A recent study published in the journal JAMA Network Open found that health insurance premiums in the US have increased significantly between 1999 and 2024, outpacing worker earnings by three times. The main driver of these premium increases is the rising cost of medical services, particularly hospital services. Hospital costs have increased the most, while physician services and prescription drugs have risen more slowly. The study suggests that hospital consolidation, where hospitals and healthcare entities merge, has led to higher prices as hospitals raise their prices above their costs.
The research also found that hospital CEOs prioritize profit over delivering high-quality care, with their compensation often tied to growing profits and organization size rather than quality of care. This has raised concerns that financial success is the dominant priority at these institutions. To address this issue, it has been suggested that nonprofit hospitals should be required to disclose their executive compensation guidelines, allowing the public to pressure companies to prioritize affordability and quality of care.
Some economists have proposed regulating hospital prices, capping prices at the most expensive hospitals and restricting price growth for all hospitals. This approach would involve flexible but service-specific oversight to respond to market disruptions. Employers, who bear the bulk of premium increases, can also play a role in keeping insurance affordable by introducing price sensitivity when designing benefits for their employees. For example, offering health insurance plans with tiered copayments based on hospital prices can achieve savings without reducing quality.
The study highlights the need for greater accountability and transparency in the healthcare industry, particularly among nonprofit hospitals. By restraining price growth and introducing greater price competition, the healthcare market can become more affordable for everyone. The mission statements of nonprofit healthcare systems often express a desire to improve community health, but it is essential to hold them accountable for prioritizing the health of their communities over profit. Ultimately, addressing the rising cost of healthcare will require a multifaceted approach that involves regulating hospital prices, increasing transparency, and promoting affordability and quality of care.