The American healthcare system is an economic paradox — a complex machine that consumes more resources than any other in the developed world, but consistently delivers inferior results. Statistics from 2023 show that we spend roughly $13,432 per person annually. That’s over $3,700 more than any other high-income nation. This massive investment has failed to yield superior health outcomes, leaving the US lagging behind its peers in fundamental metrics, such as life expectancy and infant mortality.

This system doesn’t just fail patients, it actively harms them. American healthcare burdens millions with medical debt and forces countless families to choose between financial ruin and necessary care — or death. And even those with exemplary healthcare coverage often find themselves waiting days or months for prior authorization for services, like in-home occupational therapy following a stroke or seizure.

The core of this crisis is a profound failure of incentive design. The United States operates overwhelmingly on a “fee-for-service” model, where every procedure, test and prescription generates revenue. This structure incentivizes service volume over health and encourages fragmentation, administrative bloat and astronomical price variation. This machine is rigged to prioritize profitability across its many complex layers — insurers, pharmaceutical companies and consolidated hospital systems — all before considering the patient’s wellbeing.

The heavy toll of prior authorization

This structural failure carries a heavy human cost that extends far beyond the patient’s wallet. The primary administrative villain here is the prior authorization trap, a labyrinthine process where insurers must approve a doctor’s ordered treatment plan before care can begin. This system steals valuable time from patient interaction and directly compromises health outcomes. It contributes to catastrophic levels of physician and nurse burnout as well, as nearly half of US physicians report at least one symptom of burnout. Clinicians spend hours a day clicking through electronic medical records and fighting endless bureaucratic battles for approvals.

Worse, prior authorization often creates dangerous delays or outright denials for patients needing timely treatment. When one in three Americans reports skipping or postponing essential healthcare because of the cost, and the providers we rely on are fleeing the profession due to exhaustion and demoralization, the system has clearly abandoned its foundational mission.

We won’t find a path forward through incremental adjustments, but through a radical shift away from this transactional fee-for-service model toward Value-Based Care (VBC) and a massive commitment to systemic, digitally-driven simplification.

Five pillars to correct US healthcare

The future of American medicine must be built on five integrated pillars:

1. Aligning incentives through capitation and accountability. We must move to payment models that reward providers for keeping patients healthy and managing chronic conditions proactively, not for the number of services they perform.
   
   Capitation — a fixed payment per patient for all their care over a period — forces health systems to focus on prevention, efficient coordination and population health outcomes. This model requires robust data sharing and transparent outcome metrics, making providers accountable for the quality of life they deliver.
2. Leveraging AI for administrative rescue and simplicity. The path to reducing burnout and inefficiency must be digitally driven. We must aggressively deploy artificial intelligence tools to automate the low-value, high-stress tasks that fuel administrative bloat.
   
   This is not about replacing human judgment, but freeing up clinicians: AI can streamline prior authorizations, automate clinical documentation (like AI scribing) and optimize complex scheduling and resource allocation. By removing the repetitive, non-clinical tasks that cause burnout, we allow physicians to return their focus to the patient.
   
   Additionally, policymakers must mandate true price transparency and empower government entities, like Medicare, to negotiate drug and service prices on behalf of the public.
3. Investing deeply in primary and mental healthcare. When primary care is accessible and affordable, costly specialist visits and emergency room use decrease dramatically. We must significantly increase funding for primary care physicians, rural clinics and mental health services, embedding these critical resources within communities.
   
   A VBC system naturally reinforces this by making preventative care an economic winner rather than a cost center. This emphasis is critical, as preventive care spending is a fraction of what we spend on inpatient care.
4. Mandating health equity and addressing social determinants. Healthcare reform is incomplete without tackling the systemic inequities that create disparate health outcomes. We must mandate that VBC models specifically include metrics for reducing health disparities and actively invest in addressing the non-clinical factors — housing, nutrition, transportation and education — that account for roughly 80% of health outcomes.
   
   By financially rewarding providers for connecting vulnerable populations with social services, we turn health systems into community wellness partners, closing the gap between the privileged and the underserved.
5. Prioritizing specialized and complex care. The current system excels at acute, profitable interventions but struggles with the long-term management of complex illnesses. We must create specialized Centers of Excellence that are incentivized by VBC contracts to provide holistic, coordinated and continuous care for patients with diseases lacking a cure, such as neurodegenerative disorders or rare chronic conditions.
   
   This pillar demands the system shift from treating symptoms episodically to managing the entire disease trajectory, funding innovation in therapeutic development and ensuring that access to highly specialized treatment is not gatekept by financial barriers, but by clinical necessity.

Reforming American healthcare will be a monumental political undertaking, opposed by entrenched financial interests who profit immensely from the status quo. But the financial and human costs of inaction are simply too high to ignore any longer.  We need the political courage to prioritize the health of both our patients and our care providers. The money saved can be directed towards new medical technologies and therapies, improving the entire medical system. Only by untangling the perverse incentives that drive our system can we finally ensure that every American has access to the high-quality, affordable care they need.

[Lee Thompson-Kolar edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.