Health Care
The United States has long been a global outlier in its approach to funding and providing health care. The United States is the home of world-class research and innovation, with some hospitals delivering the best care available globally. However, access to this expertise is uneven and expensive. According to the OECD, life expectancy in the United States (78 years) is 3 years below the OECD average (81 years) and deaths that could be prevented through timely and effective health care were 23% higher than the OECD average (95 per 100,000 people compared to 77 per 100,000 people). Americans are also paying far more than people in other countries; per-capita spending is 2.5 times higher than the OECD average ($14,855 vs $5,967).
The Affordable Care Act, passed in 2010, increased access to health services; analysis by the Kaiser Family Foundation (KFF) found that the uninsured rate for working-age adults fell from 17.8% in 2013 to 9.5% in 2023. They add that coverage increased most strongly for poor and near-poor adults, as well as people of colour. However, as the Commonwealth Fund notes, the costs of insurance premiums and deductibles have risen, creating pressure on middle-income families. In 2010, workers in 10 states paid more than 10% of median income on insurance premiums and deductibles. In 2020, this increased to workers in 37 states. The Commonwealth Fund adds that middle-income households in nearly half of states are underinsured–defined as those with deductibles over 5% of income–compared to just one state in 2010. These workers are more likely to struggle with medical bills or avoid medical care. The federal government added subsidies to insurance premiums temporarily in 2021, but these expired at the end of 2025. These subsidies were the focus of the federal government shutdown in October 2025 and the threat of a second shutdown in January 2026.
The American health care system is a complicated mix of public and private funding that varies by state. The Kaiser Family Foundation notes that, over the past 11 years, 41 states have increased the income threshold for Medicaid–public funded health insurance–and 20 million people enrolled. They add that Medicaid expansion is associated with increased coverage, access and affordability. They also note that Medicaid expansion improves health outcomes by enabling earlier cancer diagnosis, strengthening chronic disease management, and reducing mortality rates. However, Medicaid expansion is also politically controversial. The Foundation for Government Accountability argues that Medicaid expansion increases the burden on states–as people with private insurance move onto Medicaid–and reduces reimbursement for providers since Medicaid pays less.
Previous Republican attempts to reform health care focused on a “repeal and replace” of the Affordable Care Act. However, these largely focused on lowering premium prices by reducing the scope of coverage for insurance and increasing deductibles. This approach increases the risk of patient care not being covered, making that care potentially unaffordable. It also contrasts with Democratic proposals that promise to increase coverage and affordability, at taxpayer expense. Even with subsidies, insurance premiums will continue to rise until policymakers address the rising costs of health care delivery.
Below are market-based options that can increase access and affordability of health care.
Incentivise individual insurance policies
The American health insurance market heavily favours those who obtain insurance through their employer. The Census Bureau found that, in 2023, 53.7% of people had employment-based insurance, compared to 10.2% of people who purchased their own insurance (the remaining people had Medicare, Medicaid and other government insurance policies). According to the Association for Healthcare Executives, employer-based insurance began in the United States in the 1940s as a company benefit. In 1954, Congress passed legislation that exempted employer-based insurance from taxes. This likely drove the shift toward employer-based insurance, as individual plans do not have these benefits and are more expensive than equivalent employer-sponsored plans. The Affordable Care Act went some way to address this by establishing the Health Insurance Marketplace and a Premium Tax Credit if they meet specified income and other criteria.
Over time, the employer-based model has transformed from a work benefit to an essential lifeline, and it carries a bigger burden than it was designed to support. The employer-based model developed at a time when many workers had a job for life and health care needs centred on specific incidents, such as an accident or a heart attack. Workers today change jobs far more regularly–Bureau of Labor Statistics data reports a median job tenure of 3.9 years in January 2024–and people are more likely to have long-term conditions such as diabetes and cardiovascular disease. The National Institute for Health Care Management (NIHCM) notes that approximately 60% of Americans had one or more chronic conditions in 2022. They add that 90% of the $4.5 trillion spent on health care covered care for people experiencing chronic mental or physical health conditions.
