Reports blaming “aging population” for rising health care costs ignore key driver

Recent reports attributing rising healthcare costs in the United States to the aging population have drawn sharp criticism from experts, who argue that these reports ignore significant factors such as excessive administrative costs and profit-driven motives within the insurance industry.

The U.S. healthcare system has seen a substantial increase in costs over the past few decades, with recent reports highlighting the aging population as a primary driver. Proponents of this view argue that as the baby boomer generation ages, the demand for care services naturally increases, leading to higher costs.

However, New Jersey Democrat Lisa McCormick contends that this narrative oversimplifies the issue and overlooks the substantial role played by administrative costs, insurance company profits, and the fragmented nature of the U.S. health system.

“According to some estimates, nearly one-third of every dollar spent on health care in the U.S. goes toward administrative costs and profits, a figure that far exceeds the spending in other industrialized countries,” said McCormick. “This greed and wasteful spending are far more significant contributors to rising health care costs than the aging population alone.”

“Medicare, Medicaid, and other government health programs comprise an increasing share of the federal expense due to an aging population, but in general inflation should be attributed to greedy private-sector insurance practices, corporate health business consolidation, and profiteers raising prices for drugs and other health services,” said McCormick. “To a lesser extent, advances in costly medical treatments and a growing incidence of chronic disease are driving up costs but the malignancy is greed.”

“While it is true that an aging population can put some pressure on health care systems, the real driver of rising costs in the U.S. is the bloated administrative structure of the health care system,” said McCormick, who earned nearly four of ten ballots cast in New Jersey’s 2018 Democratic US Senate primary. “Insurance companies, hospital networks, and pharmaceutical companies are profiting at the expense of patients, driving up costs without necessarily improving care.”

The U.S. healthcare system is unique in its reliance on private insurance companies, which have significant administrative overhead, including marketing, billing, and customer service functions.

In 2023, 65.4% of Americans had private health insurance, compared to 36.3% with public coverage, while eight percent of people were without health insurance. Because many public health insurance programs are aimed specifically at coverage for children, older adults, and those in need, the uninsured rate among working-age adults ages 19 to 64 is higher.

The U.S. ranks last on international scales that measure the best healthcare in the world based on access to care, administrative efficiency, equity, and patient outcomes, but Americans are number one when it comes to spending despite poor results and spotty coverage.

These costs are often passed on to consumers in the form of higher premiums and out-of-pocket expenses. Additionally, the profit margins of insurance companies add to the overall cost burden.

In contrast, countries with similar aging populations, such as Japan, Germany, and the United Kingdom, have far lower healthcare expenditures.

These nations typically employ more centralized or public health care systems, where administrative costs are kept much lower, and profits are not the driving force behind care delivery.

For example, in many European countries, healthcare systems are designed to minimize the role of private for-profit insurance, focusing instead on universal coverage from governments that provide care without extensive administrative processes, marketing, or decisions based on greed.

Critics of the ‘aging population’ narrative also point to life expectancy data, which shows that Americans are less likely to live to old age compared to people in other high-income nations.

Despite spending far more on health care, the U.S. ranks lower than many other countries in terms of life expectancy, with factors such as higher rates of infant mortality, chronic diseases, and preventable deaths contributing to this disparity.

“The argument that an aging population is solely responsible for increasing costs ignores the fact that Americans are more likely to die prematurely compared to other developed nations,” said McCormick. “In fact, people in the U.S. are not living longer than people in other countries, despite spending far more on health care. This suggests that the health care system is not as effective as it should be, and inefficiencies are driving up costs.”

The U.S. has a lower life expectancy than other wealthy nations, ranking 49th in the world for life expectancy in 2022, behind countries like Cuba, Estonia, and Saudi Arabia.

While aging populations certainly contribute to rising healthcare needs, most experts agree that the primary factors driving up costs in the U.S. are not demographic changes but rather the inherent inefficiencies and profit motives within the system.

High administrative costs, drug pricing practices, and the dominance of private insurers have been identified as key culprits in exacerbating the problem.

“Ultimately, it is the pursuit of profit within the health care sector that drives costs upward, not the aging of the population,” said McCormick. “We need a system that prioritizes care over profit, which means reducing administrative waste and focusing on preventive care rather than expensive treatments.”

As the U.S. continues to grapple with rising healthcare costs, experts argue that policymakers must look beyond simplistic explanations that blame the aging population and instead address the root causes of inefficiency and greed in the system.

While aging may increase demand for services, it is clear that the cost burden is being driven by a much more complex set of factors that go beyond demographics.

The debate over health care costs remains central to discussions around U.S. policy, with growing calls for reform to address the underlying issues of waste and profiteering in the system.