The U.S. health care system is massive. It's a $5 trillion behemoth, nearly 20% of the U.S. economy or more than $15,000 per person per year. The cost of health care for consumers, including the cost of health insurance continues to increase. On this episode, we sat down with two people who pay close attention to the health care market and to how state legislatures are responding to rising costs.
The U.S. health care system is massive. It's a $5 trillion behemoth, nearly 20% of the U.S. economy or more than $15,000 per person per year. The cost of health care for consumers, including the cost of health insurance continues to increase.
On this episode, we sat down with two people who pay close attention to the health care market and to how state legislatures are responding to rising costs. Our first guest is Katie Martin is CEO, and president of the Health Care Cost Institute, a nonprofit research group that collects and analyzes data on health care costs in the U.S. Also joining the discussion is Sarah Jaromin, who tracks health care issues for NCSL.
Martin noted that her organization taps into data from employers who provide insurance to about half the people in the U.S. as well as data from Medicare and Medicaid. She pointed out that as of 2023, health care costs had increased more than 50% since 2014, and the trend does not show any signs of slowing.
Jaromin sketched out the legislative landscape and explained how legislatures have tried to slow the growing cost of health care. She noted that NCSL has collected data showing that last year, 48 states, along with Puerto Rico, the Virgin Islands and Washington ,D.C., enacted nearly 500 bills related to health care costs and delivery.
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ES (00:12):
Hello and welcome to “Our American States,” a podcast from the National Conference of State Legislatures. I'm your host, Ed Smith.
KM (00:21):
The primary driver of health care costs is prices from 2018 to 2022 per person health care spending. The amount we spent for everyone who had insurance through work increased by a $1,000 roughly. Prices were responsible for about $900 of that $1,000.
ES (00:41):
That was Katie Martin, the CEO and president of the Health Care Cost Institute, a nonprofit research group that collects and analyzes data on health care costs in the U.S. She's my guest on the podcast along with Sarah Jaromin. She tracks health care issues for NCSL.
The U.S. health care system is massive. It's a $5 trillion behemoth, nearly 20% of the U.S. economy or more than $15,000 per person per year. The cost of health care for consumers, including the cost of health insurance continues to increase.
Katie Martin noted that her organization taps into data from employers who provide insurance to about half the people in the US as well as data from Medicare and Medicaid. She noted that as of 2023, health care costs had increased more than 50% since 2014, and the trend does not show any signs of slowing.
Sarah Jaromin sketched out the legislative landscape and explained how legislatures have tried to slow the growing cost of health care. She noted that NCSL has collected data showing that last year, 48 states, along with Puerto Rico, the Virgin Islands and Washington, D.C., enacted nearly 500 bills related to health care costs and delivered.
Here's our discussion starting with Katie Martin.
Hi Katie. Welcome to the podcast. Great to have you here.
KM (02:13):
Thanks so much, Ed. It's great to be here. I appreciate you having me.
ES (02:17):
So, to get started, why don't you tell us a little bit about the Health Care Cost Institute and how you came to be the CEO and president of that organization.
KM (02:26):
HCCI is a small nonprofit nonpartisan organization, and our mission is to use data and analytics to improve the US health care system. And we do that through a range of data sets. We happen to have a unique data set that allows us to study employer sponsored insurance, insurance people get through work either themselves or through a family member. And we also have access to Medicare and Medicaid data. So, all that together provides insights on nearly 200 million people. And with all that data, we conduct original research and that describes health care costs and try to identify causes of high and growing health care spending. How did I become president and CEO? I've spent most of my career working for the federal government and have always worked at the intersection of health policy and evidence, data research, all of those things. And HCCI gave me the opportunity to continue to provide policy relevant data and analysis, but not working for the government. And I came here in 2019 and became president and CEO in 2022. And it's a real pleasure to be part of such an impactful organization.
ES (03:35):
Why don't we start with talking about the cost of health care and to say that it's been in the news a lot lately is to understate the situation. Tell us a little bit about the trends relating to costs that you see and what we're likely to see in the next few years.
