High drug prices anger the public. Steep hospital costs elicit yawns. Why is that?
Dave Pearson|July 25, 2026|Health Exec|Economics
A recent KFF national tracking poll found three-quarters of Americans believe pharmaceutical companies deserve “a lot of the blame” for the ever-rising cost of healthcare. In the same poll, well fewer than half—40%—pointed the finger at hospitals.
In a think piece published this month by JAMA Health Forum, KFF executive VP for health policy Larry Levitt, MPP, looks at the contrast between the two sectors—and between perception and reality.
It turns out the gaps are large.
For starters, hospital care accounts for 31% of all national health spending, Levitt shows. By comparison, retail drug scrips ring up just 9%.
What’s more, from 2022 to 2024, hospitals guzzled 40% of health spending while retail prescriptions took a comparatively small sip of only 11%
How is it that pharma companies—and, by extension, health insurers that cover drugs—have targets on their backs while hospitals live like wallflowers?
Levitt describes several contributing factors, including these five:
1. Hospitals represent the largest category of healthcare spending, but people spend more of their own money for drugs than for hospital care
At the population level, healthcare consumers reach deeper into their wallets to pay for drugs than for hospital care. In 2024 they shelled out $54 billion at the pharmacy counter while taking $41 billion out of their collective pocket at the hospital cashier.
Levitt points out the difference owes much to the design of individual insurance plans, meaning consumer choices for deductibles, co-pays and coinsurance. “Hospital bills can be expensive, but most of the cost is covered,” he writes. “People who are hospitalized may reach the out-of-pocket maximum for their insurance, with the insurer paying 100% of the cost beyond that.”
2. For most people, hospitalization is a rare occurrence. Drug therapies? Practically as common as meals.
U.S. residents fill an average of one scrip per month. Many fill more than the average. With each refill comes a reminder of cost. By contrast, there is an average of about one hospital admission each year for every 10 people, Levitt observes.
“Even among people with Medicare—who tend to use more healthcare than others—13% use inpatient hospital services in a given year while 93% use prescription drugs.”
3. From the point of view of politicians, voters are more vocal about drug prices than hospital costs.
This may be on the verge of changing, as evidenced by a Congressional hearing in April during which a handful of health-system CEOs took heat from federal lawmakers
“When patients receive hospital care, they are generally seeing caregiving professions like physicians, nurses, nurse assistants and physical and occupational therapists,” Levitt underscores. “There are certainly executives at hospitals making financial and pricing decisions, but the corporate nature of hospitals may be less apparent to patients than that of drug companies.”
4. From where the healthcare consumer stands, hospital prices are far fuzzier than their drug counterparts.
That’s largely because bills for hospital-based care seem to come from all over the place. A hospital may send one invoice for technical components, meaning facility charges, while individual physicians and labs come after the patient for professional services. Or any number of such charges may appear as line items in the hospital bill.
“Since the first Trump administration, hospitals have been required to disclose their prices,” Levitt reminds, “but the complexities of hospital billing mean the data often defies interpretation.”
5. Prices paid to hospitals by private insurers are more than 2 and a half times what Medicare pays. The general public doesn’t know this
“Drug prices are high, and it is important to address them, particularly given how much they drive patient out-of-pocket expenses,” Levitt remarks. “But if we want to meaningfully restrain underlying healthcare costs, we need to do what bank robber Willie Sutton said about his motivation for robbing banks and go where the money is—hospital pricing.”
More:
‘Hospital margins are relatively modest industry-wide, but the operating costs of hospitals are not a law of nature resistant to change. … There is substantial variation in hospital prices across the country and even within states, driven in large part by consolidation and market power, suggesting there is room for cost savings.’
That’s the meat of the piece, which is posted in full for free.
Dave Pearson
Dave P. has worked in journalism, marketing and public relations for more than 30 years, frequently concentrating on hospitals, healthcare technology and Catholic communications. He has also specialized in fundraising communications, ghostwriting for CEOs of local, national and global charities, nonprofits and foundations
