Access to affordable health care services, a long-standing issue in the U.S., will likely become increasingly challenging for many Americans as costs continue to rise for both insured and uninsured individuals to varying degrees. Efforts over the years to address access difficulties and rising health care delivery costs include passage of the Affordable Care Act (ACA) and various government and provider initiatives. But costs and access remain a pressure point for many individuals and health care services organizations.

Moreover, the recent federal reconciliation bill passed by the House of Representatives but subject to change as the Senate reviews the bill, could slightly impair credit quality for some rated for-profit and not-for-profit providers, depending on individual issuers' circumstances, and could further strain individuals’ access to care. Key proposals that could constrain the sector include potentially decreased Medicaid enrollment due to work requirements and future limitations to certain Medicaid payments to providers.

Why it matters: The U.S. spends disproportionately more on health care than other high-income countries, $13,432 per capita versus the “comparable country average” of $7,393 for in 2023, according to the Peterson-KFF Health System Tracker. But higher spending has not necessarily alleviated access gaps. And medical debt remains a leading cause of personal bankruptcy in the U.S.

What we think and why: For-profit and not-for-profit health care services issuers continue to face increasing operating costs and often insufficient insurance and government reimbursement (relative to those costs), which together could impair credit ratings depending on the effectiveness of the industry’s strategic initiatives to counter these factors. Indeed, U.S. health care services issuers are regularly taking measures to preserve their viability, even if some are at odds with improving access and affordability. However, as costs increase for patients and providers, and considering the potential impact of federal policy proposals, risks for credit ratings could rise.

Health Care In The U.S. Is Costly Compared To Peer Countries

At $4.9 trillion in 2023, health care is the largest sector in the U.S. economy, representing 17.6% of GDP. The U.S. spends more on health care services than any other country by any metric. The $13,432 per capita spent on total health care costs in 2023 was 39% above the second-highest spending country (Switzerland) and 82% higher than the comparable country average, according to the Peterson-KFF Health System Tracker. Yet the ability of the nation’s population to access and/or afford what the industry has to offer varies greatly by demographics and socioeconomic status.

Despite efforts to improve access to and affordability of care over the years, including passage of the ACA, attempts to manage health care costs are mixed and generally with fragmented results. The ACA expanded insurance coverage, with the uninsured population falling to 26 million in 2023 from 45 million a decade prior, according to U.S. Census estimates. That said, there are still people without insurance who must pay out of pocket, which not everyone can manage.

Further, over the last two decades, average out-of-pocket annual health care costs, including insurance, medical services, pharmaceutical drugs, and medical supplies, have increased nearly 140% to $6,159 in 2023. Combined care and ancillary costs now take up 6% of an individual’s average annual income before taxes, according to data from the U.S. Bureau of Labor Statistics (chart 1). Because these are average costs, this can play out in meaningful ways at the personal level as the ability to access and manage even the typical annual out-of-pocket costs for preventive and minor care needs can vary based on individual income and insurance. And of course, more meaningful health care illnesses and events can be financially burdensome to both the patient and health care provider.

Chart 1

Drivers Of Health Care Services’ Access And Affordability Concerns

While the causes of access issues and elevated health care costs in the U.S. are complex, with many interacting and long-evolving components, we highlight three important contributing factors: a complex payer-payee system, ownership structures of health care service organizations, and operational and input cost inflation. They also influence financial performance and cash flow generation for U.S. health care providers.

A complex payment system limits pricing transparency and creates mixed incentives

The U.S. health care system is unique when juxtaposed against universal systems such as those in Canada, the U.K., and other nations. Instead, it comprises publicly financed programs (Medicare and Medicaid), typically through government reimbursements, and private health insurance, largely provided by employers. In either case, patients often have some copayment responsibility and annual deductible thresholds that continue to rise. This sits on top of the fact that a portion of the population remains without health insurance coverage. The ACA, enacted in 2010, helped reduce the uninsured rate to about 7.9% of the total population by 2023 from 15.5%, according to U.S. Census Bureau data, but many other industrialized nations have systems with universal coverage.