KM (03:53):
I couldn't agree with you more about health care costs being really front and center these days, and I think it's because people are just experiencing it at a level that they haven't previously. I mean, for context, in 2023, the US spent $5 trillion on health care. That's nearly $15,000 per every person that lives in the United States. And to your question about trend, that's about 55% higher than just in 2014. So unfortunately, and I wish I had better news, but the data just showed that costs are going up and continue to go up. Our area of focus or one of the areas we focus on at HCCI is private health insurance. As I mentioned before, we have this unique data set on people who get insurance through work, and that represents about 30% of all health care spending in the country. And about half the people in the U.S. get their insurance that way. I don't think people really appreciate that employer sponsored insurance is really the dominant form of insurance in the country. And I say that just to mention that among that population over five years per person spending has gone up by almost 19% with about half of that spending going to hospitals in particular, in hospital care in particular.
ES (05:09):
So, just to emphasize that point, when you look at the next several years, do you think that we're going to see a similar kind of increase in health care costs? Is there anything on the horizon that gives you a sense that we may be able to reign this in more in some of these areas?
KM (05:25):
I think that's a real good news, bad news situation. I think on the one hand I expect it to continue on the same trajectory it has all of the data that we've seen, even through COVID for example, where the world shut down and there was a pretty substantial dip in utilization of health care services and spending almost immediately it went right back on the same trajectory. If you can imagine a straight diagonal line with just a brief dip in the middle, that's what we saw. On the other hand, I've been working in health policy for 25 years and people have been talking about how unsustainable health care costs are for that whole period. And we've never really exceeded 20% of GDP on health care, which is not to say that is not a lot of money, but we seem to be hitting a point at which we seem to hit a point and then just hover just below it. And I think what's most encouraging is there's lots of opportunity to make change and there does seem to be real momentum around doing so. That's the source of optimism is the opportunity if left unfettered and left unchecked or untouched. We're going to just see the same trends that we've seen over the past several years continue, I'm afraid.
ES (06:36):
One thing we have no shortage of in health care is research about costs. And I wonder, you're obviously someone who spends a lot of time paying attention to research of that sort, and what are the key things here driving health care costs?
KM (06:52):
The primary driver of health care costs is prices. Health care costs and health care spending are interesting. If I talk to you about health care spending, health care costs and health care prices, you're going to think I'm talking about the same thing. And you wouldn't be wrong. Lemme try to give you a quantitative, a tangible quantitative example. From 2018 to 2022 per person health care spending, the amount we spent for everyone who had insurance through work increased by a $1,000 roughly. Prices were responsible for about $900 of that $1,000, use was responsible for about $200. And then the mix of services that people use actually offset it, both of those. But it's just to say that it is the prices that are making us spend more on health care. It's the actual price of the service itself. That 19% increase I mentioned is a combination of a 14% increase in price and a 4% increase in use. So, when it comes to health care costs and health care spending, it really is prices. That is a challenging policy area to intervene in. All of that revenue that goes to health care represents income to people. These lead to tough conversations. But if we're going to make care more affordable, we have to address underlying health care costs. And if we're going to address underlying health care costs, we have to address prices.
ES (08:17):
Let me ask you about something I've done some podcasts on, which is efforts to make the cost of health care more transparent. What do you think about that? What are the results telling us? Is that bringing down costs?
KM (08:32):
Yeah, so a lot of the momentum around transparency has been really productive, I think and transformed the conversation around health care costs and health care prices and what should be available to people and what shouldn't. While partially it has brought out new information, I would say primarily these efforts have really shed light on how opaque and the system has been traditionally and how little we knew beforehand. There's certainly still a lot more work to do to make that transparency information available and usable and some key data elements that are missing. But there's been real progress and I've been encouraged to see that. One additional thought related to transparency in the power of transparency is that from my perspective, transparency is foundational to anything else that you want to change in health care. If you want to move from fee for service to value-based care, you have to know how much care is being used and how much care is being spent.
KM (09:28):
If you want to address rural health access issues, you have to know what's going on. So, transparency to me is foundational. It probably is insufficient alone to change the trajectory of health care costs, but I don't know how you intervene in any way without starting with transparency. And then the last thought I have about this is related to consumer choice. And look, there's no question that empowering consumers with information about their health care is good and giving them the information about how much something costs is important. And I would argue that we shouldn't put it on consumers to solve the health care cost problem in this country. They didn't cause it. They shouldn't have to solve it on their own. And so, to me, the transparency, the value of transparency is just as much an understanding how does money flow through the system? What financial incentives have we created in the system and how do we see those materialize? And then how can state and federal policy makers act to interrupt some of the patterns that we think are leading to higher costs and lower quality. All of that is essential to transparency and I think the consumer piece is important, but really just one component of a larger approach and larger potential impact
ES (10:44):
Beyond transparency states in all their diversity, have certainly talked about past legislation on a variety of other approaches to try to get health care costs under control. What do you think looking at those other things that states have done, of course we have an audience that includes a lot of state legislators. When you look at what else states have done, what do you see as far as trends go? What's sort of the most common thing that states are looking at to try to get a handle on this?
