The economics of the U.S. health care system are broken, creating a cycle where prices rise without a mechanism to keep total spending within bounds. While increasing federal subsidies offers short-term relief, it does not solve the underlying financial instability. With federal debt surpassing $40 trillion, covering the entire system through government spending is no longer a viable option. Most federal non-interest spending already goes toward health care and income support, meaning the only sustainable path to affordable care is to control costs directly. Meanwhile, nearly 70% of federal, non-interest spending is on health care and income support like Social Security, leaving little room for other critical investments if costs continue to escalate unchecked.
High premiums and limited coverage
High costs are already forcing difficult decisions among families. One healthy man in his early 60s, who runs a small business, faced a monthly premium of nearly $5,000 this year. This amount exceeds a quarter of his pre-tax income, leading him to drop his own coverage and keep insurance only for his wife and two children. He plans to remain uninsured until he becomes eligible for Medicare. This scenario is not rare.
More than 27 million Americans lacked health insurance in 2024, and millions more have coverage they cannot afford to use due to high deductibles. The average employer-sponsored family premium is nearly $27,000 annually. For context, this premium exceeds the median household income in many parts of the country, making health insurance a luxury rather than a necessity for some families. The burden of these costs falls disproportionately on small businesses and individuals, who often lack the negotiating power of larger employers to secure more affordable rates.
A model for national reform
To break this cycle, the system needs a budget that applies to all participants. This body would require transparency in how prices are set and would establish thresholds for year-to-year increases, capping growth at the rate of inflation. If an organization fails to meet these targets, the office would impose corrective actions and, ultimately, progressive financial penalties. The office would also ensure that realized savings translate into lower premiums and out-of-pocket costs for families, employers, and taxpayers.
California has implemented a similar framework with its Office of Health Care Affordability, setting enforceable cost-growth targets for the entire sector. The state aims to keep growth near 3%, aligning with wage growth, and has established fines that will begin in 2028. This approach is particularly significant because it addresses both the transparency and accountability gaps in the current system, ensuring that cost increases are justified and that savings are passed on to consumers.
Without enforceable cost targets, every new medical breakthrough risks becoming another layer of expense rather than a source of savings. Because the system rewards volume rather than efficiency, investments in prevention often lack financial backing. Accountability is also necessary to ensure payment reform moves beyond incremental changes. Policymakers cannot responsibly expand access to coverage without cost certainty.
The health care system has placed Americans and the nation in a massive financial bind, and the only way to fix this is to demand that the industry manage to a budget. This is particularly critical as innovations like gene therapies and AI have the potential to transform care but could also dramatically increase costs if not managed properly. By focusing on prevention and value-based care, the system could reduce long-term costs, but this requires a fundamental shift in how success is measured and rewarded.
