8 Reasons For Rising Healthcare Costs Globally

If you’ve found yourself surprised by the price of healthcare, you’re not alone. Healthcare costs have been increasing globally every year since 1960, when the United States began tracking the national health expenditure per capita.

The only exception was during 2020, when healthcare costs dropped over 8% during the early stages of the COVID-19 pandemic. However, when the economy rebounded and the pandemic tailed off, prices once again soared to record heights.

Now not only is the world spending more on healthcare than ever before (spending in the US reached a record US$4.9 trillion in 2023), the rate of increase is also accelerating. For instance, in the US healthcare costs rose 7.5% in 2023, up from a rate of 4.6% in 2022.

As many countries around the world are in the midst of a cost of living crisis, we understand that the rising cost of healthcare is a concern for everyone—no matter where they live in the world. In this article, we’ll help you to understand why healthcare costs are increasing, and how this may affect your international health insurance.

Why are healthcare costs rising?

The rising cost of global healthcare is due to a combination of factors, which are often labelled under the term ‘medical inflation’.

It’s important to consider each of the factors that contribute to medical inflation in isolation, as some may impact your healthcare budget more than others. However, it’s also important to understand the big picture, and why we should expect to have healthcare a spending priority in the future.

Here are eight of the main reasons you may see the cost of healthcare rise in coming years:

1/ The population of the world is increasing

In 2025, the population of earth is expected to reach 8.2 billion. Since, theoretically, every person on earth is a potential customer of the healthcare sector, prices can only remain constant if the rate of growth in that sector is consistent with the rate of population growth.

In other words, as the population grows, we need more doctors, nurses, healthcare supplies and technology to meet the growing demand. And if demand outweighs supply, prices must increase to cover the deficit.

Using hospital beds per capita as a measure for growth in the healthcare sector, we see many countries are either breaking even or making a net decline year-on-year. Indeed, several of the world’s most advanced economies are among the net decliners, including France, Germany, Japan and Canada.

In England, the number of hospital beds has more than halved over the past 30 years, from 299,000 in 1987/88 to 141,000 in 2019/20, despite the population increasing from 47 million to 56 million in that time.

Thus, many countries are in a position where demand has far outstripped supply. This, however, is not the only reason healthcare costs are rising, so let’s look at some of the other causes.

2/ People are living longer than ever

Not only are there more people on earth than ever before, the needs of those people are also becoming more complex as we start to live longer. Global life expectancy has increased from 46.5 years in 1950 all the way to 73.3 years in 2025, and is expected to increase by another 5 years by 2050.

This is largely thanks to modern medicine, which is helping to keep us alive longer. However, it’s important to remember that the drugs we use to survive into old age are also expensive, and grow increasingly more expensive as the years go on.

To use one example, the Alzheimer’s Society in the UK estimates the cost per patient for mild dementia care to be around £28,700/US$37,250, while more advanced dementia can cost £80,500/US$104,500 per patient. All in all, the UK spends around £42 billion per year on Alzheimer’s treatment, making it one of the country’s single greatest areas of healthcare expenditure.

Suffice to say, the longer we live, the more likely we are to experience major illnesses requiring complex care, including cancer, stroke, Parkinson’s disease and Alzheimer’s. These diseases often require expensive drugs and treatments, sometimes administered over very long courses – and these costs

This problem is particularly compounded in some advanced societies where the population is described as ‘aging’, meaning the number and percentage of older people is growing faster than that of young people. Hong Kong, South Korea and Japan currently have some of the fastest growing aging populations on earth. These countries are expected to see a crisis in the coming years, where the healthcare crisis may not be able to cope with the overwhelming demand for treatments related to aging.

3/ The cost of living crisis has hit the healthcare sector too

One of the biggest impacts of the cost of living crisis, which has largely come as a result of the Russia-Ukraine war, is that the global prices of raw materials and energy have skyrocketed.

This, in turn, has pushed up the cost of supply lines in every industry, including healthcare. With everything from energy and fuel, to the chemicals needed to make prescription drugs now more expensive, it costs more to run medical research centres, hospitals and even ambulances – and these costs are inevitably passed on to patients.

The cost of living crisis has also led to an acute rise in health inequality, as deflating household budgets have led many people to stop spending on their health. In the UK, a survey by Healthwatch found that 38% of people said the cost of living crisis has had a negative impact on their mental health, with 13% saying their ability to manage a long-term health condition had been negatively affected.

4/ Drugs and treatments are better than ever – but also more expensive

The healthcare industry is fast-moving, constantly evolving and highly competitive. This was well-demonstrated during the COVID-19 pandemic, when different healthcare companies competed to be the first to create a vaccine.

Elsewhere, healthcare companies remain competitive in the hunt for cures to major diseases such as cancer, diabetes, Alzheimer’s and HIV/AIDS. In 2024 alone, the Center for Drug Evaluation and Research in the US approved 50 new treatments.

With drugs and treatments becoming more effective, but remaining the intellectual property of only a handful of companies, the businesses in charge of their manufacturing and distribution are able to charge higher and higher prices. In the US, drug companies typically raise their prices at the start of each year by around 10%, although the price hike in early 2025 was lower at just 4%. Still, that meant the prices of around 575 drugs increased at a rate far higher than inflation.

Drugs and medical technology can also be more expensive in countries that do not manufacture them domestically, because they must often bear import costs, tariffs, or markups in the supply chain. The United States is home to several of the world’s leading pharmaceutical companies and plays a dominant role in global drug development and innovation. Given the political pressures around trade and import tariffs under President Trump, medicines sourced from U.S. firms could become significantly more expensive in some markets abroad.