KM (11:13):
Yeah, I've been really heartened to see that they're just ongoing focus at the state level about this. I think state policymakers have the advantage of being very close to the folks who are most affected by this. So, they hear about it routinely, not that federal policymakers don't, but it's just a little bit different. The dynamic is different and state policymakers have seemed to take that to heart. Overall, I would say just the ongoing focus on health care costs has been really encouraging. The trends that I'm noticing and seeing are related to something called facility fees, which is the additional charge that a patient gets when they receive care in a hospital or a facility instead of a doctor's office. There's been a lot of innovation in that space from disclosing facility fees to banning it. In certain instances, there's been increasing efforts to really increase oversight over competition. So, injecting the state more in oversight of upcoming mergers, for example. And then some states are really having explicit cost growth benchmark targets. So, they're saying, we can't keep health care costs can't keep growing. We're going to measure the rate at which it grows and we're going to set a target at which we're not going to accept growth beyond that. And I think those are all really innovative solutions and they seem to be catching a foothold in states
ES (12:35):
When you look at these approaches. Is there enough data, has enough time passed that you can say, this looks like it's really working? This may be not so much,
KM (12:46):
Not quite yet, I'm afraid in terms of timing. And that has as much to do with data being a little bit slow as anything as time passing. So, it takes our data a little while to catch up, but I don't think there is definitive evidence yet about the impact of many of these. And also, I think there's been a real surge in them. So, it might be a little bit too soon to tell, but there's certainly a ton of promise there. And one of the things I think about when I think about transforming policy and lowering health care costs is we're really fighting against the status quo. So, any action from my perspective is positive. Whether it works exactly as intended or not, I've observed that in health policy arguments when change is proposed, the counter to the change is staying the same, not a different change.
KM (13:36):
So, the debate becomes do we stay where we are or do we try something different or new? And I'm always fascinated by how loudly the voices are to maintain the status quo when there seems to be pretty universal consensus that the status quo is getting us higher costs and lower quality. And so why are we advocating for that? That's a long way of saying we don't have the answers yet, but I don't want folks to be discouraged by trying something new and trying to make progress because the only way we're ever going to see a change is to make a change.
ES (14:10):
We, as I said, have legislators in the audience, legislative staff, you've got this audience in front of you. What would you tell them? What are the most promising things? How would you, not even a specific policy, but how would you suggest they think about this and look at it as state legislators maybe expecting that if it's fair to say the federal government may not come riding to the rescue, that this is probably something that you're going to get a lot more traction on at the state level.
KM (14:40):
So, my biggest piece of advice, which I alluded to earlier, my biggest piece of advice is to do something, anything, engage with your constituents, listen to their stories, but ask a lot of questions. Nearly everyone I know who works in health care has likely entered this process, the system, the structure to do good, to help people, to save lives, to cure disease. I don't think anyone is malicious, is a malicious actor here. And they all represent a very particular point of view. So, if you hear from your hospitals, ask them a lot of questions, ask them how they generate their revenue, ask them how they respond to certain things, they receive one in every $2 that we get. At the same time, they are lifelines for people. We don't want hospitals to go away, and they are economic and health care centers of their community. So really explore that with them and try to find the solution that you think works best for your community.
KM (15:40):
And it might really need to be very incremental, starting with disclosure and transparency and then building from there because I feel like that may be a little bit evasive. I will try to answer a little bit more substantively. There are a lot of things going on in health care right now that encourage people to make more money, which is to generate more revenue, which creates health care spending. And so, I would be mindful of those things. I think consolidation, both providers joining together, but also provider hospitals absorbing physician practices. I think all of that is important to be mindful of. We've done research that shows that system affiliated hospitals, so large systems of hospitals have higher prices than independent hospitals. And we also observe that percent of independent hospitals has declined over time. So, competition is really a central component of this. And so, figuring out how to promote more competition and maybe interrupt some of the patterns.
KM (16:39):
The other thing I would keep a close eye on is private equity and private equity involvement in health care. And again, I'm sure they go in with good intentions. I'm not questioning anyone's intentions. The business model of private equity is to generate a return on investment. And that seems to me fundamentally at odds with lowering costs overall to the system. And so, I know some states have taken initiatives looking at a private equity investment, and I think that would be an area that I would be curious about if I were in a state legislature in part because I don't think we've yet begun to see the full impact of that investment. I still think we're early on enough that we might be able to disrupt in a way that we will be grateful for down the road.
