The Insightful Corner Hub: Health Insurance and Treatment Costs in 2025: Why Patients Still Pay More and What Can Be Done

 

 

Introduction

Despite decades of health financing reforms, patients across the world continue to face high treatment costs, even when insured. In 2025, health insurance coverage has expanded globally, yet out-of-pocket (OOP) expenditure remains a major driver of financial hardship, particularly for people living with chronic diseases, cancer, and rare conditions.

According to the World Health Organization (WHO), nearly 2 billion people globally still experience financial hardship due to healthcare spending, with medicines accounting for the largest share of out-of-pocket payments in many low- and middle-income countries (LMICs). Even in high-income countries, rising insurance premiums, deductibles, and co-payments are shifting costs from insurers to patients.

This article provides an evidence-based analysis of health insurance and treatment costs in 2025, examining why care remains expensive, how insurance design contributes to patient burden, and what policy solutions can realistically improve affordability.

Further Reading:

1. Pharmaceutical Price Markups: Why Medicines Cost Far More Than Their Production Price

Gain insight into how medicines are priced across the supply chain and why patients often pay significantly more than production costs. This analysis highlights a major driver of rising treatment expenses and out-of-pocket payments.

2. Generic vs Branded Medicines: How Much Can Patients Really Save? Evidence from Global Drug Markets

Explore how the choice between generic and branded medicines affects healthcare spending, insurance reimbursement, and patient affordability, with evidence from global drug markets.

3. Why Essential Medicines Remain Unaffordable in Low- and Middle-Income Countries

Understand the systemic barriers to medicine affordability in settings such as Rwanda and other LMICs, including supply chain weaknesses, policy gaps, and insurance limitations.

4. Breakthrough Medicines and Clinical Trials in 2025: What Patients and Clinicians Need to Know

While focused on medical innovation, this article also explains how new therapies and clinical trials can increase treatment costs and influence insurance coverage and patient access.

5. Managing Diabetes Effectively at Home: Evidence-Based Approaches for Better Health Outcomes

A practical, patient-education perspective showing how effective chronic disease management can reduce long-term treatment costs for both patients and health insurance systems.

Understanding the True Cost of Healthcare

Healthcare costs are driven by multiple interlinked components, including:

• Medicine prices and markups
• Diagnostic and laboratory services
• Hospitalization and specialist fees
• Administrative and insurance overhead
• Long-term care for chronic diseases

While insurance is designed to pool risk and reduce individual financial exposure, insurance alone does not control prices. In many systems, insurance actually enables higher prices by guaranteeing payment.

Globally, medicines remain the single largest cost driver for patients, particularly where reimbursement lists are limited or cost-sharing is high.

Global Trends in Health Insurance Coverage

Expansion Without Full Protection

Over the past decade, many countries have expanded health insurance coverage through:

• Universal Health Coverage (UHC) schemes
• Social health insurance
• Community-based health insurance
• Private insurance markets

However, coverage does not equal financial protection.

WHO data consistently show that countries may report high insurance enrollment rates while still experiencing:

• High catastrophic health expenditure
• Delayed care due to cost
• Treatment non-adherence

This gap is largely explained by benefit package limitations and cost-sharing mechanisms.

Out-of-Pocket Spending: The Persistent Problem

What Counts as Out-of-Pocket Costs?

Out-of-pocket spending includes:

• Co-payments for consultations
• Deductibles
• Non-covered medicines
• Diagnostic tests outside benefit packages
• Informal payments in some settings

WHO defines catastrophic health expenditure as spending exceeding 10–25% of household income, a threshold still crossed by millions of households each year.

Medicines as the Main Cost Driver

In many LMICs, medicines account for 30–60% of total health expenditure, compared to 10–20% in most high-income countries. This imbalance explains why insurance schemes that fail to comprehensively cover medicines provide limited financial protection.

For a deeper policy perspective, see our analysis of effective drug pricing policies and regulatory frameworks, which explores how governments can reduce medicine costs through evidence-based interventions.

Insurance Design and Its Impact on Treatment Costs

Deductibles and Co-Payments

In private and mixed insurance systems, high deductibles and co-payments are increasingly common. These mechanisms are intended to reduce unnecessary utilization but often:

• Discourage timely care
• Increase long-term costs
• Disproportionately affect low-income patients

Narrow Benefit Packages

Many insurance schemes exclude:

• New medicines
• Specialized diagnostics
• Long-term rehabilitation
• Mental health services

As a result, patients remain insured on paper but under-protected in practice.

Treatment Costs for Chronic Diseases

The Long-Term Financial Burden

Chronic diseases such as diabetes, hypertension, asthma, and cardiovascular disease require lifelong treatment, making affordability a sustained concern.

