Why is health care in the United States still the most expensive in the world after decades of cost-cutting initiatives?

In her announcement “Grand Healthcare Plan” In January 2026, the Trump administration became the latest in a long history of efforts by the US government to rein in rising health care costs.

As a doctor and professor he teaches The intersection of business and healthI know that the challenges facing reforming America’s sprawling health care system are enormous. This is partly true For politics And even Philosophical reasons.

But it also reflects a A complex system fraught with competing interests – and the fact that patients, hospitals, health insurance companies, and drug manufacturers change their behaviors in conflicting ways when faced with new rules.

High costs

Health care in the United States is The most expensive in the worldAccording to a poll published in late January 2026, two-thirds of Americans do Very concerned about their ability to pay for it – Whether it’s for their medications, a doctor’s visit, health insurance, or an unexpectedly expensive medical emergency.

Disagreements over health policy even played a role Central role In the fall of 2025, the federal government shuts down.

Trump’s health care framework It does not specify any specific policy measuresbut it sets priorities to address a number of long-standing concerns, including: Prescription drug costs, Price transparencyReducing insurance premiums and making health insurance companies more accountable in general.

Why was tackling these challenges so difficult?

Drug price sticker shock

Prescription drug costs in the United States It began to rise sharply in the 1980swhen drug makers increased development New and innovative treatments for common diseases. But efforts to combat this trend have been a game of whack-a-mole because the factors driving it are so intertwined.

One issue is the unique set of challenges that define drug development. As with any consumer good, manufacturers price prescription drugs to cover costs and earn profits. But pharmaceutical manufacturing It involves a cost and Time-consuming development process together High risk of failure.

Patent protection is another issue. Drug patents last 20 yearsBut completing the expensive trials needed to gain regulatory approval takes much of that period, reducing the time that manufacturers have exclusive rights to sell the drug. After the patent expires, generic versions can be manufactured and sold at a much lower price, reducing the original manufacturer’s profits. Although some data challenges this claimthe The pharmaceutical industry confirms High prices while drugs are under patent help companies recoup their investments, which then finance the discovery of new drugs. And they are often Find ways to expand their patentsWhich keeps prices higher for longer.

Then there are the brokers. Once a drug is on the market, prices are usually determined through negotiations with contacted officials Pharmacy benefits managerswho negotiate discounts and rebates on prescription drugs for health insurance companies and employers who provide benefits to their workers. Pharmacy benefit managers are paid based on those discounts, so they have no incentive to lower overall drug prices New transparency rules were enacted on February 3 Aiming to change payment practices. Drug makers often Raise the list price From drugs to Compensation for write-offs That pharmacy benefit managers negotiate – And perhaps more than that.

In many countries, central government negotiators set prescription drug prices, resulting in lower drug prices. This prompted American officials to think Using those prices as a reference To determine the prices of medicines here. In its plan, the Trump administration called for “Most Favored Nation” drug pricing policy.under which the prices of some U.S. drugs will match the lowest prices paid in other countries.

This might work in the short term, but manufacturers say it could work just as well – Reducing investment in innovative new medicines. Some industry experts worry that this could prompt manufacturers to do so Raising global prices.

In late 2025, 16 pharmaceutical companies Approval of most-favoured-nation pricing for certain medicines. Consumers can now buy them directly from manufacturers By TrumpRxa portal that directs consumers to drug manufacturers and provides coupons to purchase more than 40 widely used brand-name drugs at a discount, was launched on February 5. However, many medications are available through the platform They can be purchased at lower prices as generic drugs

Increase price transparency

Less than 1 in 20 Americans know this How much will healthcare services cost? Before they receive them. One solution to this seems obvious: have providers list their rates up front. This way, consumers can compare prices and choose the most cost-effective options for their care.

stimulated by Bipartisan support in CongressThe government has Embrace price transparency For healthcare services over the past decade. In February 2025, the Trump administration Announced stricter enforcement For hospitals, which must now publish actual prices, not estimates, for common medical procedures. However, data is mixed on whether the approach works as planned. Hospitals have reduced prices for people who pay out of pocket, however Not for those who pay with insuranceAccording to a study conducted in 2025.

On the one hand, when regulations change, companies make strategic decisions to achieve their financial goals and meet the new rules – sometimes leading to unintended consequences. One study, for example, found that price transparency regulations at a chain of clinics led to… Increase doctors’ fees to insurance companies Because some providers that were charging less raised their prices to match more expensive competitors.

Additionally, a 2024 federal government study found that 46% of hospitals were not compliant. The American Hospital Association, a trade group, suggested price transparency It imposes a significant administrative burden Hospitals are forced to provide confusing information to patients, the costs of which may vary depending on the unique aspects of their condition. The fine for non-compliance may be US$300 per day Insufficient to offset the cost of disclosing this informationaccording to some health policy experts.

Aside from high costs, patients are also wary of insurance companies It won’t actually cover care They receive it. Cigna is currently fighting a lawsuit accusing its doctors Claims are rejected almost instantly – within 1.2 seconds on average – But concerns about claim denials are widespread throughout the industry. Companies using artificial intelligence to deny claims It exacerbates the problem.

– Reducing the rise in health insurance premiums

Many Americans Struggling to afford monthly insurance premiums. But significantly reducing this increase may be impossible without reining in overall health care costs and, ironically, keeping more people insured.

Insurance works by pooling the money paid by members of the insurance plan. These funds cover health care costs for all members, with some using more than they contribute and others less. Therefore, the premium prices depend on The number of people in the plan, as well as the services the insurance will cover and the services people actually use. Because health care costs are generally rising, commercial insurance companies You may not be able to significantly lower your premiums Without reducing their ability to cover costs and absorb risks.

Nearly two-thirds of Americans are under the age of 65 Obtaining health insurance through employers. last 6.9% of them get it through the Affordable Care Act’s marketplaceswhere enrollment numbers are very sensitive to premium costs.

Enroll in ACA plans Nearly doubled in 2021from about 12 million to more than 24 million, when the government provided subsidies to lower insurance premiums during the Covid-19 pandemic. But when? Subsidies have ended On January 1, 2026, ca 1.4 million decreased coverageAnd for most who don’t, Insurance premiums more than doubled. The Congressional Budget Office expects so Another 3.7 million will become uninsured In 2027, Reverse some huge gains They have been in place since the ACA was passed in 2010.

When health insurance costs rise Healthy people may risk going without it. Those who remain insured tend to need more health services, requiring those more expensive services to be covered by a smaller group of people and raising premium prices to higher levels.

The Trump administration has proposed directing money spent on benefits directly to eligible Americans to help them buy health insurance. It’s unclear how much money people will receive, however amounts in previous proposals What you provided will not be covered by subsidies.

In short, health care is very complex and there are many barriers to reforms, as successive US administrations have learned over the years. Whether the Trump administration achieves some success depends on the extent to which policies can overcome these and other obstacles.