ES (17:25):
Yeah, we did a private equity podcast in health care, I don’t know, a few months ago. Very interesting, very educational for me, and I hope for our listeners, but there were some stories at a Massachusetts and other places that were of, I think would give people a little pause and want to learn more about that. Well, Katie, thank you so much. This has been good information for me. I think probably a good education for a lot of people listening, and I really appreciate you taking the time to do it. Take care.
KM (17:56):
Thank you so much for having me. It's been a pleasure.
ES (18:00):
I'll be right back after this break with Sarah Jaromin.
Speaker 3 (18:10):
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ES (19:03):
Sarah, nice to have you back on the podcast.
SJ (19:10):
Thanks for having me. It's good to be here.
ES (19:13):
So, Sarah, I just talked with Katie Martin from the Health Care Cost Institute, and she walked us through some of the key drivers of increasing health care costs and some of the ways states are responding. When you talk with folks around the country, I'm wondering what you're seeing, what you're hearing. How busy are legislatures with bills addressing health care spending?
SJ (19:35):
States have been busy in 2025 alone. NCSL has tracked more than 117 enacted bills across 33 states and Washington DC focused broadly on addressing health care costs. And these policies spin everything from consumer affordability and price regulation to monitoring health care market structure as well as payment delivery reform. So, there's quite a bit of activity and a broad range of policies that we're tracking in this area.
ES (20:03):
Wow. It does sound like there's a lot of activity. Not too surprising given how much money we spend on health care. Sometimes I've done podcasts on health care legislation and sometimes I can see how the consumer might not see the immediate benefit that the legislation might bring about in their lives, their lives. And I wonder if you can talk about what states are doing to focus more specifically on consumer affordability, where the rubber meets the road for the consumer.
SJ (20:34):
Absolutely. States are very active in the area of consumer affordability, and I'll focus on four main buckets of policies in this arena. First, we have medical debt. States have enacted a number of policies related to addressing debt in recent years, and that activity has continued through 2025. There were 14 enacted bills across 10 states addressing medical debt in 2025. And these policies include a variety of approaches such as using state appropriations to pay off residents’ medical debt, limiting certain collection practices, capping interest rates, and regulating how medical debt is reported to consumer credit agencies. Another area of state action that relates to consumer health care costs is surprise billing, particularly for ground ambulance services, which aren't covered under the federal No Surprises Act. Several states have enacted their own laws that address ground ambulance surprise billing, and as of 2025, 22 states have codified protections related to surprise ground ambulance bills using a range of policy approaches.
SJ (21:36):
Most recently, Oregon enacted legislation that added protections related to ground ambulance surprise billing and capped ground ambulance rates at 325% of Medicare rates. States have also turned their attention to what consumers can pay out of pocket for services with a particular attention to facility fees. Activity in this area has increased in recent years, though we've seen fewer bills enacted during this most recent session. In 20 25, 30, facility fee bills were introduced in 11 states with two enacted in Colorado and one in Mississippi. Since 20 20 15, states have enacted laws regulating facility fees with common provisions, including banning facility fees for telehealth services, requiring notice or disclosure when facility fees are charged or prohibiting these fees in certain outpatient settings. And then lastly, I'll just highlight that states have also been addressing access and affordability in health insurance marketplaces, specifically looking at state-based marketplace subsidies. In light of the federal enhanced premium tax credit expiration, a number of states already offered state-based subsidies prior to the expiration funded through mechanisms like general fund revenue and tobacco settlement funds. But a handful of states have recently enacted legislation directly in response to the expiration of the enhanced premium tax credits, including California, Colorado, Connecticut, Massachusetts, Maryland, Minnesota, and Washington as well.
ES (23:01):
Another area that's had a lot of focus is health care competition. Are states focused on that? Do they see that as a viable way to try to control costs?
SJ (23:13):
States have been busy when it comes to consolidation and competition. We saw 21 states and Washington DC enact 42 bills related specifically to consolidation and competition. This session, these policies include increased oversight of mergers and acquisitions involving health care entities, changes to contracting practices, reviewing corporate ownership structures, as well as modifications to existing certificate of need laws. Diving a bit deeper, I'll start with mergers and acquisitions. Currently, at least 35 states require hospitals, health systems, or other health care entities to notify state authorities of plan transactions prior to their completion. During the 2025 legislative sessions, we saw several states enact or consider legislation to expand or refine these notification requirements. For example, Colorado and Washington now require entities who submit a Hart-Scott-Rodino premerger notification to the federal government to also submit a copy to their respective state attorneys general. Under certain conditions, Indiana expanded the authority of its attorney general to investigate market concentration among health care entities and issue civil investigative demands.