The U.S. system has extraordinary size and capabilities but is fragmented and can create accessibility hurdles. The multiple payer sources each have different rules, payment methodologies, enrollment requirements, and high administrative costs--complexity that much of the population struggles to navigate. Price transparency remains a work in progress. Individuals may pay different amounts based on their health insurance and don’t necessarily know the full price of the health care they are using (which also may be different depending on the commercial payer). Historically, there have also been mixed incentivizes around health care use to do more without accountability for costs and outcome. All this influences access to care as well as the generation of higher costs borne by different participants in the system. While there are providers who have worked to simplify the process and focus on appropriate care management for patients, these efforts are not widespread and don’t necessarily fit all the market dynamics across the country.

With the mixed reimbursement environment, providers develop strategies to ensure their financial viability; however, this can affect access. For Medicare and Medicaid, providers are typically price takers, with rates determined by the government and incorporate its budget considerations. Private payers negotiate rates with health care providers, influenced by the negotiating strength of each party. Typically, public payers reimburse at much lower rates for the same services, often providing little or no margin. Historically, Medicaid reimbursement has been the weakest, not covering the cost of providing care; however, in recent years, this has been altered by various provider fee payments and other funding programs--often in a very meaningful way--in an attempt to support costs of service and maintain or improve access. On balance, though, private insurance plans pay higher rates and produce most of providers’ bottom lines.

All providers (both not-for-profit and for-profit) have specific missions to serve their patients. However, with the payer dynamics, providers may deploy strategies to offset weak government reimbursement by optimizing their commercial businesses. This strategy may vary between for-profit health care services versus not-for-profit and public providers (and even among specific types of not-for-profit providers), as some providers have more flexibility around their mix of services and, to varying degrees, where they provide them. These strategies are often designed to attract better-paying patients or to help balance the payer mix but, in some cases, could lead to access issues. Moreover, lower reimbursement by government payers has led to independent physicians closing their practices to Medicare and/or Medicaid patients. This can contribute to unequal access in certain markets as those providers tailor their strategies toward better reimbursements and people who can afford higher out-of-pocket requirements.

Ownership structure could influence what services are offered and where

All health providers rely on sufficient margin and cash flow to provide services and support operations. Whether for-profit or not-for profit, providers must at minimum generate an adequate margin and cash flow to meet their capital needs, invest in technology and services, and maintain health care access for their communities.

If organizations can’t generate a sufficient margin, they must make difficult decisions about services offered or even divestiture or closure of facilities. This can contribute to regions without adequate health care services, or “health care deserts”, because it can be difficult to make it financially sustainable. Even not-for-profits still must generate enough margin in one area to effectively subsidize care in a loss-making area. However, whether an entity is for-profit or not-for-profit could influence the service mix and geographic coverage, with implications on access and affordability.

For-profit entities must operate to maximize profitability and cash flow for the benefit of key stakeholders, including shareholders. Hence, they may focus on a service mix with greater attention on margins. They typically choose to operate in more favorable markets and may be discouraged from investing in and broadening access to more challenging reimbursement markets. They may distribute excess cash flow to shareholders in share buybacks or dividends rather than reinvesting in ways that may improve access but would not necessarily provide a desired return.

Of course, not-for-profit providers aren’t maximizing return to shareholders. But they still need to maintain financial viability, particularly as margins remain pressured (chart 2). By their nature, not-for-profit providers are often linked to the communities they serve and may have less flexibility where they operate and the service mix they provide. That said, mergers and acquisitions and divestitures by some hospitals and systems came with the objective of maintaining financial sustainability and service availability. Even still, given cost pressure and payer dynamics, many not-for-profit providers have increasingly had to consider their service offering and balancing their payer and service mixes to ensure ongoing stability.

Chart 2

Higher input and operating costs

As input and operating costs have gone up, including for technology and labor, U.S. health care services providers have passed much of them through to payers and consumers:

Administrative and labor: Factors to consider for the high cost of care include the mounting expenditure associated with the web of regulations, compliance, and reimbursement systems. Health care is a labor-intensive sector, and total compensation for workers spiked during the COVID-19 peak years. Growth and labor compensation remains elevated over historical norms and more broadly in the U.S. (chart 3). The industry contends with much higher physician salaries than average in all other industrialized countries. Salaries for nurses are also high and will continue to rise given the structural labor shortage, but they are reasonably close to those in most other developed countries.

