Addressing Healthcare’s Affordability Crisis: A Moonshot Mission is Needed
TL/DR –
The US healthcare system’s growing affordability crisis requires an effort comparable to a moonshot, according to Robert Pearl, former CEO of The Permanente Medical Group. Current reimbursement models, fee-for-service and pay-for-value, are ineffective in controlling costs, with the former often rewarding volume over superior medical outcomes, and the latter failing to change clinician behavior until a majority of their revenue comes from fully capitated payments. A healthcare moonshot, involving a significant risk, could be motivated by fear, such as a looming recession impacting employer-provided insurance, or reward, such as AI-driven chronic disease management potentially saving up to $1 trillion.
Moonshot needed to address US healthcare’s growing affordability crisis
John F. Kennedy’s famous 1961 “We choose to go to the moon” declaration reflected the US’s fear of falling behind the Soviet Union during the Cold War. Similarly, today’s space race is propelled by governments and private companies investing billions in fear of missing out on economic advantages, from satellite infrastructure to advanced computing and resource extraction.
Healthcare affordability – a challenge requiring a moonshot
Like moonshots, significant societal changes often happen when fear or financial motivation becomes so strong that inaction is riskier than action. These factors will play a crucial role in deciding whether the US government or private companies address the escalating healthcare affordability crisis.
The scale of the healthcare cost crisis
The US’s healthcare cost crisis is on a grand scale, rendering small solutions ineffective. The US spends roughly $15,000 per person on healthcare each year, nearly double what comparable nations spend. With an average annual family coverage costing $27,000, workers are paying almost $7,000 out of pocket. Without changing how medical care is reimbursed, costs will continue to rise.
The flawed pay-for-service and pay-for-value healthcare models
American healthcare depends on two flawed models: fee-for-service and pay-for-value. The former pays doctors and hospitals per service, rewarding quantity over quality, a method that doesn’t work in healthcare. The latter model is designed to reward patient outcomes rather than service volume. However, it hasn’t reduced hospitalization rates, improved chronic disease management, or lowered costs as intended.
Launching a healthcare moonshot
A healthcare moonshot, similar to a space voyage, involves accepting substantial risk. One possible motivation for such a mission is fear. With the next economic recession potentially close, according to historical analyses, employers might reduce coverage for the 160 million Americans relying on job-based insurance. This could lead to a political shakeup as affected workers vote out incumbents.
Another potential motivation is reward. Advances in AI could significantly improve chronic disease management, which affects three out of four Americans. The CDC estimates that efficient disease control could prevent up to half of all heart attacks, strokes, and kidney failures, saving close to $1 trillion. The prospect of capturing even a fraction of this potential saving could create a powerful incentive for insurers and new market entrants to act.
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