Subsidizing healthcare access to fix market failure feels morally right, but it leaves underlying costs unchecked. Between 2011 and 2024, average insurance premiums grew nearly dollar for dollar alongside health spending, with spending growth accounting for 91% of the overall increase in premiums. Meanwhile, insurer markups actually fell from 19% to 15%, showing that demand-side subsidies pour fuel on healthcare inflation rather than containing it.
Rather than lowering administrative overhead as expected, artificial intelligence is expanding private insurer reimbursements. Healthcare providers leverage AI systems to document clinical care more aggressively. This allows identical patient interactions to generate higher numbers of billing codes and produce greater profits for provider networks, contributing to rising healthcare costs rather than generating anticipated administrative savings.
Medicare pays hospital-owned clinics nearly twice what it reimburses independent physician practices for identical services. This pricing asymmetry gave hospital systems a massive financial incentive to buy up independent practices and bill taxpayers higher rates for unchanged care. Adopting site-neutral payments would eliminate this incentive for hospital mergers and save Medicare an estimated $170 billion over a decade.
While political debates spotlight prescription drugs—which represent only 8% of healthcare spending—hospitals and clinics drive 52% of costs. The core problem is artificial supply suppression: Congress froze Medicare residency slots at 1996 levels, 35 states use certificate-of-need laws allowing hospitals to block competitors, and state licensing barriers sideline over 260,000 healthcare-credentialed immigrants alongside qualified foreign-trained doctors.
Gradually lowering the Medicare eligibility age would directly curb employer premiums. Workers aged 45 to 64 generate 32% of all healthcare spending, compared to 31% for all employees aged 44 and younger. Moving older workers into Medicare liberates the 25% of workers locked into jobs for benefits while utilizing Medicare's 1.3% administrative overhead, compared to 8% to 17% overhead in private and Advantage plans.