Evidence from multiple health systems shows that:

• Patients with chronic illness spend significantly more out-of-pocket
• Medication non-adherence increases when co-payments rise
• Poor adherence leads to higher hospitalization rates

This creates a cost spiral where short-term savings in insurance budgets result in long-term system inefficiency.

Cancer Treatment Costs and Insurance Gaps

Cancer remains one of the most financially devastating conditions worldwide. Even in insured populations:

• New oncology medicines are frequently excluded or partially covered
• Diagnostic delays increase total treatment costs
• Patients face indirect costs such as travel and income loss

Our detailed review on equitable access to cancer medicines highlights how pricing policies, reimbursement delays, and supply chain inefficiencies restrict access even in countries with formal insurance coverage.

Why Insurance Alone Cannot Control Prices

The Price-Setting Problem

Insurance systems typically pay prices rather than set them. Without strong regulation, insurers may reimburse:

• High launch prices for new medicines
• Inefficient service delivery models
• Fragmented care pathways

Countries that successfully control costs rely on:

• Price regulation
• Health technology assessment (HTA)
• International price benchmarking

For example, comparing how countries set reimbursement prices through international benchmarking mechanisms has been shown to reduce excessive price variation and improve affordability.

Private Insurance and Cost Inflation

Private insurance markets often contribute to rising costs by:

• Encouraging supplier-induced demand
• Negotiating prices without transparency
• Segmenting risk pools

In several OECD countries, private insurance complements public systems but still increases total health expenditure due to administrative overhead and profit margins.

Health Insurance in Low- and Middle-Income Countries

Coverage Expansion vs. Service Availability

In many LMICs, insurance coverage has expanded faster than health system capacity. This results in:

• Stock-outs of essential medicines
• Limited provider networks
• Continued reliance on private pharmacies

When essential medicines are unavailable in public facilities, insured patients are forced to pay out-of-pocket, reinforcing inequities.

This challenge is explored in detail in our article on why essential medicines remain unaffordable, which examines structural and financing barriers beyond insurance coverage.

Policy Tools That Reduce Treatment Costs

1. Strategic Purchasing

Purchasing services and medicines based on value, not volume, allows insurers to:

• Negotiate better prices
• Prioritize cost-effective interventions
• Reduce waste

2. Essential Medicines Coverage

Expanding reimbursement of WHO-listed essential medicines has consistently reduced catastrophic spending.

3. Price Regulation and Transparency

Countries with transparent pricing frameworks experience:

• Lower medicine prices
• Reduced price variation
• Improved public trust

For a systems-level view, our guide on building effective pharmaceutical pricing systems outlines key regulatory pillars for sustainable cost control.

Digital Health and Cost Efficiency

Digital health tools increasingly support insurance systems by:

• Reducing administrative costs
• Improving claims processing
• Supporting remote monitoring

However, digitalization alone does not reduce prices unless paired with policy reform and benefit redesign.

The Role of Pharmacists in Cost Containment

Pharmacists play a critical role in:

• Generic substitution
• Medication therapy management
• Preventing irrational medicine use

Evidence shows that pharmacist-led interventions reduce both medicine costs and hospitalization rates, particularly for chronic diseases.

Future Outlook: What Must Change by 2030

If current trends continue, health insurance expansion without cost control will:

• Increase public expenditure
• Worsen household financial strain
• Undermine trust in health systems

Sustainable solutions require:

• Strong price regulation
• Comprehensive benefit packages
• Evidence-based reimbursement decisions
• Cross-sector collaboration

Conclusion

In 2025, health insurance remains a necessary but insufficient tool for protecting patients from high treatment costs. Without addressing medicine prices, benefit design, and systemic inefficiencies, insurance coverage alone cannot deliver financial protection.

Reducing treatment costs requires coordinated policy action, combining insurance reform with pharmaceutical pricing regulation, strategic purchasing, and health system strengthening. Only then can insurance fulfill its promise of equitable, affordable care.

Frequently Asked Questions (FAQs)

Why do insured patients still pay high treatment costs?

Because many insurance schemes include co-payments, deductibles, and limited benefit packages that exclude essential medicines and diagnostics.

Are medicines the biggest contributor to out-of-pocket spending?

Yes. In many countries, medicines account for the largest share of household health expenditure, especially where reimbursement is limited.

Does expanding insurance coverage reduce costs?

Coverage improves access but does not automatically reduce prices. Cost control requires price regulation and value-based purchasing.

How can governments reduce treatment costs?

Through price regulation, essential medicines coverage, international benchmarking, and strategic purchasing mechanisms.

Will digital health reduce healthcare costs?

Digital tools improve efficiency, but meaningful cost reduction depends on broader policy and financing reforms.