SJ (24:24):
States have also enacted legislation related to private equity investment in health care in 20 25, seven states enacted eight bills that specifically address private equity, ownership or investment in the health care sector. Policymakers are exploring various options to increase transparency as well as assessing the impacts of this type of ownership in their states. For example, Indiana enacted legislation that requires hospitals and certain health care entities to report ownership and financial information to the state, including private equity ownership and Maine enacted legislation that prohibits private equity companies and real estate investment trusts from acquiring direct or indirect ownership or control of hospitals within the state states have also examined certain contract terms. This session, at least eight states, enacted 12 bills in 2025 that ban or limit certain contracting provisions including noncompete agreements. For example, Colorado updated its noncompete regulations to prohibit agreements that restrict the practice of medicine, advanced practice registered nursing or dentistry, which removes the prior exemption for highly compensated workers, Wyoming voided non-compete agreements that restrict the physician's right to practice after leaving a job partnership or a corporate affiliation. And then lastly, I'll just highlight that states are also examining and modifying their certificate of need laws with at least 11 states and the District of Columbia enacting 21 bills, modifying their certificate of need laws this session. And most of this recent legislation has made targeted changes to CON oversight, typically by exempting specific facilities from review rather than creating new programs or fully repealing existing programs.
ES (26:05):
We've talked here about some direct affordability efforts, this very extensive look at competition issues. What else are states doing? What else are they looking at, and what do you think is worth keeping an eye on?
SJ (26:21):
Yeah, beyond the examples I've mentioned, states have enacted or considered a variety of additional policy options to name a few states are also looking at price transparency and right to shop programs, reference-based pricing initiatives, cost growth, benchmarking, putting caps on out-of-network payments for consumers, value-based payment models, and premium review among others. So, action in this area has been incredibly varied and states are taking a variety of different approaches, not just related to consolidation, competition and consumer affordability as well.
ES (26:55):
So, as we wrap up here, we're getting into the 2026 sessions. We're here talking in February. A lot of legislatures are in session. What are the early indications of what the big focus will be this year? Is it more of what you've been discussing?
SJ (27:13):
And so, while there isn't much to comment on yet in terms of enacted legislation that we've seen, states are facing greater budget uncertainty and preparing for a more constrained fiscal environment in 2026 and beyond, which could sharpen the focus on health care costs in some states. One trend that we do expect to see in 2026 relates to commitments made in state applications for the Rural Health Transformation Program, which is a federal initiative that will provide $50 billion for states to invest in rural health care. So related to this discussion on affordability as part of their applications, six states, Alaska, Delaware, Iowa, Nebraska, Rhode Island and Tennessee have committed to reforming their certificate of need laws in those applications. Maryland and South Carolina have also referenced CON reform in their applications. Tennessee in particular, committed to fully repealing its con laws while most of the other states proposed more targeted reforms.
SJ (28:08):
For example, Iowa committed to reforming their CON requirements for behavioral health services specifically. And so, as a result, we do anticipate some legislative activity related to COM this session. And then beyond that, we'll be closely tracking the policy levers and innovative strategies that states pursue this session to address health care affordability. And so, for more information on that state activity that I've mentioned today, as well as into 2026, we track all this legislation in our health cost coverage and delivery database, which provides a comprehensive view of enacted state legislation across these topics, as well as more dating all the way back to 2022 as well.
ES (28:48):
Well, Sarah, thanks so much for sharing the legislative landscape. It's such a huge issue for states, huge issue for our economy that I really appreciate you taking the time to come on here and walk us through it. Take care.
SJ (29:00):
Thank you so much.
ES (29:06):
I've been talking with Katie Martin from the Health Care Cost Institute and Sarah Jaromin from NCSL about the cost of health care and state legislative efforts to address the issue. Thanks for listening.
Search for NCSL podcasts wherever you get your podcasts. This podcast, “Our American States,” dives into some of the most challenging public policy issues facing legislators. Our occasional series , “Across the Aisle,” features stories of bipartisanship. Also check out our special series, “Building Democracy,” on the history of legislatures.