5/ Medical professionals now live in fear of legal action

It’s fair to say that medical professionals around the world are under more scrutiny than ever before. This is best exemplified in the rapidly increasing risk of medical lawsuits. For instance, in 2017/18, the NHS in the UK paid out £1.63 billion for negligence compensation claims. By 2023/24, this had nearly doubled to £2.8 billion, resulting from 13,382 claims.

This record number of legal claims has caused two things to happen:

1. Indemnity insurance for medical practitioners and hospitals has increased significantly
2. The development of a new trend called “defensive medicine“

Defensive medicine is a practice in which doctors will intentionally make more conservative choices for their patients, with the intention to protect themselves from a lawsuit – rather than to create the best possible medical outcome. They may recommend tests and procedures that are unnecessary, avoid performing high-risk procedures or administering high-risk drugs, or even avoid high-risk patients altogether.

Defensive medicine leads to worse patient outcomes and increases the need for further treatment down the line, which in turn costs healthcare providers more. Defensive medicine is believed to cost the US healthcare system US$46 billion per year.

6/ The global regulatory landscape is growing more and more complex

The global healthcare regulatory landscape is complex and constantly evolving. In the future, healthcare providers will continue to face a highly complex and rapidly changing set of global, regional, country and industry-specific regulations, laws and directives, determining which drugs and treatments become – and remain – viable.

But why, you might ask, will regulation become stricter? The answer is the increasing likelihood of fraud. The Global Health Care Anti-Fraud Network estimates that around $260 billion – or around 6% of global healthcare spending – is lost to fraud each year, which can occur in several ways. For instance, health insurance fraud, whereby an insurer or government healthcare programme is targeted by a fake claimant, is a growing problem, while prescription drug diversion is anticipated to become an increasing problem around the world.

Tackling fraud and adhering to regulations comes with a price tag. Expensive security software must be purchased to protect confidential patient information from hackers. Healthcare costs must therefore rise to ensure data and patients are kept safe.

7/ Healthcare providers need to invest in the future

In many ways, the global healthcare sector is going through a renaissance. New drugs and treatments are becoming available at a faster rate than ever before, healthcare delivery is benefitting from digital technology, and the advent of artificial intelligence (AI) promises even faster, more accurate medical research than ever before.

However, as exciting as these possibilities may be, they also require a significant amount of investment. Healthcare providers must ensure they are turning a profit from their services in order to re-invest this money into new technology, ensuring their services will become more efficient and more effective in the future.

If all goes according to plan, this means patients will experience higher healthcare costs in the present, to benefit from lower prices in the future. For instance, the NHS has invested £21 million in AI tools for lung cancer diagnosis, in the hopes of saving £16.7 million per year.

8/ Globalisation is creating new competition

Where once it was the case that healthcare providers only competed within territories, now the competition is global. Buoyed by the low costs of international journeys, medical tourism is becoming an increasingly common trend.

When individuals decide to relocate for treatment, they can take advantage of drugs or treatments not available in their own country, or access the same level of treatment for a lower cost. Medical Tourism magazine ranks Canada, Singapore, Japan, Spain and the United Kingdom in the top 10 destinations for medical tourists.

This trend creates two effects: first, it places greater demand on the healthcare sector in popular destinations, driving costs up within that territory; and secondly, it removes the opportunity for local healthcare sectors to do business, thus compounding their lack of investment and so pushing a greater number of people towards medical tourism.

Will healthcare costs continue to rise in the future?

It’s likely that many of these trends will continue into at least the near future, meaning healthcare services are almost guaranteed to become more expensive.

In fact, we may even start to see the effects happening in real time. According to a recent study by PwC, during 2025, the healthcare sector will see an 8% rise in expenses, with the average person paying around 7.5% more for healthcare than in 2024.

However, there is a light at the end of the tunnel. The development of new technology, and especially the application of AI and machine learning, may help to make the delivery of healthcare easier and less expensive than ever before. This could lead to a sharp drop in the cost of healthcare.

If you are worried about the rising cost of healthcare, now may be a good time to consider your health insurance policy. Health insurance can help you to avoid paying astronomical fees, especially if you experience a medical emergency, and may offer you access to a higher quality of private medical care. Your policy may also help you to cover additional and routine healthcare expenses, such as maternity care, mental health support and dental care.

How do rising healthcare costs affect my insurance?

Suffice to say, as the cost of global healthcare increases, so too does the price of health insurance.

At William Russell, we calculate your premium based on a number of factors. This includes your age, general health and medical history. We’ll also take into account where you live, and the cost of healthcare in that country.

However, with our international health insurance policies, you can also choose cover that extends to multiple countries within your region, or even globally. This not only gives you cover wherever you wish to travel – whether it’s for a vacation or work – it ensures you’ll have the option to choose where you receive medical treatment.

Better still, all of our policies include medical evacuation cover as standard. This means you’ll always be offered treatment in another region or country if the quality of healthcare in your home country does not meet our high standards.

And of course, as your health insurance provider, we’ll pay the bill for whatever treatment you need, no matter how complex it may be.

Health insurance may not suit every budget. But if you don’t want to compromise on the quality of your healthcare, and you think you might struggle to afford healthcare in the future, perhaps it may be right for you and your family.

Wherever you go, go with total peace of mind

We’ve been providing international health insurance for over 30 years. Our flexible policies give you access to the highest-quality healthcare all over the world, with optional extras to suit your needs.

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