What’s driving the healthcare affordability crisis?

Everyone agrees that healthcare is too expensive; what industry players can’t agree on is why. There isn’t just one reason behind the unaffordability problem, but understanding some of the key drivers is necessary if we want to fix this crisis.

Insurance coverage isn’t fully protective

Uninsured Americans are about twice as likely to have trouble paying for healthcare compared to those with health insurance. But simply having insurance is no longer fully protective against high health costs. Nearly one-third of insured adults under 65 have had trouble paying for healthcare in the past year, and 42% say it is somewhat or very difficult to afford healthcare costs. 

Part of the issue is the cost of premiums, which increased by 6% this year on average for those with employer-sponsored insurance and a whopping 21% for those with Affordable Care Act plans. But some of the increases have been much higher. New York Times readers recently shared stories of facing incredibly high healthcare costs. One woman’s premium increased from $406 per month in 2025 (6.5% of her income) to $1,123 per month in 2026 (18% of her income) as a result of the loss in subsidies. She subsequently ended up dropping her coverage entirely. Other readers reported cashing in their retirement accounts, taking on side gigs, and considering moving out of the country to afford care.

It’s not just premiums making healthcare unaffordable, but also out-of-pocket costs such as deductibles, co-pays, and co-insurance. In 2025, the average annual deductible for employer-sponsored coverage was $1,886; most plans required co-insurance (patient share of costs after the deductible is met) with the average rate being 20% for a hospital visit; and nearly half of employer-sponsored plans (46%) have an out-of-pocket maximum over $5,000. For Affordable Care Act plans, the average deductible is $2,912, but for Bronze plans with lower premiums, the average deductible is $7,476. In a country where most families have $500 or less in emergency savings, any unexpected medical event could put insured Americans in debt. 

High prices drive up costs for everyone

If you ask health insurers (as Congress did in Congressional hearings last week) they will say higher premiums and out-of-pocket costs are driven by increasing costs of hospital care and medications.

Indeed, spending on hospital care makes up 31% of total national health expenditures, the largest single spending category. Hospital prices have also increased more steeply over the past few decades compared to doctor visits or health insurance profits. Hospital prices get a lot of attention because they are not only absurdly high in many cases, but because they are seemingly arbitrary, depending on which hospital you go to and which insurance you have. For example, among a small sample of academic medical centers, the median price of a coronary stent ranged from $657 to $25,521 depending on the hospital. Even within the same hospital, the price of a stent ranged from $11,325 to $23,392 depending on the insurer. 

Pharmaceutical companies are also under fire for their role in the affordability crisis, for good reason. More than half of Americans are worried about affording prescription drugs for them or their family, and 28% say it is already difficult for them to pay for their medications. In particular, employers have called out GLP-1 medications as a key driver of healthcare cost increases. These medications, while very effective, are also very expensive— priced at about ten times the amount it costs to manufacture them. Pharmaceutical companies are also the most profitable for-profit healthcare sector, making more than $1 trillion in profits over 20 years, and giving as much back to shareholders in buybacks and dividends. 

Larger forces behind unaffordability

Aside from specific healthcare sectors, there are broader market and social forces contributing to healthcare unaffordability. In a recent article in Health Affairs, Michael Chernew points out that increased utilization is behind health spending growth from 2024-25, which may be due to greater use of health services, higher “intensity” of services, or both. This is not unexpected, given that many people delayed care during COVID-19, and effects of the pandemic such as long COVID and mental health challenges now require attention. Chernew also points out the impact of low-value care and fraud on healthcare spending, noting that value-based care models and initiatives like WISeR could help reduce these costs.

On the other side of the equation, the failure of wages to keep up with the escalating cost of living makes everything unaffordable. Americans aren’t just struggling to afford healthcare, they’re skipping meals and delaying other important purchases because of the cost. To really understand the affordability crisis, we have to look at the bigger picture of wages lagging behind productivity, weakened labor laws and worker protections, and a federal government unable or unwilling to address these shortcomings through legislative action.

Beyond the blame game

In the face of a massive unaffordability crisis, patients and policymakers are tired of pointing fingers and desperate for solutions. Fortunately, there are plenty of clinicians, hospitals, payers, business leaders, researchers, and others who understand the urgency of the problem, and are looking to break down silos to find common ground and impactful solutions. If that sounds like you, we want to see you at Lown26: Confronting Healthcare Affordability. Stay tuned for more details on registration coming soon!