The cost of care in the U.S. has also burdened providers practicing defensive medicine, given the highly litigious environment.

Chart 3

Technology: No one can deny the benefits of the incredible advances in technology, but they contribute to the overall growth in health care spending. New technologies and advancements continue to add to industry capabilities, creating new demand. Diseases can be treated more effectively, improving quality of life, but that is costly. Advances create new demand as well as new costs layered on other increasing costs. People are living longer with certain disease states that may also require drugs and other treatments.

There are, of course, benefits to all of this as people live, work, and contribute to society longer. Considering the costs of these advancements and capabilities, their benefits are not equally accessible, contributing to the disparity in health care access and affordability.

Progress to improve access and reduce health care costs has been mixed and generally specific to certain providers and markets

The industry and government have undertaken efforts over the years intended to curb costs and improve access and affordability, but widespread progress will likely require ongoing, systematic, and coordinated changes to the complicated health care system. In addition to broadening access to insurance via the ACA, there has also been, for instance, a focus on broadening services in lower-cost outpatient settings as well as value-based care to manage resources more appropriately while making inroads to reduce the growth of costs of care. Value-based care is a reimbursement approach that emphasizes outcomes and quality while managing care appropriately as opposed to fee-for-service based on the number of visits and services provided.

Some providers have provided access and affordability while maintaining sound credit quality ; however, success has resulted from significant investment over a number of years among other specific market-based dynamics. Ultimately, the U.S. health care system is not organized or incented for greater adoption of value-based care systems outside of those already committed to and invested in that journey.

Federal and state provider fee and directed payment programs can pressure government costs, but support expanding health care to individuals in uninsured or underinsured areas. Additionally, benefits from the 340B drug pricing program, administered by the federal Health Resources and Services Administration (HRSA) and available to qualifying not-for-profit hospitals, are intended to provide access to medication and stretch “scarce federal resources as far as possible, reaching more eligible patients, and providing more comprehensive health care services”, according to the HRSA website. Oversight of that program, however, is limited, and evaluation of its success is in process.

Technology is also a potential means for broadening access, improving efficiency and affordability. Technology can be costly, but it has been expanding capacity and will continue to increase access--though not evenly across the population. Telehealth services (for which the COVID-19 pandemic accelerated both advances and adoption), AI technology to triage care, and technologies to reduce the overall cost of care delivery could help broaden cost-efficient access to care. However, many of these advances are in their early stages. We believe it will take some time before they translate into meaningful and broad-based improvements and likely for those providers that have the financial strength to make the infrastructure investments.

Structural Challenges For Providers Could Persist, Diminishing Access And Affordability

Recent increases in cost structure, ongoing workforce shortages, and related financial challenges will likely only exacerbate the issues. The rapidly changing and uncertain policy environment has recently added potentially large risks to both access and affordability.

With no broad solution on the horizon, access to affordable care will remain a chronic problem for many. Not new, but emerging over the years, out-of-pocket spending and medical debt illustrate this. High patient deductibles, copayment requirements, other forms of cost sharing, and increasing insurance denials contribute to higher out-of-pocket spending. And it has profoundly hurt many families, even those with insurance. According to 2024 research from Peterson-KFF, about 1 in 12 adults (or about 20 million Americans) have medical debt, totaling a staggering $220 billion. Medical debt is often cited as a primary cause for personal bankruptcy filings. This disproportionally affects those with disabilities, who are not in good health, often have lower income, and are uninsured.

