The Intermediate Guide to Rising Cost of Healthcare

Updated on January 3, 2022

It’s no secret that Americans are spending more and more on healthcare each year, being one of the countries with the highest healthcare costs in the world. Rising insurance premiums, deductibles, and a lot of other expenses are some of the visible costs associated with health in the country.

In fact, the average household has spent about $5,000 per person on healthcare each year, which is almost twice as much as it did 30 years ago in the 1980s, according to real estate data company Clever, with values adjusted for inflation.

However, there’s a lot of factors at play in the continuing increase to healthcare costs. To have a glimpse of the whole picture, here are some of the causes as well as the effects of rising costs of healthcare.

Why Do Healthcare Costs Continue to Rise?

Healthcare costs seem to be increasing ever since it began, and identifying some of the reasons behind it could help shed light on what we can do about it. A 2017 study in the Journal of the American Medical Association (JAMA) assessed five factors associated with healthcare spending in the country from 1996 to 2013, a period that saw a spending increase of $933.5 billion.

In the JAMA study, the five factors include population growth, population aging, service utilization, disease prevalence or incidence, and service price and intensity. Among these factors, the last one–service price and intensity–accounted for more than half of this observed increase. Additionally, the combination by how these five factors affect spending varies depending on the type of health condition and care needed.

One of the reasons why service price and intensity takes the largest part of healthcare spending is because most insurers, including the government’s own Medicare, pay medical care providers (doctors, clinics, hospitals) through a fee-for-service system. Each check up, test, or medical procedure performed is reimbursed by the insurer. Since more services mean more fees, it has encouraged overtreatment and redundant testing that not only increases costs, but could expose patients to unnecessary harm according to a 2021 study from the BMJ Quality & Safety journal.

Also, the population is becoming more unhealthy. A report on the NCBI journal ACR Open Rheumatol reveals that half of the population has a chronic condition like diabetes or heart attack. About 85% of our total healthcare costs go to addressing and caring for chronic conditions.

What Can Businesses Do About It?

As employers struggle to take care of their employees, the rising cost of healthcare remains a problem that’s always right around the corner. On one end, a comprehensive healthcare plan with good coverage is an important part of attracting new talent and improving employee retention in the company. On the other, the time, resources, and costs involved in setting up a healthcare plan, plus the maintenance costs over the years.

However, there are strategies businesses can use to help them reduce the costs they shoulder without sacrificing the quality of care they give their employees.

1. Keep an eye for new plans

While medical care providers and insurers teaming up together have driven costs by minimizing competition, there are still new players in the market that can offer good coverage for your employees. There are low-cost healthcare services that are more enticing to employees who will then prefer lower-cost plans and high HSA deductibles. This means lower premiums and lower claims costs.

2. Assess your employee needs

Everyone wants the best healthcare but not everyone has the same needs. Conducting a survey helps you better understand the demographics of your workforce, have enough data to reevaluate your company’s benefits package, and maybe even raise the level of awareness and involvement in their own healthcare.

3. Promote a healthy culture

Taking initiatives to encourage employees to adopt a healthy lifestyle also serves as a cost cutting measure for your company in the long run. Healthy employees are more likely to choose lower-cost plans and keeping them that way means less risks for diseases and less claims for the employer. There are a lot of employee wellness program ideas available, from raising awareness to improving workplace conditions to reducing employee exposure to potentially hazardous materials and actions.


The continuous rise of healthcare costs is not an issue limited to a single demographic or a single industrial segment, it is determined by all of us just as it affects all of us. While the rising cost of healthcare is one issue that won’t be going away soon, employers have options to soften the blow on their also increasing overheads.

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.