By Ryan Boyle

Over the summer, Carl revisited an essay detailing the array of challenges facing the U.S. healthcare system.  The picture hadn’t changed much.  But as the system limps along, costs have risen continually, and even higher prices are in sight.

Insurance broker Aon projects U.S. employer health care costs to rise 9.5% in 2026, exceeding $17,000 per employee.  A survey by consultancy Mercer forecast that a 6.5% cost increase is in store next year.  Both reports pointed to a greater rate of chronic diseases and higher price pressures from new treatments, like advanced weight-loss medications.  Also, more employees are using healthcare services, a lingering outcome of deferred care during the pandemic.

Personal consumption data shows that healthcare (including insurance premiums) accounts for 17% of household spending.  Roughly half the U.S. population gets health insurance through an employer policy. Employers will be challenged to design compensation plans that accommodate the cost of healthcare. The Bureau of Labor Statistics’ Employment Cost Index shows both wages and benefits have increased over time at a consistent rate.  Employees take note of wage raises but may not be aware of the greater cost of insurance that their employers are absorbing.

The entire healthcare system lacks transparency, with consumers often unaware of their cost of insurance, nor the prices charged and collected for medical services.  Opacity is an obstacle to reform.  The insurance sector has tried to find efficiencies with constructs like health management organizations and high-deductible health plans.  Past legislative efforts at broader reform met strong resistance.  Congress’ only recent action was to reduce future funding for Medicaid and health exchanges in the reconciliation bill, which will push more costs onto the insurance sector.

Price pressures abound.  Like many services, healthcare costs are driven by wages.  Wage gains in the sector grew disproportionately in the pandemic; they are still rising.  Healthcare is highly dependent on immigrant labor, and shortages may return amid tighter border policy.

Sometimes, the cure for high prices is high prices: Greater costs could compel greater reform.  But inertia is difficult to overcome.  We expect rising healthcare costs to be a recurring theme in our coverage for years ahead.Throughout the process, LFS updates have upheld the importance of credible public statistics.  Changes have been slow, but the end result should be a more reliable product.  We hope any other modifications to government data around the world are informed by this experience.