The United States is home to over 330 million people. It has some of the world’s best hospital systems and research universities. Its healthcare system is one of the world’s most complicated and expensive ones. The system’s complexity isn’t an accident. It’s the result of many years of decisions made to maximize profit. In doing so, everyone involved has focused on their bottom line instead of patient outcomes. The result is a system full of conflicting incentives. The sickest Americans often have to deal with the highest barriers to care, and medical bankruptcy is a uniquely American problem.
The problem with healthcare in America is that everyone involved all have different motivations. Health systems that provide best possible care have morphed into these huge organizations that balance patient care with profit margins. This is how they survive in a competitive marketplace. Insurance companies usually pay hospitals and medical groups for the services they provide. This creates a system where the more services a hospital or medical group provides, the more money they make.
Meanwhile, insurance companies work as financial intermediaries. Their main responsibility is to shareholders, not patients. Their business model is simple: collect more money from premiums than pay out in claims. This creates a problem where every approved claim reduces profitability. This leads to the well-known practice of rejecting claims and restricting network coverage. These are all things that have become common in our healthcare system.
Around 160 million Americans get health insurance from their employers. These companies are usually not keen on these responsibilities. Their primary goal is straightforward: cut healthcare costs to maximize business profitability. This usually means buying the cheapest insurance plans irrespective of employees’ healthcare needs.
The misalignment of these interests leads to domino effects that harm patients while making the middlemen richer. For example, companies looking to save money often offer high-deductible plans so that they can pass the cost along to employees. These plans have lower premiums and deductibles that can reach $3,000 for individuals and $6,000 for families. This makes it hard for anyone without a lot of savings to get the care they need.
Insurance companies in turn create plans that appeal to healthy people but not so much to those with chronic conditions. They do this through narrow provider networks, high costs for specialty drugs, and prior authorizations. This makes it hard for people to get the care they need. When claims do arise, insurers send in teams of medical reviewers who look for reasons to deny coverage. They know that most patients don’t have the time, energy, or knowledge to challenge decisions.
Health systems, caught in this web of dysfunction, respond by raising prices to offset underpayments and claim denials. A simple blood test that costs $50 to perform might be billed at $300 with the expectation that insurance will negotiate it down to $75. This pricing opacity creates a system where no one knows the true cost of care until after it’s delivered.
This complexity and opacity has attracted financial actors who view patient care as a way to make money. Wall Street has turned healthcare into a financial industry. Insurance companies and hospital chains are doing well on the stock market lately. They have gotten so focused on making a quick profit that they’ve forgotten about patient care. These companies use many consultants and efficiency experts whose only job is to “trim fat” and make as much money as possible. They do this by doing things that hurt patients. For example, they don’t cover expensive treatments and limit which doctors and hospitals their patients can see. Overall, they make it harder for patients to get care.
Private equity has emerged as the most destructive force in healthcare. They buy medical practices and hospitals with the clear goal of making the most profit in the shortest time possible. These companies use debt to make acquisitions. They cut staffing levels and outsourced important tasks to whoever’s cheapest. Plus, they’ve put in place small-dollar strategies that charge patients extra for services that are standard. Their emergency rooms are staffed by contract physicians who balance-bill patients. Anesthesiologists surprise patients with out-of-network charges. Their medical practices are transformed into profit-extraction vehicles where patient care suffers.
Pharmaceutical companies, while contributing genuine innovation, have weaponized the patent system to extract maximum profits from life-saving medications. They charge Americans multiples of what the same drugs cost in other developed nations. They know that insurance companies will pay the inflated prices and pass costs to patients through higher premiums. Washington makes this possible by having a revolving door of corruption disguised as lobbying. A lot of former healthcare execs write regulations as government officials and return to industry positions to exploit the very rules they helped create. The result is a set of rules that protects industry profits while leaving patients in financial ruin.
Rather than advocating for the wholesale change which would create massive disruption. It would be more effective to implement small incremental changes that realign incentives. The profit motive in health insurance should be eliminated. We could do this by state and federal risk-sharing mechanisms to make sure premium collections match claims payments. Insurance companies would operate as regulated utilities. They will receive fixed administrative fees rather than profits based on claim denials. This approach keeps things as they are while getting rid of the financial reasons to deny care.
We need to make billing and handling claims simpler by having standard prices and automated claims adjudication. Healthcare systems should be required to share real-time and binding price estimates for all services. Fraud penalties should be severe enough to ensure compliance. When patients know costs upfront, market forces can actually control costs.
Wall Street’s role in healthcare should be limited by removing healthcare companies from the stock market. They should be reclassified as benefit corporations. Their tax-exempt status should be tied to meeting patient outcome metrics instead of profit margins. This removes the quarterly earnings pressure that drives many of the system’s worst behaviors.
Finally, employer-sponsored insurance should transition to a sliding-scale model. In this model, companies pay a fixed percentage of each employee’s salary toward healthcare premiums. Higher earners would contribute more to the risk pool than lower-wage workers. This new system will be run by an independent federal agency that’s similar to the NIH or FDA. It would get rid of the employer incentive to hire only healthy workers while making sure there’s enough money for full coverage. Patients should also be responsible for more than paying for their care. They should also be involved in taking steps to stay healthy. We spend about $4.1 trillion on healthcare each year. Around 90% of that money is spent on treating chronic diseases that could be prevented by making changes to one’s lifestyle.
## The Path Forward A single-payer system might be the best fix. It won’t come anytime soon because it’d cause too much political and economic disruption. The approach outlined above focuses on evolutionary change that preserves existing structures. It also shifts focus to patient care instead of profits. These changes require us to face some hard realities. First, healthcare is unique from other markets because it’s all about people’s needs. Second, sometimes the people who make money from healthcare don’t always do what’s best for the public. And third, when healthcare is this complicated, it often helps some people in the middle, but can be hard on patients and healthcare providers. The current system’s defenders will say that competition and market forces push for new ideas and better efficiency. But for years, we’ve been making changes to the healthcare system based on the market. As a result, we pay more for healthcare than people in any other developed nation, and our health outcomes are still worse most measures. The evidence shows the market don’t always help patients. In fact, they often make money for people in the middle. To make real changes, politicians must also understand that healthcare is not something that people buy. They should put patient welfare before healthcare profits.