High healthcare costs driven by inflation, public health issues, high-cost drugs, and mental health spending are pushing payors, employers, and providers to adopt targeted cost-containment strategies.

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The final entry in last year's series on the top healthcare trends of 2025 explored the escalating financial crisis within the U.S. healthcare landscape, and its intersection with a variety of advancements in care delivery, technology, and operational strategy.

Looking toward 2026, we must unfortunately report that many of the same economic headwinds remain in play or have intensified-and some new challenges, such as sweeping tariffs on global imports, have also emerged.

Last year's U.S. national healthcare expenditure (NHE) data showed a difficult road ahead for the healthcare market. PricewaterhouseCoopers (PwC) projected correctly that individual medical costs would reach their highest level in 13 years in 2025, and with year-over-year medical cost trends for groups and individuals remaining at 8.5% and 7.5% respectively (the same growth rates held since 2024), we'll likely see a new high in 2026.

Likewise, the Centers for Medicare & Medicaid Services (CMS) project that NHE will surge to an astounding $8.59 trillion by 2033, putting per capita expenditures at $24,200 and establishing NHE as more than one-fifth of gross domestic product (GDP)-an all-time high.

Interestingly, this projection is nearly $2 trillion less than what CMS estimated in 2010, a discrepancy that could be due in part to massive cuts to federal public health funding.

With expenses continuing to soar, providers, payors, and employers are seeking opportunities to contain costs while maximizing patients' access to high-quality care. Let's take a look at the underlying factors driving this financial crisis, as well as some potential ways to stay ahead of the cost curve.

Inflation continues to impact healthcare

The cost growth of medical services tends to grow at a faster rate year-over-year than other economic sectors. According to the U.S. Bureau of Labor Statistics, medical care prices rose by 4.3% in July 2025.

Comparatively, the headline inflation rate (the inflation rate of all consumer spending, including food and energy) from July 2024 to July 2025 was 2.7%, slightly lower than the 2024 year-end rate of 2.9%. This dip indicates that prices continue to rise, but at a slightly slower rate than last year.

Several elements continue to contribute to healthcare inflation, including:

• the U.S.' aging population
• the prevalence of chronic diseases
• inefficiencies in healthcare delivery and the supply chain
• the trend of mergers, acquisitions, and consolidation in the industry
• high administrative costs associated with complex billing (estimated to account for 15% to 25% of total NHE)
• increased reliance on advanced cybersecurity measures
• rising drug, supply, and real estate costs

These and other factors represent a significant burden on the budgets of governments, providers, employers, and payors, who typically pass the cost onto patients and consumers through higher premiums, deductibles, and copays. This not only limits access to care, but also hinders revenue and drives other costs as some patients elect not to receive care or are forced to rely on emergency care.

In response to rising healthcare inflation, care organizations and leaders will need to build cost-containment strategies that limit expenses while maximizing savings. For certain players in healthcare consulting, finance, and software/IT, the increased reliance on these strategies could present opportunities to provide supportive solutions.

Here are a few strategies providers should consider to mitigate the impact of healthcare inflation:

Optimize workforce costs

Amid the ongoing healthcare labor shortage, providers need to make the most of their staff without undercutting care. That starts with supporting current staff to help them remain productive and avoid burnout.

Reducing turnover is almost always more cost effective than aggressive hiring practices. Provider organizations can implement retention incentives, professional development opportunities, and flexible scheduling to keep their teams happy and limit reliance on expensive contract labor.

For teams struggling to attract or retain physicians, advanced practice providers like nurse practitioners and physician assistants can extend a practice's capacity at a lower cost than MDs.

Technology can also play a role here. Automating administrative work using AI and other software tools can lower staffing costs and keep workers focused on the highest-value (and more fulfilling) tasks.

Focus on revenue capture and reimbursement

Well-polished revenue cycle management (RCM) processes won't bring in new patients or attract top talent, but it can prevent delays and denials in claims processing and help to avoid compliance-related penalties, revenue loss, and patient frustration that leads to leakage.

Again, certain technologies offer cost-effective ways to improve RCM. AI-assisted billing and claims processing, for example, can boost accuracy while expediting the collections process.

