Why American Healthcare Is in Crisis — and the One Reform That Can Fix It

America’s healthcare crisis is not caused by one bad policy or one failing program. The system is breaking because it is built on incentives that undermine affordability, coordination, and quality. When you look across the major failures — rising costs, fragmented care, clinician burnout, unnecessary utilization, fraud, and overwhelming administrative burden — a single pattern emerges: these are symptoms of a fundamental design flaw.

Affordability Is the Breaking Point

ACA premiums keep rising. Medicare Part B premiums will jump 9.7% in 2026. Working families now pay about $20,000 a year for employer coverage. Regardless of age or income, Americans face the same conclusion: healthcare has become unaffordable.

Care Is Fragmented Because No One Is Paid to Coordinate It

Chronic illness is increasing, and medical specialization has exploded. Patients juggle multiple specialists and medications, yet the payment system pays no one to coordinate care. Fragmentation is now one of the most expensive and dangerous failures in American healthcare.

Administrative Burden Is Crippling Clinicians

Physicians spend 45% of their time on documentation, coding, and prior authorization. The U.S. spends $1 trillion a year just billing for healthcare—nearly 30% of all spending. This burden drives burnout and reduces the capacity of an already strained workforce.

Over-utilization and Fraud Are Incentive Problems

Roughly 30% of services are unnecessary, driven by the fee-for-service model that rewards volume. For forty years, policymakers have tried to replace it with Value-Based Care models that the market has not meaningfully adopted. Meanwhile, a massive fraud-policing apparatus adds cost without fixing the root problem: incentives that encourage overuse.

Three Targeted Reforms

Primary Care: Pay clinicians a fair salary plus simple outcome bonuses, reimburse practice costs, and eliminate billing and prior authorization for primary care. This would nearly double capacity and reduce fragmentation and costs.

End-of-Life Care: Use cost-based reimbursement for hospice and palliative care to encourage earlier use, eliminate coding manipulation, and improve quality.

Medicare Advantage: Stop coding-driven overpayments by setting MA rates at the average per-capita cost of traditional Medicare.

The Common Denominator

All these failures trace back to the same cause: a coding and billing system that determines what gets paid, who gets paid, and how much gets paid. Until we fix how we pay for care, every reform will continue fighting the system rather than redesigning it.

Payment reform is the gateway reform — the one change that makes all others possible.

Payment Cross-Subsidization Makes Pricing Transparency Irrational

In U.S. healthcare, payor mix and service mix—not posted “prices”—determine whether hospitals and physicians stay financially viable.

Payor Mix: The Real Driver

Different insurers pay providers wildly different margins:

• Medicare: ~90% of costs (negative margin)

• Medicaid: ~70% of costs (even more negative)

• Uninsured: ~25% of costs (catastrophically negative)

If a provider relied solely on these groups, it would go out of business. Because prices cannot be negotiated with government programs—and uninsured patients often can’t pay—providers depend on commercial insurers to subsidize those losses.

That’s why commercial insurers are charged 20–30% above cost and why providers strive to increase their commercial patient base. In practice, that means:

• Locating in more affluent communities

• Avoiding areas dominated by Medicaid and uninsured patients

• Creating increasingly complex pricing tactics to manage dozens of commercial payment formulas

  
  

This is not “bad behavior.” It is baked into the economics of the system.

Service Mix: Profitable vs. Undervalued Care

Margins vary just as widely by service line:

• Profitable: surgeries, cancer care, dialysis, and procedural services—because they are easy to measure and code

• Underpaid: primary care, mental health, palliative care, geriatrics—services built on conversation, coordination, and prevention

These undervalued services suffer because coding systems reward what is measurable, not what is most beneficial to long-term patient health. The result? A nationwide shortage in the very services that improve outcomes and reduce costs.

Why Pricing Transparency Fails

The idea that consumers can “shop” for care based on published prices ignores how the system actually works:

• 65–85% of care is paid by government programs, which do not use prices at all—they set payment rates unilaterally.

• Providers’ margins vary dramatically by payor and service line

• Patient complexity and unexpected complications make “pricing” nearly meaningless

Cutting commercial prices through transparency simply deepens the cross-subsidy problem and accelerates provider instability—especially in poorer communities.

The Real Solution: Payment Reform

Payment reform—not price transparency—is the path to controlling healthcare costs.

Until we rebalance payments across payors and fix coding inequities across service lines, transparency reforms will continue to miss the core problem: a system structurally dependent on cross-subsidies and distorted incentives.

Go to www.thejourneys-end.org for more details on how to reform provider payments to achieve success.

Healthcare Costs Have Finally Become Unbearable

The latest KFF Employer Health Benefits Survey shows the average U.S. family premium has soared past $27,000 a year. That’s the cost of a new car—just to stay insured.

The recent government shutdown over ACA subsidies misses the real issue. Americans across the board—whether covered by ACA, Medicare, or employer plans—can no longer afford healthcare. The crisis isn’t who pays the bill; it’s why the bill is so high.

We know the causes:

 • Overtreatment and waste.

 • Fragmented care that drives duplication and error.

 • The collapse of primary care, worsening outcomes and cost.

 • End-of-life overtreatment that prolongs suffering.

 • A trillion dollars a year lost to administrative complexity.

The solution isn’t spending more on insurance. It’s redesigning the system itself—simplifying administration, restoring primary care, and aligning payment with better health and humane outcomes.

We can fix this—but not by doing things the old way.

Learn more at www.thejourneys-end.org.

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