Perverse incentives in profit-driven healthcare
Crisis Analysis"We seek critique, not endorsement. Please be harsh. We can handle it."
Healthcare for Profit
When the Customer's Death Is More Profitable Than Their Life
The Core Thesis
The American healthcare system is not designed to produce health. It's designed to produce profit. These goals are fundamentally misaligned. Healthy people don't need healthcare—they're worthless customers. Sick people generate revenue. Dead people stop costing money. The incentives are perverse at every level, and the results are exactly what those incentives predict: the most expensive healthcare in the world with some of the worst outcomes among wealthy nations.
This isn't about "bad actors." The system is working as designed. Profit-driven healthcare cannot optimize for health because health is bad for business.
The Numbers: What We Pay vs. What We Get
What We Spend
What We Get
We pay the most and get the worst outcomes among wealthy nations. This isn't failure—it's the predictable result of a profit-optimized system.
The Perverse Incentives
Insurance Companies: Profit From Denial
Health insurance companies make money by collecting premiums and denying claims. Their incentive structure:
Deny claims initially (many people give up)
Require prior authorization (delays care, some die waiting)
Create networks that exclude expensive specialists
Hire doctors specifically to deny claims ("medical directors")
Make appeals processes Byzantine and exhausting
Drop unprofitable (sick) customers when possible
Raise premiums faster than wages, forever
Administrative overhead: Private insurance: 15-30%. Medicare: 2-3%. The difference is the cost of denying care—claims reviewers, appeals processors, prior auth staff, lawyers, executives, shareholders.
Hospitals: Profit From Volume and Acuity
Hospitals make money from procedures, not outcomes. Incentives:
More procedures = more revenue. Unnecessary tests, surgeries, and interventions are profitable.
Emergency care = maximum billing. Primary care that prevents emergencies is less profitable.
Readmissions = more revenue. Actually fixing the problem means one-time payment.
"Non-profit" hospitals: Same incentives, just called "surplus" instead of "profit." Executives still make millions. They still sue patients for medical debt. They still close unprofitable (poor neighborhood) facilities.
Pharmaceutical Companies: Profit From Sickness
Pharma makes money from chronic disease, not cures. Incentives:
Maintenance drugs > cures. Insulin for life beats cure for diabetes. Monthly prescriptions beat one-time treatments.
Patent games: "Evergreening" extends monopolies. Pay generic makers to delay. Reformulate to restart clock.
Price whatever market bears: Insulin costs $3-8 to make, sells for $300-400. Epinephrine (EpiPen) went from $100 to $600+.
Marketing > R&D: Pharma spends 2x on marketing/admin as on research. Create demand, don't solve problems.
Opioid crisis: Pharma made billions pushing addictive drugs. 500,000+ dead. Companies paid fines, kept profits.
Orphan drugs: Price rare disease treatments at $100K-2M/year. Patients pay or die.
Doctors: Profit From Fee-for-Service
Most doctors genuinely want to help patients. But the system pays them for doing things, not for outcomes:
15-minute appointments maximize billing
Ordering tests generates revenue
Referrals to specialists (in your group) increase revenue
Procedures pay 3-10x more than cognitive work (talking, thinking)
Spending time on prevention doesn't pay
Documentation for billing consumes hours that could go to patients
Good doctors fight these incentives constantly. The system is designed to make good medicine harder and less profitable than bad medicine.
Where the Money Goes
The Overhead Tax
The difference: ~$500 billion/year wasted on bureaucracy that exists only because of our fragmented system
Executive Compensation
UnitedHealth: $23.5 million
CVS/Aetna: $21.3 million
Cigna: $21.1 million
Elevance (Anthem): $20.9 million
Humana: $16.7 million
Average large hospital CEO: $1-5 million
Top "non-profit" hospital CEOs: $10-25 million
Same hospitals suing patients for medical debt
Shareholder Returns
The Human Cost
Deaths
Deaths from underinsurance: Unknown but substantial (people skip care due to cost)
Deaths from delayed care: Prior authorization kills (documented cases of patients dying while waiting for approval)
Financial Devastation
Medical debt on credit reports: Ruins credit, affects housing, employment, everything
The Fear Tax
Beyond the deaths and bankruptcies is the constant fear. Fear of getting sick. Fear of losing job (and insurance). Fear of the bill. Fear that a diagnosis means financial ruin. Fear of calling an ambulance. Americans live with a background terror that citizens of other wealthy nations don't experience. This is a form of violence.
Why It Persists
Political Capture
Result: Medicare can't negotiate drug prices (until minimal 2022 law). Public option killed. Single-payer "off the table."
Ideological Capture
"Socialism" scare: Universal healthcare labeled socialist, despite working in every other wealthy nation
"Choice" rhetoric: Americans have "choice" of unaffordable plans that don't cover care
"Innovation" argument: US profits supposedly fund global R&D (mostly false—NIH funds basic research)
"Long waits" scare: Meanwhile Americans wait weeks for appointments, ration insulin, die waiting for prior auth
Employer Trap
Employer-sponsored insurance (an accident of WWII wage controls) creates job lock. People stay in bad jobs for insurance. Entrepreneurs don't start businesses. Workers don't demand better conditions. Employers have leverage. The system is a control mechanism as much as a healthcare system.
The AIP Solution
Remove Profit From the Equation
AIP provides universal healthcare funded through Stability Accounts. Healthcare becomes infrastructure—like roads, fire departments, police. You don't profit from firefighting. You shouldn't profit from healing.
The Structure
Funded through accounts: Healthcare costs deducted from Stability Account growth, capped to prevent catastrophic drain
Private delivery: Doctors and hospitals remain private—compete on quality, not on denying care
Prevention focus: System paid to keep you healthy (saves money), not to treat sickness (generates money)
No insurance companies: The middlemen extracting $40B+ in profit while denying care—eliminated
The Incentive Realignment
New incentive: System funded by healthy, productive workers paying into accounts. Healthy population = larger tax base = more funding. Prevention pays.
Providers compete on outcomes: You choose your doctor. Doctors/hospitals with better outcomes attract patients. Quality, not extraction, wins.
The Results
Universal coverage (28 million currently uninsured)
Lower total spending (admin savings alone: $500B+)
Better outcomes (prevention focus, no rationing)
No medical bankruptcy
No job lock (insurance not tied to employer)
Employers save $15K/employee
No fear tax
Discussion Questions for Validators
Is the 'profit is the problem' thesis too simplistic? What role does profit play positively?
How do we maintain innovation incentives without profit-driven pharma?
What happens to the 2.7 million insurance industry employees?
Is private delivery with public funding the right hybrid?
How does this interact with Stability Account mechanics?
What's the political path given industry capture of both parties?
Note: This document presents a strongly critical view of American healthcare. The data on spending, outcomes, and incentives is well-documented. Validators are invited to challenge the framing and suggest where profit does serve useful functions in healthcare delivery.