It's also a good time to consider the fine-print of payor contracts. Seek agreements with payors that index reimbursement to inflation or prioritize value-based outcomes instead of fee-for-service volume. If possible, plan growth initiatives for services lines that attract commercial payors, which tend to reimburse at a higher rate than governmental programs like Medicare and Medicaid.

Reduce supply chain and drug spending

Tariffs and inflation are making it harder for providers to reliably access the supplies and medications they need to operate. Joining group purchasing organizations (GPOs) or entering long-term contracts with suppliers can reduce volatility, prevent waste, and lead to better pricing arrangement.

Partnering with pharmacy benefit management (PBM) organizations or launching in-house pharmacies can help guide prescribers toward cost-saving generics and biosimilars (when appropriate), but make sure to stay up to date on evolving PBM reforms in your market.

Drug costs could hit record highs thanks to GLP-1, specialty meds

The rising cost of prescription drugs is likely to remain one of the defining cost pressures for the U.S. healthcare system in 2026.

One recently popular product category has had an outsized impact on drug spending: GLP-1 receptor agonists. Fetching over $1,000 per month before rebates, GLP-1 drugs designed for weight loss are pushing pharmacy spend up.

In 2023, Americans spent around $71.7 billion on GLP-1 drugs like Ozempic and Wegovy, a 500% increase in spending since 2018. Payors are anticipating considerable growth ahead: Blue Cross Blue Shield of Massachusetts, for example, forecasts spending $1 billion on GLP-1 drugs in 2026-more than triple what they spent in 2023.

Accordingly, employers are preparing to foot the bill and projecting a 10% increase in healthcare costs next year, up from the 8% growth projected for 2025. With a number of new GLP-1 drugs in the pipeline set for release in 2026, many estimates are likely to be surpassed, even as providers and PBMs seek stricter oversight of these drugs in order to control costs.

Specialty drugs continue to be considerable cost drivers, too. While GLP-1 spending growth outpaced specialty drugs for the first time in 2023, Mercer projects that the specialty drug spending growth will rise from last year's 5.5-9.5% rate to 6.5-10.5% in 2026, ultimately accounting for 50% of total drug spend. Categories like oncology, HIV, pulmonary, and inflammatory conditions are expected to be the primary drivers of this growth.

Will the government tighten its hold on the drug industry?

On average, U.S. patients and payors spend two to three times as much on medications as those in other high-income countries.

In 2026, we may see health insurers, government agencies, and others that pay for prescription drugs employ strategies to slow the growth of medication costs. This could range from expanding the powers granted to Medicare under the Inflation Reduction Act to eliminating marketing tactics that discourage the use of generic drugs or even allowing the purchase of prescription drugs from outside the U.S.

The Inflation Reduction Act-initially enacted in 2022 and effectively extended through 2025-empowers Medicare to negotiate with drug companies to get lower prices for certain drugs, caps out-of-pocket spending for beneficiaries, and penalizes pharmaceutical manufacturers if they raise prices faster than inflation.

In its first two rounds of negotiations, Medicare identified 25 widely used drugs for price reduction. The first 10 of these will see lower prices take effect early in 2026, with another 15 set for later in the year.

There could also be measures in place to streamline the FDA approval process, which is notorious for being lengthy, expensive, and risky. Expediting the approval process could reduce research and administrative costs and introduce new drugs into the market sooner, which could prevent the use of more expensive treatments.

The U.S. government seems open to leveraging stricter controls on drug manufacturers as a means to curb drug prices. President Trump issued an executive order in May 2025 seeking to establish a most-favored-nation pricing policy for American patients and to facilitate direct-to-consumer purchasing programs.

Still, for providers, payors, and patients, the reality in 2026 is that drug costs are unlikely to plateau. Even with regulatory action, specialty drugs and breakthrough therapies are expected to grow in cost. The challenge will be balancing innovation and access with affordability-a tension that will define the healthcare cost debate for the remainder of the decade.

An aging population remains a challenge for providers and payors

The rapid aging of the U.S. population will continue to shape healthcare demand and expenditures in 2026. As of 2024, 61.2 million Americans were age 65 and older, up by 3.1% from 2023, and now representing 18.0% of the population-a marked increase from 12.4% in 2004. Forecasts indicate that this demographic will grow even further: by 2030, 1 in 5 Americans (20.7%) will be aged 65+.

