The Cost Story That Isn't Getting Told

When politicians and the media talk about what's driving up American health costs, prescription drug prices dominate the conversation. But a new analysis published in JAMA Health Forum by KFF's Larry Levitt argues that hospitals, not drugmakers, are quietly the bigger driver of recent spending growth. According to KFF's report, hospitals accounted for 40% of the growth in national health spending between 2022 and 2024, yet hospital prices receive a fraction of the policy scrutiny that drug prices do.

For Medicare enrollees, this imbalance matters. The costs you pay, and the premiums, deductibles, and coverage rules that shape your plan options, are influenced by both sides of this equation. Understanding why one side gets more attention than the other can help you make more informed decisions about your coverage.

Why Drug Prices Dominate the Debate

Levitt outlines four structural reasons why high drug prices attract more public and political attention than equally high hospital prices.

Visibility at the pharmacy counter. When a patient picks up a prescription, they see the cost directly, sometimes sticker prices in the hundreds or thousands of dollars for a single medication. Hospital bills, by contrast, are typically processed through insurance and arrive weeks later as a confusing Explanation of Benefits, obscuring the true price charged.

Industry concentration and named villains. Drug companies and their executives are identifiable targets. A single manufacturer sets the price for a branded drug, making it relatively easy to point to a decision-maker. Hospital pricing is more diffuse, involving complex chargemaster rates, insurer negotiations, and facility fees that are harder to pin on any one actor.

Political and advocacy infrastructure. Patient advocacy groups, employer coalitions, and insurers have long mobilized around drug costs, producing a steady stream of data and legislative proposals. The hospital industry, while politically powerful, has successfully positioned itself as a community institution, which tends to soften the tone of public criticism.

Recent legislative momentum on drugs. The Inflation Reduction Act gave Medicare the ability to negotiate prices on a limited set of drugs for the first time, keeping pharmaceutical pricing in the news cycle. No comparable federal policy framework currently exists to directly restrain what hospitals charge Medicare or commercial insurers.

What the Hospital Cost Picture Looks Like for Medicare

For Original Medicare enrollees, hospital costs hit through Part A deductibles and coinsurance. In 2026, the Part A deductible for each benefit period is $1,676, and if a hospital stay extends beyond 60 days, daily coinsurance begins. A Medigap (Medicare Supplement) plan can cover most or all of those costs, which is one reason Supplement plans remain attractive for people who want predictable out-of-pocket exposure.

Medicare Advantage enrollees face a different structure: plans set their own copays and out-of-pocket maximums for inpatient hospital stays, which can vary significantly from plan to plan and year to year. The maximum out-of-pocket limit for in-network services in Medicare Advantage provides a ceiling, but it can be as high as roughly $9,000 or more depending on the plan. As hospital costs rise system-wide, Advantage plan premiums and cost-sharing terms can shift at annual enrollment periods to reflect those pressures.

On the Part D drug side, the 2025 redesign introduced a $2,000 annual out-of-pocket cap and eliminated the coverage gap. Those changes meaningfully reduced cost exposure for many enrollees. Hospital cost policy has not seen equivalent reform at the Medicare level, meaning that side of the ledger continues to operate largely on existing rules.

Key Takeaway for Medicare Enrollees

Drug prices get more headlines, but hospital costs are quietly the larger driver of overall health spending growth. When comparing Medicare Advantage, Supplement, or Part D plans, pay attention to both inpatient cost-sharing terms and drug formularies, not just whichever cost category is in the news. During Open Enrollment each fall, review your plan's hospital deductibles, copays, and out-of-pocket maximums alongside your drug costs. A licensed Medicare insurance agent or your State Health Insurance Assistance Program (SHIP) counselor can help you compare options side by side.

The Policy Outlook and What to Watch

Levitt's analysis raises a question that's increasingly relevant as Congress and regulators look for ways to slow health cost growth: if hospitals are driving nearly half of recent spending increases, why aren't they subject to the same intensity of policy pressure as drug companies?

The answer, his analysis suggests, is partly structural and partly political. Hospital systems employ large local workforces, enjoy nonprofit status in many cases, and have cultivated strong community relationships that make them harder to target legislatively. Drug companies are more concentrated and more easily cast as remote, profit-driven actors.

Whether that dynamic shifts is worth watching. Any move to constrain hospital pricing, through site-neutral payment reforms, price transparency enforcement, or changes to how Medicare sets facility payment rates, could ripple into plan designs for both Medicare Advantage and Original Medicare. Site-neutral payment proposals, for example, would reduce the premium hospitals can charge for services delivered at off-campus outpatient facilities compared with independent clinics, a change that major hospital lobbying groups have actively opposed.

For now, Medicare beneficiaries have limited direct leverage over what hospitals charge. What you can control is your plan choice: selecting coverage with predictable cost-sharing for hospital stays, understanding your in-network hospital options, and reviewing those terms each year before the Open Enrollment window closes. As the broader policy debate catches up to the cost data, the rules may evolve, and staying informed is the best way to respond when they do.