical care commodities—prescription drugs, over-the-counter medicines, and medical equipment and supplies—have increased by 76 percent in the past 25 years.

“The tragic news of UnitedHealthcare’s CEO has opened a lot of discussion about the very nasty subject of health care costs and quality of service,” Mark Malek, chief investment officer at Siebert Financial, told The Epoch Times in an email.

The Federal Reserve has attributed elevated price pressures to services inflation, particularly in the housing sector, which accounts for a significant portion of the CPI report.

“Do you know what other services inflation consistently runs hot, well above the 2 [percent] guideline? Health care,” Siebert said.

PricewaterhouseCoopers’s Health Research Institute is projecting that health care spending growth—group and individual—will rise significantly in 2025.

The report forecasts that medical costs will increase by 8 percent from last year for the group market and by 7.5 percent for the individual market. If accurate, health care cost growth will be the highest in 13 years.

A new study by LendingTree insurance portal ValuePenguin is predicting that the average cost of private health insurance will rise by 7 percent in 2025 to a record high of $7,452.

The research shows that private health insurance premiums have risen cumulatively by 15 percent since 2022 and that they are becoming more expensive in 42 states.

Employer health care costs are anticipated to surge by 9 percent in 2025 to about $16,000 per employee, according to a recent study by professional services firm Aon.

“In the health care sector, both rising employment levels and wage increases fueled by economy-wide inflation during the past few years are pushing health care costs higher,” Debbie Ashford, North America chief actuary for Health Solutions at Aon, said in a statement.

“To keep pace with these pressures, the health care industry negotiates higher prices, which in turn emerge as higher medical trends.”

National health care spending has garnered attention recently, with billionaire Elon Musk shining a spotlight on the exorbitant costs amid the Department of Government Efficiency (DOGE) initiative.

Musk reposted a Peter G. Peterson Foundation chart shared by the popular social media X account “The Rabbit Hole.” The data highlight administrative costs per capita of $1,055, the highest among the more than 100 Organisation for Economic Co-operation and Development countries.

“Shouldn’t the American people be getting their money’s worth?” the SpaceX and Tesla Motors CEO wrote on Dec. 5.

The fiscal think tank estimated that U.S. health care spending reached $4.5 trillion in 2022, averaging $13,493 per person and accounting for 17 percent of gross domestic product (GDP).

Experts say the triple-digit percentage increase in health care costs is because of a combination of hospital consolidations, growing prescription drug prices, and an aging population.

“When the population is aging and getting sicker, it adds more strain to the health care system and just an overall shortage of healthcare workers,” Divya Sangameshwar, an insurance expert and spokesperson at LendingTree, told The Epoch Times.

“And this isn’t a new problem. Health care costs have been rising since the year 2000, and these costs are just ultimately getting caught down to policyholders in the form of higher premiums.”

Farxiga is made available to customers at the New City Halsted Pharmacy in Chicago on Aug. 29, 2023. Scott Olson/Getty Images

If in-hand subsidies from the Affordable Care Act and the American Rescue Plan expire next year, “everyone’s health insurance premiums could go up by quite a lot,” she said.

Medicare

In fiscal year 2024, the federal government spent $874 billion on Medicare.

Census Bureau data suggest that the share of people older than 65 has swelled in the past decade, reaching 17 percent in 2022, up from 13 percent in 2012. This demographic is expected to account for 22 percent of the national population by 2050.

As a result of an increasing number of seniors, Medicare enrollment is expected to surge in the coming years, adding to the ballooning costs of the federal program.

In March, the nonpartisan Congressional Budget Office projected that Medicare spending would play a sizable role in the significant increase in federal spending over the next 30 years. Medicare spending, the report concluded, will double over the next 30 years and reach 5.5 percent of GDP.

“Outlays are large by historical standards, and they generally rise over the 2024–2054 period, reaching 27.3 percent of GDP in 2054. Rising interest costs and spending for the major health care programs, particularly Medicare, drive that growth,” the budget watchdog stated.