This shift places enormous pressure on healthcare systems. Older adults are significantly more likely to suffer from chronic illnesses such as diabetes, arthritis, heart disease, and dementia -conditions that require long-term medical attention, frequent drug therapies, and hospitalizations. Long-term care demands are also surging: nursing homes, assisted living, and in-home services face rising labor costs amid worker shortages.

In response, 2026 will see increasing adoption of aging-in-place strategies, blending remote monitoring, home health technologies, and expanded caregiver networks to deliver cost-effective care that aligns with patient preferences. Still, unless investments in the elder care workforce and infrastructure accelerate, the aging trend will continue to drive up Medicare and long-term care costs throughout the rest of the decade.

Chronic disease, mental illness complicate healthcare

Chronic disease is another leading source of upward pressure in U.S. healthcare spending, and will continue to be in 2026. The CDC estimates that 90% of the nation's $4.9 trillion in annual healthcare expenditures are tied to people with chronic illnesses.

Chronic conditions like heart disease, cancer, diabetes, and obesity are widespread in the U.S. The CDC estimates that 60% of Americans have at least one chronic condition and 40% have two or more. These patients tend to require more frequent visits to providers, ongoing monitoring, and more expensive diagnostic and treatment methods.

While the government has allocated $33 million for chronic disease interventions in its FY 2026 budget-including improved nutrition labeling and school-based food programs-the ongoing reorganization of the Department of Health and Human Services would dissolve parts of the CDC specifically tied to chronic disease mitigation, namely the National Center for Chronic Disease Prevention and Health Promotion (NCCDPHP).

It's true that chronic conditions are more likely to affect older people, as described above, but younger patients are increasingly being treated for conditions once exclusively seen in elderly populations. For example, one study reported that stroke rates in patients ages 20-44 increased by 65% between 1993 and 2015.

As we noted in last year's trends report, the impact of the COVID-19 pandemic on chronic disease management is still being felt. Millions of patients skipped appointments, tests, and screenings necessary to manage their conditions, leading to increased utilization of higher-cost interventions.

COVID-era conditions like increased isolation, stress, and reduced access to support programs-as well as growing public awareness-may have also contributed to growing rates of mental illness in the U.S. and around the world. An estimated 1 in 5 American adults lives with a mental illness, costing the U.S. economy around $282 billion annually in direct care costs and lost productivity, or about the same amount as a year-long recession.

Many patients with mental illness face inequities associated with lower income status, racial and ethnic disparities, and/or homelessness, a combination of factors that makes them less likely to receive proper care management and more likely to utilize emergency services. Today, emergency department utilization associated with mental illness costs around $5.3 billion annually and could rise to $17.5 billion by 2040, according to Deloitte.

Without meaningful change, the U.S. could find itself spending $1.26 trillion annually on mental health care by 2040.

The main takeaway: Providers must balance cost-containment with innovation, growth

As we head into 2026, the forces driving healthcare costs higher show no sign of slowing. Inflation is putting pressure on everything from hospital operations to patient out-of-pocket costs, while prescription drug spending continues to climb as new specialty therapies enter the market and traditional therapies-like GLP-1 agonists-see higher and higher demand. An aging population will increase the need for long-term and specialized care, even as younger generations face rising rates of chronic disease. Meanwhile, the growing prevalence of mental illness is compounding the financial and societal strain, with billions lost annually in both direct medical spending and productivity.

Taken together, these trends highlight a pivotal moment for the healthcare system. Providers, payors, life sciences companies, and policymakers will need to find innovative ways to deliver care more efficiently, address preventable conditions, and expand access to behavioral health support. Without action, the cost burden will continue to grow, but in spite of this headwind, with targeted strategies and smart investments, 2026 could mark the beginning of a shift toward more sustainable, equitable care-and new opportunities for healthcare organizations.

Be sure to check out the other entries in our 2026 trends series, covering the growing threat of data breaches, the impact of AI-driven search behavior on healthcare marketing, and more.

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