Why Is Healthcare So Expensive?

Why Is Healthcare So Expensive

Why Is Healthcare So Expensive?

Analytical breakdown of the global healthcare costs

Ok, so yes we all know healthcare is expensive. But why? Why are we having to fork out so much on healthcare if we do not have medical insurance? This is exactly what I’m going to breakdown and uncover in this blog. Here’s a quick summary. 

Quick Summary: Healthcare costs historically always have been expensive but are also increasing globally due to factors like advancements in medical technology, administrative costs, ageing populations, legal costs and expensive prescription drugs. These elements contribute to the increasing financial burden of healthcare, making it more expensive over time.

cost of healthcare overview for each country - bills

Overview Of Healthcare Costs In The World

The cost of healthcare is constantly increasing around the world. There are many reasons why and to be honest, it’s not necessarily a bad thing that these costs are increasing for those who are covered with medical insurance. 

As a rule of thumb, a sign of increased costs does show advancement and improvement in our healthcare systems around the world. This generally means they are getting better and able to provide better services. 

Here’s our blog on the average cost of medical insurance

Europe healthcare cost overview

The cost of healthcare varies a lot in Europe, as you have so many different countries. Countries like Germany and France tend to have the highest healthcare expenditure relative to their GDP within the EU.

This is indicative of the substantial investment these countries make in their healthcare systems which as a result increases the cost of healthcare making it more expensive for all. 

The expenditure on healthcare can be broken down into 3 main categories in Europe which are financing sources, healthcare functions financed, and healthcare providers. 

Hospitals are the major providers of healthcare in terms of expenditure, constituting nearly two-fifths (or 37.4%) of all healthcare spending in the EU. Other significant providers include ambulatory health care and retailers of medical goods.

Overall, Europe has a good healthcare system that has a large funding pool meaning the average cost of healthcare is much more expensive than Asia or the Middle East. 

America's healthcare cost overview

As of 2023, the U.S. continues to have the highest health spending per capita among comparable countries. Health spending in 2021 reached nearly $4.3 trillion, equating to 18.3% of the U.S. GDP, averaging $12,914 per person. 

The strain on the healthcare workforce is a likely impact for the rising costs of healthcare and why it seems to be so expensive in the US. Similar to Europe, USA is very advanced and places large investments into their healthcare systems with drive up costs. 

One significant aspect is spending on prescription drugs, which accounts for about 10% of healthcare spending. The U.S. spends substantially more per person on retail prescription drugs than other countries. 

Additionally, labour costs, particularly for physicians and registered nurses, contribute to the high healthcare spending. This means the expense of healthcare is driven up in The States. 

new york medical patient catching a bus

Asia healthcare cost overview

In many Asian countries, government spending on healthcare has been increasing, but it varies widely. For instance, countries like Japan and South Korea have well-established public healthcare systems with significant government spending. 

However, in many other Asian countries like Vietnam and Cambodia, private insurance plays a varying role across the region. This contributes to higher costs of healthcare in these countries, making it more expensive overall. 

The pandemic has led to an approximate 9% increase in spending on the healthcare sector in Asia-Pacific as well. This has caused patient numbers to grow significantly, indicating a strong demand for healthcare services. 

Although the overall cost of healthcare in Asia is more affordable than Europe or US, it still seems to be increasing potentially due to supply and higher risk of industries in those countries. 

Middle east healthcare cost overview

The healthcare market in the Middle East is undergoing significant growth, with a focus on expanding and modernising healthcare facilities and services. The Middle East and North Africa (MENA) region’s healthcare market is projected to grow from $185.5 billion in 2019 to $243.6 billion in 2023

This growth is attributed to several factors, including the increasing demand for healthcare services and the development of new hospitals, clinics, laboratories, health resorts, health research centres, medical colleges, and medical cities.

Additionally, there’s a growing emphasis on public-private partnerships (PPPs) in new hospital projects to meet future healthcare needs, particularly in Dubai. This summarises why healthcare in the Middle East is expensive, as it’s private and growing.

hospital in the middle east

Factors That Are Causing High Healthcare Costs

Of course, keeping it relevant to the question in hand. Why is healthcare so expensive? Well, here I am breaking down the biggest attributes and factors that are causing healthcare to become more and more expensive. 

