Healthcare consumes 1 of every 5 dollars spent in the U.S. economy

Healthcare costs are rising rapidly and now represent 1 of every 5 dollars spent in the U.S. economy. A new Peterson-KFF Health System Tracker report identified eight trends that are shaping healthcare costs in 2026.

Healthcare costs remain top of mind for many Americans. Consumers identify healthcare as the center of the affordability crisis, above food, rent and utilities. Affordability remains a concern for people with various types of insurance, from individual market plans to employer-sponsored insurance.

Premiums have increased across commercial and individual marketplaces. In advance of the midterm elections, the drivers of healthcare spending and alternative policy proposals—such as restoring enhanced ACA tax credits, reversing Medicaid cuts from Democrats and expanding health savings accounts from Republicans—may attract sustained attention.

The public and private sectors are looking for solutions as U.S. spending on prescription drugs continues to increase. The Inflation Reduction Act, including Medicare price negotiations for a list of eligible drugs, led to lower costs for some beneficiaries and the federal government. However, Americans continue to pay more for the same drugs than peer nations.

See also: The healthcare cost crisis is here: How are SMBs surviving it?

Transparency for healthcare prices has momentum. Providing clear and accurate pricing should, in theory, improve the ability of consumers and employers to negotiate or shop for lower prices. Many employers, consumers and advocates believe this data could improve affordability by allowing more informed purchasing choices.

Federal, state officials interested in addressing consolidation impacts

Federal and state policymakers show interest in addressing the impacts of healthcare consolidation. Policymakers at both the federal and state levels see opportunities to reduce consolidation or increase the competitiveness of healthcare markets in other ways. For example, recent bipartisan legislative proposals include restrictions on anticompetitive contract clauses between providers and payers, and prohibitions on some types of vertical consolidation.

The use of artificial intelligence in healthcare is likely to accelerate coding intensity, placing upward pressure on spending. Better documentation increases the proportion of visits that can be coded as higher complexity, which in turn increases billing. Payers are already finding that AI-driven documentation and coding are increasing billing amounts.

States are responding to funding and program implementation pressures with changes to Medicaid, beginning in 2027. States are grappling with shouldering more costs of the Medicaid program as well as implementation costs of the new community engagement requirements and more frequent eligibility redeterminations. In response to anticipated budget shortfalls, states are weighing a variety of actions to cut Medicaid reimbursement rates and limit benefits such as dental care.

Effective distribution of Rural Health Transformation Funds will require rapid state action. Each state has proposed using some of the funds to deploy various technology-enabled healthcare solutions, including expanding telehealth infrastructure; deploying remote patient monitoring for certain conditions and patient populations; modernizing electronic health record systems; or using AI to support administrative functions, clinical decision-making and patient management of care.

This article was originally published on BenefitsPRO, a sister site of HR Executive. For more content like this delivered to your inbox, sign up for BenefitsPRO newsletters here.

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