Why Healthcare Is So Expensive in the U.S.

Author: Samantha Bridge, RN, MSN, MBA-HCM, IQCER
Date: April 08, 2025

Healthcare in the United States costs more than anywhere else in the world. From routine checkups to major surgeries, Americans pay more—and often, get less in return. So, what’s driving these high costs?

In this post, we break down the major reasons why healthcare in the U.S. is so expensive.

How Much Do We Actually Spend?

In 2022, the U.S. spent $4.5 trillion on healthcare—around $13,493 per person. That’s more than double the average of other wealthy countries. And healthcare spending is expected to keep rising, hitting 20% of our total economy by 2025.

Even with this much spending, the U.S. still lags behind other countries in key health outcomes like life expectancy, maternal health, and chronic disease management.

Why Are U.S. Healthcare Costs So High?

1. Everyone’s Trying to Earn a Profit

The U.S. is the only major country with a profit-driven healthcare system. That means hospitals, insurance companies, pharmacies, and even nonprofit organizations are structured to generate revenue. While competition can fuel innovation, it also creates conflicting incentives—and those costs trickle down to patients.

2. Hospitals and Doctors Charge More

Doctors, especially specialists, earn more in the U.S. than in other countries. Hospital prices are also much higher, whether you're getting a hip replacement, a C-section, or a basic diagnostic test. Many U.S. hospitals, even nonprofits, collect billions in revenue each year.

3. Administrative Complexity

It’s estimated that up to 25% of healthcare costs go toward billing, compliance, and admin overhead. Billing, coding, authorizations, compliance… the U.S. healthcare system is built on a maze of rules. This leads to high administrative costs, often involving multiple staff, systems, and hours to process one patient’s care.

4. Lack of Price Transparency

In most cases, patients don’t know what a service will cost until after it’s done. The price for the same MRI can range from $300 to $3,000 depending on where you go. Without clear pricing, it's hard to shop around or budget—making it easier for costs to rise unchecked.

5. Prescription Drug Prices

Americans pay more than twice as much for prescription drugs compared to people in other developed nations. One example? The diabetes/weight-loss drug Ozempic costs about $969/month in the U.S.—but under $155 in countries like Canada or Germany.

Why? Because unlike other countries, the U.S. government doesn’t regulate drug prices. Pharmaceutical companies often price based on what the market will bear—not what the drug actually costs to make.

6. A Growing and Aging Population

By 2032, 21% of Americans will be over age 65—most enrolled in Medicare. More people are living longer, which is a good thing—but it also means more people need healthcare, often for chronic conditions. This rising demand puts strain on the entire system.

7. Fee-for-Service Models

More tests = more pay, even if outcomes don’t improve. In the U.S., many healthcare providers are paid for how many services they deliver—not how well those services work. This encourages more tests, procedures, and visits, even when they might not improve a person’s health.

8. Private Equity in Healthcare

Profit-driven acquisitions often raise prices while reducing accountability. More hospitals and specialty practices are being acquired by private investors. Their goal? Profit. In some cases, this has led to hospital closures, layoffs, and higher prices—with less accountability for patient outcomes.

9. Fraud, Waste, and Abuse

Experts estimate that fraud alone costs the U.S. healthcare system up to $230 billion per year. When you include waste and abuse—like unnecessary tests, excessive billing, and inefficient systems—the total rises to nearly a quarter of all healthcare spending. In a system where every extra form or test adds a charge, the costs of inefficiency add up fast.The National Health Care Anti-Fraud Association (NHCAA) estimates that fraud alone costs the U.S. about $68 billion annually, but some government and industry estimates put it as high as $230 billion per year—roughly 3–10% of total healthcare spending. Waste and abuse, while harder to quantify, are even costlier. According to a JAMA study, the U.S. wastes $760 billion to $935 billion annually on things like administrative complexity, unnecessary services, and inflated prices. That’s up to 25% of total healthcare spending.

Who’s Really Paying for All This?

Patients—even with insurance—are paying more via copays, deductibles, and denials. Even with insurance, patients are bearing more of the burden. High deductibles, copays, and uncovered services mean many Americans are delaying or avoiding care because they can’t afford it. And when services are denied or coded incorrectly by providers, the out-of-pocket costs can be even higher.

What Can Be Done?

There’s no one-size-fits-all fix. But understanding the system is the first step toward navigating it with more confidence. At Appeal Tech Allies, we help people take action—especially when insurance doesn’t cover the care they need. With our tool, EZ Med Appeal, we make it easy to write clear, effective appeal letters to challenge denials and take back control of your coverage.

One denial isn’t the end—it’s where we begin.