The Medicare Hospital Insurance trust fund is expected to be insolvent in 2036, the Centers for Medicare and Medicaid Services said in May.

Health Care Consolidation

In recent years, there has been a prevalence of health care consolidation—hospitals, insurance companies, and other health care organizations joining together by either acquisitions or mergers—and industry observers say this is adding to price pressures across the marketplace.

Although this is not a new trend, it has accelerated in recent years, with nearly 1,900 hospital mergers between 1998 and 2021, according to the American Hospital Association.

Various assessments suggest that this has adversely affected the health care system, including the number of hospitals, according to experts.

In 1975, there were 7,156 hospitals in the United States, according to Statista. By 2022, this number had decreased to 6,120.

“Health care consolidation impacts every aspect of the health care system,” David Grande, director of policy at the University of Pennsylvania’s Leonard David Institute of Health Economics, said in a report.

“There are also indications that consolidation will reduce access to health care for the most vulnerable populations through hospital closures and higher prices in highly consolidated markets.

“Adding to that is the fact that private equity has entered the market amid predictions that the stresses of the COVID-19 pandemic will accelerate the pace of consolidation.”

The newest trend is that corporate giants such as Amazon, CVS, UnitedHealth, and private equity companies are acquiring many physician practices.

According to data compiled by KFF, the share of physicians employed by corporations surged to 22 percent in 2022, up from 15 percent in 2019. A paper published in Health Affairs found that private equity physician practice agreements have risen from 816 in 119 metropolitan statistical areas (MSAs) in 2012 to 5,779 in 307 MSAs in 2021.

The U.S. government is beginning to take notice.

In January, the Federal Trade Commission (FTC) launched a lawsuit to block a hospital purchase in North Carolina.

“Hospital consolidations often lead to worse outcomes for nurses and doctors, result in higher prices, and can have life and death consequences for patients,” Henry Liu, director of the FTC’s Bureau of Competition, said, noting that this deal could lead to higher out-of-pocket costs for essential health care services.

Earlier this year, the Department of Health and Human Services, the Department of Justice’s Antitrust Division, and the FTC submitted a request for information regarding the effects of health care consolidation. These federal departments want to determine the effects of consolidation regarding health care providers, products, and services.

Administration

The costs of health care administration—billing and coding, insurance administration, and physician administrative activities—have contributed significantly to health care price inflation.

Although the numbers vary, data show that administrative costs represent a sizable share of total expenses incurred in delivering health care to patients.

A 2021 McKinsey examination estimated that administrative costs represent about one-quarter of the $4 trillion-plus annual health care outlays.

The Peterson-KFF Health System Track projects that administration accounts for about 8 percent of overall health spending, more than double the rate in comparable countries.

Vivek Ramaswamy, co-head of DOGE, blames regulations and bureaucracy for high administrative costs.

“Most regulations ultimately hurt the very people they are supposed to ‘help,’” Ramaswamy wrote on X on Dec. 6.

According to a recent study by the American Hospital Association, one reason for the spike in administrative costs is the billions of dollars in denials.

“Many hospitals and health systems are forced to dedicate staff and clinical resources to appeal and overturn inappropriate denials, which alone can cost billions of dollars every year,” the report reads.

John Bright, founder and CEO of Med Claims Compliance Corporation, said costs associated with administrative errors can also add to the final tally.

Medicare maintains an improper payment rate—or claims overpaid in errors—that costs as much as $32 billion per year. According to Bright, this could be because of administrators not knowing the proper billing codes. The elevated improper payment rate can also be attributed to theft, fraud, waste, and abuse, he said.

“Health and Human Services has to factor in the improper payment rate,” Bright told The Epoch Times. “It’s kind of like if you own a grocery store, and you have to allocate the cost of what’s called shrinkage theft. You have to factor it into your cost of operation.”

The incoming administration, particularly Robert F. Kennedy Jr., wants to work with the American Medical Association to remedy this situation. The organization devises the billing codes and generates millions in revenue from royalties. RFK Jr. aims to update the system to bolster primary care and enhance health outcomes.