Key takeaways
Prices are accelerating faster than utilization across both medical and pharmacy in Texas.
Health system consolidation may be contributing to price increases in both medical and pharmacy.
GLP-1s have an impact on utilization growth, but pharmacy prices remain high even without considering them.
The story of rising healthcare costs in Texas is largely a story of increasing medical prices. Lockton’s 2025 trend data (opens a new window), which examines how changes in both price and utilization growth contribute to overall healthcare cost growth, showed that medical price growth in Texas accelerated from 7.3% in 2024 to 9.3% in 2025, meaning that price growth was 27% higher year over year.
Although utilization also grew, it expanded at a slightly slower rate than in the previous year. Together, this data points to rising prices as the primary driver behind growing healthcare costs.
While no single factor can explain increasing cost pressure in Texas, healthcare market consolidation, workforce capacity challenges, and the cost of pharmaceuticals may all be contributing to the broader trend.
Texas healthcare market consolidation may be a factor in increasing prices
The three areas that drove the biggest price trend increases in Texas were ER, inpatient, and outpatient, according to the 2025 trend data. Each category experienced price growth of at least five percentage points, with the outpatient price trend over six times higher in 2025 than the year prior.
Because these categories are heavily influenced by hospital pricing, the findings may point to provider consolidation, when hospitals or health systems begin to merge or acquire smaller providers, as a possible factor behind rising healthcare costs in Texas. While these mergers can be a strategy to keep struggling systems open and operating efficiently, they also concentrate power among fewer health systems, narrowing provider options and driving care costs up anywhere from 6% to 65%, according to data from the U.S. Department of Health and Human Services (opens a new window).
Market consolidation is not unique to Texas. Nearly half of all metro areas in the United States are controlled by just one or two health systems. (opens a new window) However, the impact is especially pronounced in Texas, where over 60% of the population lives in highly concentrated hospital markets (opens a new window), the highest number among large peer states.
There are nine Texas metropolitan areas that operate with just one or two health systems, including three that are served by just one. Even in markets that may appear to have more competition, market power can still be highly concentrated. While Austin has four health systems, two of them control 89% of the inpatient hospital care market. The same is true of Bryan and Lubbock. In Houston, Texas’ largest city and the fourth-largest city in the U.S., three hospital systems make up over 70% of the market.
The consolidation leads to substantial influence over the prices that employers and health plans pay. Texas employers pay hospitals approximately 2.5 times what Medicare pays for identical care, according to the most recent data available.
GLP-1s matter, but they’re not the full story
National trend data shows that GLP-1 coverage adds nearly two percentage points to the overall pharmacy trend, driven primarily by utilization. Texas data is consistent with that finding. Brand Rx, the category that includes GLP-1 medications, experienced a slight decline in price trend, while utilization rose from -3.0% in 2024 to 2.1% in 2025, an increase of 5.1 percentage points.
However, though it does contribute to the overall pharmacy trend, GLP-1 coverage does not explain the majority of the pharmacy cost trend. Generic Rx and Specialty Rx, neither of which include GLP-1 medications, both declined in utilization growth while increasing in price growth. This suggests that, as is the case with medical care in Texas, employers are battling accelerating costs while utilization is stabilizing.
These diverging patterns may suggest that utilization-management strategies are helping prevent prescription use from accelerating. However, utilization management alone cannot address the price side of the equation, highlighting the need for strategies that address both how medications are used and how much employers pay for them.
It’s also worth noting that growing mail-order pharmacy may influence utilization. These programs can improve medication adherence and offer discounted dispensing rates to help employers manage pharmacy costs, which could offset some of the utilization declines that might otherwise be reported.
National data shows that the introduction of biosimilars for medications like Humira and Stelara meaningfully reduces part of the pharmacy cost trend. By providing lower-cost alternatives to their reference biologic drugs, biosimilars give employers and health plans another tool for managing pharmacy costs. However, while biosimilars and other pharmacy-management strategies can help alleviate some cost pressure, Texas data suggests that rising drug prices still erode much of the savings from any of these strategies.
Workforce capacity may add to cost pressure in the future
Workforce capacity is another potential source of cost pressure moving forward. Hospitals that struggle to recruit and retain clinicians and providers may incur costs from increased wages, overtime and reliance on contract staff. In 2025, overall workforce costs rose 5.6% due to increased wages, which is significant considering labor makes up 60% of hospital spending, according to the American Hospital Association. (opens a new window)
In Texas, continued healthcare worker shortages are projected through the next decade. The registered nurse shortage is expected to grow by over 10,000 through 2036, leaving nearly 16% of projected demand unmet. (opens a new window)