The advancements in technology

All across the world healthcare is becoming more expensive partly due to the rapid advancements in medical technology. While these innovations can lead to better diagnostics and treatment, they often come with high development and implementation costs. 


High-tech medical equipment, state-of-the-art facilities, and cutting-edge treatments are typically more expensive than traditional methods. This is a direct cause for hospitals, private investors and insurance companies to cover their costs by increasing the cost of healthcare. 

Cost of healthcare administration

You also have to consider the cost of admin in healthcare as well. These are expenses for things like managing insurance claims, billing systems, hospital managements and many other admin factors. 

The day to day running for healthcare facilities can become extremely expensive. This cost is usually passed down the end user, which will be you. As a result of this, health care generally becomes more and more expensive. As admin costs rise, so does healthcare. 

healthcare administrators hard at work

Ageing population is increasing

An ageing population leads to a higher prevalence of chronic diseases and a greater demand for long-term care and medical services. It would seem that our life expectancy around the world is increasing, meaning there are more older people. 

Older populations typically require more medical attention and healthcare resources. This in turn increases the supply and demand for medical facilities, healthcare and prescription drugs. When the demand is high, and supply is low, healthcare becomes more expensive. 

Legal costs

In some healthcare systems, particularly in the United States, legal costs associated with medical malpractice and the practice of defensive medicine can drive up costs.

Legal costs are where doctors order more tests and procedures than medically necessary to protect themselves from liability. 

Suing is so common in places like the US that medical professionals don’t take the risk. As a result, the cost is passed down to you, making your healthcare become more expensive. 

medical specialist signing a legal document

Prescription drugs

The cost of prescription drugs is a major contributor to the overall expense of healthcare. In some countries drug prices are much higher compared to other countries. Manufacturing locations make a difference as well, and the speed at how quickly drugs can be made.

This is due to several factors, including the lack of price regulation, high costs of drug research and development, and marketing expenses. Again, all of these costs are going to be passed down the line to you, the end user. As a result, your healthcare costs increase. 

Supply and demand costs

Healthcare costs can also be driven by basic economic principles of supply and demand as we have so seen during COVID19. In areas with a shortage of healthcare providers or services, prices may be higher. 

Similarly, as the demand for healthcare services increases, so can the costs, especially if the supply doesn’t keep pace with the demand. As people get older, the demand for healthcare becomes more apparent. More people need support, and this makes healthcare more expensive. 

queue of patients waiting for healthcare

Insurance systems

Lastly, the structure and efficiency of insurance systems play a significant role in healthcare costs. There is some stigma that private health professionals increase the costs of healthcare knowing if you are insured, the costs get passed to the insurer. 

They want to make as much as they can, so they make healthcare more expensive overall. Additionally, the lack of universal healthcare coverage in some countries can lead to higher costs for both insured and uninsured individuals.

Why Is Medical Insurance Important?

I think this nicely puts us forward to the next step. Why is medical insurance important in 2024 and moving forward? 

Well, as shown by the stats above, healthcare is increasing and not decreasing. This means that if you are not insured, you are likely going to have to bear the brunt of this increasingly expensive healthcare by yourself. 

Medical insurance can support you by covering those costs and paying the hospital directly, ensuring you are not left out of pocket at any time. This gives you more peace of mind and allows you to focus on getting better. 

I would say if you do not have medical insurance, you are at a much larger downfall compared to someone who does. Hospital bills can go through the roof, especially in countries like the States or Australia. 

I’ve done a full article on what is included in medical insurance here.

nomad in hospital covered by medical insurance


Overall, the reason why healthcare is so expensive is down to multiple different factors which all add up together. 

Most importantly, health care has always been expensive because it’s our lives that we are caring about. With more people wanting to care for their lives and health, it will mean the cost becomes more expensive naturally. 

I cannot stress the importance of having a really good medical insurance plan to cover all of your healthcare costs. This way you are ahead of the game and preparing for anything to come. 

Healthcare isn’t suddenly just going to turn cheap. It’s likely going to increase the same as everything else in the world increases. That’s why it’s good to realise early and prepare yourself so all costs are covered. 

Anyway, share your thoughts in the comments below. We’d love to hear what you think about why healthcare is so expensive.

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With a decade of experience in medical insurance, Damon crafts solutions for nomads and global entrepreneurs. Often seen at global seminars or featured in industry publications, he’s dedicated to simplifying medical insurance for all.

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