To Lower Health Care Costs, ‘We Have to Address Prices’

To Lower Health Care Costs, 'We Have to Address Prices'

Policy expert says price growth is at the root of rising U.S. health care spending.

Health care spending in the United States continues to climb, with price growth playing a significant role, according to health policy researchers in a recent episode of NCSL's podcast "Our American States." As costs strain household budgets and state finances alike, state lawmakers are exploring a wide range of policy responses aimed at slowing the growth.

In 2023, spending on health care-from private and public health insurance, hospital care and physicians' services to prescription drugs, eyeglasses and nursing home care-totaled about $5 trillion, or nearly 20% of the U.S. economy, says Katie Martin, president and CEO of the Health Care Cost Institute. "That's nearly $15,000 for every person that lives in the United States," she says.

Martin says that overall health care spending has increased by more than 50% since 2014, with no clear sign of slowing. Her organization analyzes claims data from employer-sponsored insurance, Medicare and Medicaid, covering nearly 200 million people nationwide.

Employer-sponsored insurance is a particularly important piece of the puzzle. About half of Americans receive coverage through work, and that coverage accounts for about 30% of all health care spending. Martin highlighted data indicating that per-person spending for people with employer-based insurance rose by nearly 19% in the past five years, with hospital care accounting for about half the increase.

While health care costs can be influenced by multiple factors, including how much care people use, the data highlights the role of prices. "The primary driver of health care costs is prices," Martin says. From 2018 to 2022, annual per-person spending for those with employer-sponsored insurance increased by about $1,000. "Prices were responsible for about $900 of that $1,000," she says.

Even the COVID-19 pandemic, which briefly reduced health care utilization, failed to alter long-term trends. "If you can imagine a straight diagonal line with just a brief dip in the middle, that's what we saw," Martin says, with the pandemic representing the decline in spending.

Against this backdrop, states are considering a variety of policy options related to health care cost containment. Price transparency has emerged as a major focus of reform efforts at both the federal and the state levels. While recent initiatives have made more information available to consumers and policymakers, Martin cautions that transparency alone is unlikely to rein in costs. "Transparency is foundational," she says. "I don't know how you intervene in any way without starting with transparency."

At the same time, she warns against laying cost-containment responsibility on patients. "We shouldn't put it on consumers to solve the health care cost problem in this country," she says.

State Actions

States have increasingly taken the lead in tackling affordability. More than 100 bills addressing health care costs were enacted across 33 states and Washington, D.C., in 2025 alone, according to the National Conference of State Legislatures.

"States have been busy," says Sarah Jaromin, who tracks health care cost issues for NCSL. "These policies span everything from consumer affordability and price regulation to monitoring health care market structure."

Other areas of focus include:

• Medical debt: In 2025, 14 bills across 10 states addressed issues such as debt collection practices, interest rates and credit reporting.
• Surprise billing: Unexpected bills from out-of-network providers-particularly for ground ambulance services not covered under federal surprise billing law-have drawn lawmakers' attention. As of 2025, 22 states have enacted protections against those charges.
• Health system concentration: "States have been busy when it comes to consolidation and competition," Jaromin says, noting that many have strengthened oversight of provider mergers and contracting practices. Several states have also imposed new guardrails on private equity investment in health care.

Looking ahead, budget pressures and federal policy changes could sharpen states' focus on health care costs in 2026 and beyond. "States are facing greater budget uncertainty and preparing for a more constrained fiscal environment," Jaromin says.

Despite the challenges, Martin, with the Health Care Cost Institute, urges lawmakers not to be discouraged. "If we're going to make care more affordable, we have to address underlying health care costs," she says. "And if we're going to address underlying health care costs, we have to address prices."