A medical workforce shortfall will likely persist for the next few years as demand increases. Even as they’ve eased, we expect challenges will keep upward pressure on labor costs. Adequacy of the physicians and nurses supply (including specific physician specialties) will vary across the country, with smaller markets and certain regions often more at risk. Shortages will continue to strain the system, and providers will prioritize resources in services that generate sufficient profit, varied among for-profit and not-for-profit health care services. The Association of American Medical Colleges estimates the physician shortage in the U.S. will increase to 86,000 by 2036. Many organizations may have to make difficult decisions as they balance providing services with growth to ensure that they can financially continue to treat under- or uninsured patients. While many providers are hyper-focused on efficiency and length-of-stay initiatives to improve overall capacity and access, we expect demand will continue to increase, further stressing capacity. We expect this imbalance will continue to strain access to care disproportionally in small and rural markets, but to some extent it will affect the entire nation.

Reduction in certain services may further limit access. Health care organizations have increasingly focused on efficiencies to try to provide more care with the same staffing, with strides to create more access points. However, for some, it’s simply not enough. Though a difficult decision, providers have closed or repositioned hospitals where they can’t staff appropriately or operate in a financially viable manner. Other providers and systems may have limited certain services in select locations. This comes on top of “health care deserts” with fewer services due to the previously discussed business economics of health care and often insufficiency of certain payers to absorb the costs of service delivery.

Relationship Between Access, Affordability, And Credit Quality Is Complicated

Credit ratings on both for- and not-for-profit health care service providers indirectly incorporate access and affordability considerations. Faced with ongoing rising costs and other profitability headwinds, providers have always had to consider financial viability and for-profit providers, generating adequate returns for key stakeholders. While management teams have deployed a host of initiatives to preserve cash flow, they sometimes must turn to initiatives that could compromise access and affordability. This could mean increasing service prices where possible, or reducing or eliminating lower-margin offerings, as well as refocusing on balancing service and payer mix. Even those providers focused on value-based care have had to make increased pricing adjustments in the recent environment to manage the inflationary environment.

These measures generally constrain access and affordability of care. In other words, what may be good for preserving or improving financial performance and credit quality may not always align with the objective of increased access to affordable care.

While we do not expect this to change soon, there are channels through which deteriorated access and affordability (including a reduced insured population) could also mar credit quality. This includes through reduced reimbursement rates, higher out of pocket requirements, lower volumes, or higher incidence of unpaid services, which can affect both revenue and margins. And the direction that health policy takes can be instrumental in whether and the degree that these negative conditions surface.

Cuts to reimbursement from any health provider’s sources of revenue (Medicare, Medicaid, private insurance) has always been a threat to its financial profile and our credit ratings. Even changes to reimbursement such that growth of payments is less than increased expenses could also be a factor. This would directly reduce margins, which in turn could lead providers to take measures discussed above to preserve viability and cash flow--and may be at odds to helping preserve access and affordability. Certain physicians, largely independent and not employed by health care systems, would be more selective about the patients they see, depending on insurance coverage. These measures could put more pressure on not-for-profit safety net hospitals, public hospital districts, and other public/county hospitals to treat those patients in affected areas. Should an organization’s measures be insufficient to overcome reimbursement cuts or not fully mitigate rising costs, we could lower ratings on both for-profit and not-for-profit providers. A rising burden of uncompensated care on public hospitals could weigh on related government credit quality to the extent governments look to help support that unfunded care from other governmental sources.

Health policy (or federal/state reimbursement) decisions that increase the uninsured or underinsured population would also hurt access, affordability, and ratings. An increase in this population could reduce patient visits, increase undiagnosed medical conditions, and ultimately raise already expensive, unreimbursed care and treatment costs.

Recent policy proposals affecting access and affordability also increase the likelihood of weakening credit quality

The Trump administration aggressively seeks to cut federal spending. It has already issued executive orders and proposed policy changes to rescind Biden administration orders. These would, among other things, shorten the ACA enrollment period, end a special enrollment period for lower-income households, eliminate eligibility for Deferred Action for Childhood Arrivals recipients, increase eligibility verification requirements, and remove funds to aid enrollment and help lower costs of insurance premiums. ACA signups hit a record of more than 24 million in 2024, more than double from 2020. New policies that increase eligibility requirements could reverse that trend.