Individual policies provide more flexibility for workers, giving them coverage regardless of where they work. This means that Americans can change jobs without disrupting their access to health care. It also means that employers can recruit staff without the burden of managing their health coverage. The growth of the gig economy makes this flexibility paramount. Research by Ogilvy Consulting estimates that half of the developed world’s workers will be in the gig economy, and this will be driven by young people seeking greater control over their work-life balance. Insurance companies can then build relationships that span longer than one year contracts. This builds trust between insurer and insured and incentivises preventative care. It also helps patients maintain relationships with doctors–given that different policies may have different providers–which strengthens the continuity of care needed to manage chronic conditions.
There is a risk that groups of individuals would be more costly to support than employer-based groups because sicker people might join the individual plans. This could make individual policies unaffordable for younger, healthier people, leading them to opt out. However, as the American Association of Actuaries notes, the Affordable Care Act accounts for this by requiring insurers to pool all of their individual market enrollees together when setting rates. Equalising tax benefits increases incentives for younger, healthier people to join by lowering costs, which in turn helps lower average premiums.
Continue shift to value-based care:
Historically, US healthcare has been funded through a fee-for-service model. This means that providers invoiced patients or their insurance companies for every test or procedure carried out, along with resources used. It also rewards providers for providing more care–and more expensive care–than may be needed, which increases health care costs.
Michael Porter and Elizabeth Olmsted Teisberg recommended a new approach in their 2006 book, Redefining Health Care. They argued that health care providers and insurers should be paid for the value they produce for patients, rather than the work they do. They defined value as the level of patient benefit in relation to the costs incurred. Their value-based care model encouraged providers to collaborate, complementing their strengths to deliver better care. They also encouraged insurance companies to become trusted advisors, using their wealth of data to reward, and help patients find, providers that deliver better value.
The Affordable Care Act applied Porter and Teisberg’s approach by introducing new, value-based models. For example, Accountable Care Organisations incentivised providers to work together to improve patient care and lower costs. According to the Health Care Payment & Action Learning Network, 28.5% of health care payments in calendar year 2023 were made through value-based payments where providers were at risk of having to return money. The Trump Administration strengthened public access to costs through the Hospital Price Transparency rule, which requires hospitals to make pricing data publicly available.
Future health reforms should build on this collaboration and transparency, ultimately moving away from fee-for-service and toward episode-based payments wherever possible. This could be strengthened with an app or website that presents data on health outcomes and costs in an accessible way for the public. It will also help providers benchmark their care and identify opportunities to improve.
Incentivise Lower Cost Delivery Models:
While sensible changes are needed around the costs of insurance, changes are also needed around the costs of health care delivery–especially for inpatient care. For example, research by the International Federation of Health Plans shows that a coronary bypass in the US in 2022 cost, on average, $89,094 compared to $17,741 in Australia and $10,734 in Spain. The average price of an appendectomy in the US was $13,560, compared to $2,622 in Spain and $3,980 in Germany. The chart below, from the International Federation of Health Plans, benchmarks prices of other inpatient procedures. OECD data on life expectancy, noted above, suggests that these costs are not equating to better outcomes.
The Commonwealth Fund analysed health care spending and found that, overall, the US spends twice as much on health care as other countries. They argue that spending is caused by higher prices for health services. They found that much of the excess spend is from administrative burden in health care providers and insurance companies, as well as high drug prices. The Trump administration introduced most favoured nation pricing to lower prescription drug prices for Medicare and Medicaid, setting rates to the lowest rate agreed with other developed countries. The administration is also introducing “TrumpRx” to help all Americans find cheaper drugs.
Building on this, the Government can also implement policies that further reduce administrative costs for insurance companies and providers. The Center for American Progress notes that administrative costs are much higher in the United States compared to peer countries; administrative costs comprise 8.3% of health care spending in the United States, compared to 4.2% in Germany, 2.0% in the United Kingdom and 1.6% in Japan.
The Affordable Care Act requires insurance companies to spend at least 80% or 85% of insurance premium earnings on clinical services and quality improvement. These thresholds, known as medical loss ratios, should be further increased to drive efficiencies and lower premiums. The Centers for Medicare and Medicaid Services (CMS) are also managing provider costs with a pilot initiative called Achieving Healthcare Efficiency through Accountable Design (AHEAD). This is based on an “all-payer” system, wherein all providers are paid the same price for a given health service, adjusted for the costs of inputs such as staff costs, buildings and utilities. These rates are negotiated at a regional or state level. Several countries with lower administrative spend use the all-payer model, including Germany, the Netherlands, Switzerland and Japan.