Health care costs in the United States have been rising for years, placing a heavy burden on many Americans. But where does all the money go?
A new study by researchers at Yale School of Medicine looks into how large health care companies spend their profits, especially the money they receive from government-funded programs like Medicare and Medicaid.
Their findings raise important questions about whether health care profits are being used to improve patient care—or simply to benefit investors.
The study examined financial records from 92 of the largest U.S. health care companies. These include pharmaceutical and biotechnology firms, insurance companies, medical supply manufacturers, and for-profit hospitals.
The researchers focused on companies listed in the Standard & Poor’s 500 (S&P 500), which tracks the 500 biggest publicly traded companies in the country. Their goal was to see how much of these companies’ profits were used for shareholder payouts over the last two decades.
The results were striking. Between 2001 and 2022, these companies spent 95% of their net income—about $2.6 trillion—on payments to shareholders. This money was given out in two main ways: dividends, where shareholders receive direct payments, and stock buybacks, where companies purchase their own shares to increase their value.
These shareholder payouts have tripled over the past 20 years, driven mainly by a small group of powerful pharmaceutical companies.
According to the study’s senior author, Dr. Cary Gross, this means that instead of reinvesting profits to improve health care services, companies are sending most of their earnings back to shareholders. This decision affects the cost and quality of health care for regular Americans, he says.
How Much Taxpayer Money Goes to Health Care?
Health care is one of the biggest industries in the U.S. economy. In 2023, it accounted for 17% of the nation’s total spending. The country spent around $5 trillion on health care that year, and about 70% of that money came from taxpayers in one way or another.
This includes direct funding through government programs like Medicare and Medicaid, as well as tax breaks for employer-sponsored health insurance.
Despite this, health care costs continue to rise. Insurance premiums, hospital bills, and drug prices have all increased significantly over time. Pharmaceutical companies often argue that they need to charge high prices to cover the expensive process of developing new drugs. However, the study’s lead author, Dr. Victor Roy, discovered something different.
While examining one major health care company, Roy noticed that most of the profits from a newly developed drug went to shareholders instead of being reinvested to cover research and development costs. He then worked with Dr. Gross to investigate whether this pattern applied to other health care companies.
Their analysis showed that across the industry, profits were consistently being redirected to shareholders rather than being used to lower drug prices, improve hospitals, or support health care workers. The study found that just 19 companies were responsible for 80% of all shareholder payouts in the past two decades.
The Impact on Patients and the Health Care System
The researchers believe that this trend contributes to the rising cost of health care in the U.S. When companies prioritize shareholder profits, they often raise prices to maintain or increase their earnings. “Shareholders expect larger payouts every year,” explains Dr. Roy. “One way companies meet these expectations is by keeping prices high—or making them even higher.”
Because such a large portion of health care funding comes from taxpayers, the researchers argue that the government could take a different approach to regulating this industry. One idea is to require companies to reinvest some of their profits into patient care, medical research, or health worker salaries.
This would be similar to how companies that receive government funding for certain projects—like semiconductor manufacturing—are required to support social programs such as childcare for workers.
Dr. Gross believes that it’s important to rethink the balance between corporate profits and public health. “Some might say that these are for-profit companies, so their goal is to make money,” he says. “But health care isn’t like other industries. You can choose when to buy a car, but you can’t choose when you have a heart attack.”
As health care costs continue to rise, the study highlights a key question: Should companies that receive billions in taxpayer-funded health care dollars be required to give back more to the system?
The findings suggest that if more money were reinvested into hospitals, research, and patient care instead of going to shareholders, health care might become more affordable and accessible for everyone.
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The research findings can be found in JAMA Internal Medicine.
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