Why Health Care Costs are Rising and What We Can Do About It

Too many families continue to struggle with rising health care costs, from the patient who can’t afford their medication, to someone who delays care because they worry the bill will be too high. 

In 2023, the average premium for an employer-provided family policy was an astounding 1/3 of median household income—an increase of 59% from 2011.

With costs continuing to rise too fast, many families and leaders are left wondering why. Several factors are contributing to the increased pressure on hard-working Americans and their families. Those factors include:

Prescription Drug Costs

In January 2024, pharmaceutical companies increased prices in the U.S. on more than 775 brand name prescription drugs, with the median price increase strongly outpacing the rate of inflation. But many people around the world don’t experience these out-of-control price hikes.

On average, Americans tend to pay prices for their prescription drugs that are 190% higher than what consumers in other high-income countries pay. More than 22 cents of every dollar spent on premiums in the U.S. pays for prescription drugs. These high costs—set by big pharma—are reflected in the health insurance premiums we pay each month. 

The pressure on premiums from prescription drugs continues to grow. GLP-1 weight-loss drugs show great potential, but they’re also incredibly expensive. Forecasts predict that providing GLP-1 drugs to all those who need it could cost over $1 trillion a year, which is almost as much as the government spends on the entire Medicare program. Patients won’t be able to get the medications they need if they can’t afford the costs. 

Rising Hospital Prices

It isn’t just drug prices that are rising fast. According to the Labor Department, overall prices for medical care increased by 2.7% year-over-year in April 2024. But during that same period, prices for hospital services grew by 7.7%, the largest increase in any month since October 2010.

Often those rising prices are due to unreasonable markups and fees from corporate hospital systems. When these hospitals take over independent doctors’ offices, patients can receive the same care in the same room from the same doctor—but at much higher prices. One study found a price increase of more than 250%.

Under the guise of consolidating practices to provide more access and better care, many hospital systems across the nation have effectively done away with competition. And the result is higher prices for American consumers. In fact, prices at hospitals with no competition are 12% higher than in markets with four or more competitors.

Solutions for More Affordable Health Care

The Blue Cross Blue Shield Association (BCBSA) is a national association of independent, community-based and locally operated BCBS companies. Operating in every ZIP Code and covering more than 1 in 3 Americans, BCBSA offers a personalized approach to health care based on the needs of the communities where their members live and work. 

Working both nationally and locally, BCBSA has been committed to making health care more affordable, including advocating for solutions that reduce health care costs by more than $767 billion over the next 10 years. Here are three solutions to help make health care more affordable:

• Lowering Prescription Drug Costs: We must close the loopholes that permit drug companies to game the system and delay patient access to lower cost, equally effective medications.
• Restrict Unreasonable Markups: Prevent hospital outpatient departments from charging patients more for the same medical services that cost less in other care settings.
• Ensuring Access to High-Quality Care: Reimburse health care providers for delivering safe, high-quality, cost-effective care rather than a high volume of services and move away from fee-for-service payments.

In addition to policy solutions, Blue Cross and Blue Shield companies are taking steps to lower costs for members now. 

Lowering Prescription Drug Costs

The lack of affordable options for common but high-priced medicines is another unique challenge in the complicated prescription drug market. To tackle this problem, BCBSA and Blue Cross and Blue Shield companies partnered with Civica to develop and distribute generic drugs for high-cost medicines that have little competition. Today, CivicaScript is driving millions of dollars in savings for consumers. 

In partnership with Blue Cross and Blue Shield companies, U.S. health systems and philanthropic donors from across the diabetes industry, Civica is developing quality, affordable insulin, which it will provide to patients for no more than $30 per vial—90% lower than historical prices.

Among the most expensive drugs on the market today are those that treat rare and complex diseases—particularly medical benefit drugs or those that are injected or infused by a health care professional in a clinical setting. Drugs that are covered by the medical benefit are often high-cost treatments such as multi-million-dollar gene therapies and infusible cancer drugs. 

In 2023, BCBSA and a group of Blue Cross and Blue Shield companies founded Synergie Medication Collective (Synergie), a new medication contracting organization focused on improving affordability and access to expensive medical benefit drugs, with the ability to positively impact over 100 million lives.

Synergie is a fully transparent and pass-through organization, meaning it passes through 100% of cost savings and value to participating companies and patients. This independent organization is driving affordability by establishing more efficient and value-based contracting models with pharmaceutical manufacturers and other industry stakeholders. 

Americans Deserve Affordable Health Care

Rising health care costs are jeopardizing America’s long-term economic growth, health and well-being. The time to act is now and the area of focus is clear. Over 82 cents of every dollar Americans spend on health insurance premiums goes to prescription drugs and medical services. 

Blue Cross and Blue Shield companies are on the front lines, offering our members personalized approaches to health care based on the needs of the communities where members live and work. 

The team at BCBSA is committed to advancing common sense solutions to improve care and lower costs for Americans because the bottom line is, we all deserve better. 

To learn more about BCBSA’s affordability solutions, visit BCBS.com.