Employers contribute to soaring health costs not through ill will, but by an unwillingness to challenge the status quo. It is easier to accept industry-wide rate hikes than to ask uncomfortable questions, scrutinize data, or sever long-term relationships with brokers and insurers, thus perpetuating the high-cost cycle.

Contrary to the narrative of government inefficiency, Medicare's administrative overhead is only 2%. In contrast, private commercial insurers spend 16% of every dollar on administration, advertising, and claim disputes, revealing a major source of bloat in the US healthcare system.

A significant hidden cost in the US healthcare system is the administrative expense of price negotiation. For a well-run hospital, the process of billing, negotiating, and receiving reimbursement from insurance companies can consume 2% to 7% of a patient's total bill, adding a substantial layer of inefficiency.

The convoluted nature of the health insurance system is not an accident; it is a strategic asset for incumbents. The resulting confusion causes exasperation among employers and consumers, preventing them from effectively questioning costs or believing they can enact change, thereby protecting the industry's profitable, high-cost model.

Official healthcare inflation appears lower than reality because hospitals are currently absorbing rising costs by accepting lower profit margins. This is not sustainable and suggests future price hikes as hospitals pass these costs on to insurers in upcoming negotiation cycles, which occur every two to three years.

High healthcare costs are not an inherent failure of capitalism but a result of regulatory capture. Established companies influence legislation to create immense barriers to entry, stifling innovation from new competitors, which leads to ballooning administrative costs instead of more physicians and better care.

Regulatory capture is not an abstract problem. It has tangible negative consequences for everyday consumers, such as the elimination of free checking accounts after the Dodd-Frank Act was passed, or rules preventing physicians from opening new hospitals, which stifles competition and drives up costs.

The US government's official inflation statistics for healthcare are often lower than public perception because the underlying price data, negotiated between hospitals and insurers, are considered trade secrets. This forces economists to use lagging or incomplete survey data, creating a disconnect with real-world costs.

Insurance firms intentionally create friction, like forcing phone calls with long hold times, to discourage hospitals from pursuing all claims. This tactic protects their profits to such an extent that UnitedHealthcare's investors sued when the company tried to make the claims process easier for providers.