Health Insurance

Why health-care costs are rising in the U.S. more than anywhere else

VIDEO11:1911:19
Why the U.S. health-care system is so bad at controlling costs
Key Points
  • Health-care spending is rising in the U.S. more than anywhere else around the world.
  • Lack of choices in insurance plans limits competition, which can drive prices higher.

Health-care spending is rising around the world, but the U.S. is the worst performer. The United States accounts for more than 40% of all global health spending.

Health-care spending made up 5% of total U.S. GDP in 1960. In 2020, spending hit almost 20% of total U.S. GDP.

"Health care almost always outpaces inflation, and so health-care costs grow faster than the economy," said Cynthia Cox, vice president at the Kaiser Family Foundation. "That's why it's representing a larger and larger share of the economy."

Americans aren't using more health care than people in other nations that spend less. Instead, U.S. residents pay more for each interaction. Hospitals, physicians and clinical care made up more than half of the total health-care spending in 2019.

One of the causes of high spending is the fragmented nature of the U.S. system. Some Americans have comprehensive and affordable health insurance coverage while others have little to no coverage.

"The way the system is structured now, it is a cure-driven system, not a prevention-driven system," said Yaseen Hayajneh, associate professor of health administration at Western Connecticut State University.

"Preventing diseases from getting worse is always going to cost less," said Dr. Tyeese Gaines, an emergency medicine physician who also previously ran her own practice.

Most Americans don't have much of a choice when it comes to their insurance plan. More than 54% get health insurance through their employer. This lack of choice limits competition, which can drive prices higher.

"[The] capitalist view works when the market is free," Hayajneh told CNBC. "Health care is never a free market."

Watch the video above to learn more about why health-care costs are rising in the U.S. more than anywhere else and how that can be stopped.