Transforming U.S. Health Care Financing for Better Outcomes

Within the U.S. health care landscape, financial incentives often misalign with the aim of optimal health system performance. Despite progress through value-based payment models over the past decade, many financial frameworks still counteract desired health outcomes. In response, the National Academy of Medicine convened a working group to assess these financial structures, identify key misalignments, and explore policy tools for correction.

The resulting discussion paper highlights three primary drivers of financial misalignment and introduces 12 policy levers for realigning incentives. These strategies emphasize comprehensive reform in health financing and encourage public and private stakeholders to collaborate effectively. If activated, these levers have the potential to transform the health system significantly.

Despite ongoing cost increases, many businesses attribute rising premiums as a deterrent to wage growth, while insurers blame provider market power for high premiums. Hospitals face challenges with managing increased costs for supplies, labor, and pharmaceuticals beyond the pace of price growth, coupled with administrative burdens from claims management. National expenditures continue to rise, outpacing improvements in population health.

A lack of consensus on inadequate system performance complicates financing reform efforts. While there is agreement on wasteful spending and the need for more funding in social and behavioral health determinants, opinions vary on the role of government intervention. Federal health agencies are pursuing goals for improving system performance through frameworks like the "Triple Aim," which focuses on enhancing patient care, improving population health, and reducing per capita costs.

Structural reform in health care financing is crucial, necessitating better resource allocation to preventive services and infrastructure. Process reform should realign incentives and accountability with defined performance expectations. These reforms aim to create a health system prioritizing high-quality, necessary care while reducing wasteful practices.

Achieving consensus on financing reform requires a detailed examination of the system's financial structures. These structures often prioritize service volume over outcomes, contributing to fragmentation. By addressing these core misalignments and leveraging available policy tools, a more effective and accountable U.S. health care system can be developed.