Proposed changes to federal funding for Medicaid and other programs over 10 years could be credit negative. Medicaid provides health benefits to 78 million low-income and disabled Americans. While it appears policy proposals such as reduction of the Federal Medical Assistance Percentage (FMAP) both for the traditional and expanded Medicaid population and elimination of provider fee and directed payment programs were not included in the most recent House bill, there still are likely to be several changes. These could include a freeze of provider tax programs at current rates, a moratorium on new provider tax programs, tougher eligibility requirements, blocks on federal funding for Medicaid recipients with unverified immigration or citizenship status, and new Medicaid work requirements. The enhanced ACA premium subsidies are set expire at the end of 2025; extending them was not in the current house bill. This could result in millions more opting out of coverage and joining the ranks of the uninsured. For health care providers, this could mean more uncompensated care.

The most recent estimates from the Congressional Budget Office suggest these Medicaid measures could save $723 billion in the budget, but in combination with changes to provisions of the ACA may also lead to roughly 15 million people losing health coverage by 2034.

The rating implications would be neutral or negative. Providers will follow the same strategy they would for any significant reimbursement cut, including targeting services in selected geographies, potentially limiting services, and looking for other cost-saving measures. The impact on rated providers depends on the services they provide, payer mix, other sources of revenues including philanthropy and investment portfolio for the not-for-profit health care providers, the markets they operate in, and financial cushion. In general, not-for-profit health care systems and hospitals would most likely be affected by reimbursement changes because many serve a significant Medicaid population and depend on supplemental funds. Entities include children’s hospitals and safety net providers, which can include certain academic medical centers and hospitals in large health systems. However, a key consideration for not-for-profit hospitals and systems will be the strength and sufficiency of the balance sheet and reserves.

There are also possible adverse rating implications for hospital districts, municipalities, and counties that operate health care facilities in their jurisdictions. Such facilities would most likely rely heavily on government payers for a significant portion of revenue. They generally do not have the size and scale of a large, diversified health system to effectively mitigate a large cut in Medicaid funding and may have to look to increased tax revenues or financial support from related governments. That may not be absorbable for particular service areas and could pressure affordability in a different way.

Whether these most recent health policy proposals pass, it is clear that the U.S. health care system continues to face structural issues that can force trade-offs between the financial performance and viability of providers and the access to and affordability of care for millions of Americans. Over time, these conditions could also be the impetus for changes and give rise to innovations as providers navigate what we expect may be a more difficult operating landscape. We continue to closely monitor how and for which issuers the balance of these trade-offs may result in material credit impacts.

Related Research

• Reducing U.S. Drug Prices Will Likely Pressure Pharmaceuticals’ Credit Quality, June 17, 2025
• Global Pharmaceutical Companies Ratings Are Unlikely To Be Highly Disrupted By Rising Risks, May 27, 2025
• U.S. States Brace For Potential Medicaid Funding Gaps, March 20, 2025
• Health Care Services Credit Outlook Revised To Stable On Broadly Better Operating Performance, Feb. 4, 2025
• U.S. Not-For-Profit Acute Health Care 2025 Outlook: Stable But Shaky For Many Amid Uneven Recovery And Regulatory Challenges, Dec. 4, 2024
• Medicare Advantage Can Harm Health Care Services Credit Quality, Aug. 15, 2024

External Research

• Allocating CBO’s Estimates of Federal Medicaid Spending Reductions and Enrollment Loss Across the States, KFF, June 4, 2025
• Paying for It: How Health Care Costs and Medical Debt Are Making Americans Sicker and Poorer, The Commonwealth Fund, Oct. 26, 2024
• Health Care Costs And Affordability, KFF, May 28, 2024
• Americans’ Challenges with Health Care Costs, KFF, March 1, 2024
• The burden of medical debt in the U.S., Peterson-KFF, Feb. 12, 2024  
• How does cost affect access to healthcare?, Peterson-KFF, Jan. 1, 2024

Primary Contacts:	David P Peknay, New York 1-212-438-7852; david.peknay@spglobal.com
	Suzie R Desai, Chicago 1-312-233-7046; suzie.desai@spglobal.com
Secondary Contact:	Bruce Thomson, New York 1-2124387419; bruce.thomson@spglobal.com