Sick, Drugged, and Billed
All Economic Stakeholders in American Healthcare Are Incentivized by Perpetual Sickness – Except One
Welcome to American healthcare, where sickness isn't just treated—it's an economic engine, and the longer you stay sick, the richer they get. All economic stakeholders in the U.S. healthcare system are incentivized by perpetual illness, except for one group. Care to guess who the outliers are? Spoiler: it’s not the hospitals, insurers, or your friendly neighborhood pharmacist. But we’ll get to that later.
First, I must start with a disclaimer: our entire healthcare delivery system is peppered with phenomenal individuals motivated to do right for their patients and customers. This is a statement about the macroeconomic realities behind each industry, with no indictment on any individual. The reality is we have too few people dedicated to doing the right thing, and those we do have are overwhelmed by the Iron Law of Bureaucracy.
Pournelle’s Iron Law of Bureaucracy states that those devoted to perpetuating the bureaucracy always gain control and push out those dedicated to the goals that the bureaucracy was supposed to accomplish.
Insurers: Betting on You Staying Sick
Contrary to what many think, insurers aren’t in the business of keeping you healthy. It’s a counterintuitive point that many in my industry take for granted. I was recently exposed to two different discussions: one with a sophisticated attorney and another with an amateur economist and investment specialist. They both assumed that health insurers would be highly incentivized to keep medical claim costs down.
It makes sense, right? If I’ve negotiated a contract to collect $1 million in premium from you in 2025, I want there to be as few claims as possible during 2025 so that I can keep the difference. And, while that is logical and true on a year-by-year basis, what happens to that insurer’s long-term earning capability if people continue to get healthier and generate fewer claims? Well, the need for insurers would abate, and premiums would have to drop.
Consider this hypothetical scenario: you're a major global insurer offering protection for large cargo ships that regularly travel between China and the U.S. If none of these ships ever faced a hijacking, a catastrophic weather event, or a collision with a large obstacle, the need for insurance would decrease. This would be a profitable outcome for the insurer in any given year, but it's a flawed long-term business model.
If, instead, these ships increasingly met catastrophic ends, insurers would have the opportunity to continually raise premiums and satisfy the insatiable, cult-like mantra of private equity and Wall Street: grow at all costs. Health insurance is no different. But, just in case that incentive was not strong enough, America cemented the deal with PPACA (aka Obamacare). Now, your illnesses guarantees their revenue source.
PPACA instituted an 85% medical loss ratio mandate. What does that mean? Insurers can only keep 15% of their premium dollars for overhead and profit. The rest must go to claims. Sounds great, right? I mean, this will keep insurers from gluttonous profits!
Wrong. No good intention goes unpunished. Now, the only way insurers can increase their profits is if those claim dollars go up. Translation: they need you to be sick—perpetually. After all, you can only charge higher premiums when you’re paying out more claims. So, while you’re hoping to avoid that third knee surgery, your insurer is secretly praying for it.
Hospitals: The “Chargemaster” Scam
Then we have hospitals, where the price tag on your medical bill is about as real as your chances of winning the lottery. Hospitals inflate their charges (see: chargemaster pricing) to six times what Medicare would pay and then “discount” it by about fifty percent for your insurer. Your insurer, in turn, brags about their deep discounts—when in reality, the hospital just walks away with three times what they’d get from Medicare.
But it’s not just hospitals pulling off this stunt. Government regulators love it too. Politicians get to crow about “keeping healthcare costs low, while simultaneously raking in over $700 billion a year from healthcare and health insurer lobbyists. Yes, you read that right. The system is rigged, folks, and it’s overwhelmingly paid for by the 30% of Americans who get their insurance through work. Congratulations on funding the healthcare cartel.
PBMs and Pharma: Who Needs a Cure When You Can Have a Lifetime Supply of Pills?
Prescription Benefit Managers (PBMs) and pharmaceutical companies also enjoy their piece of the pie, and why wouldn’t they? Their best-case scenario is to ensure you’re taking drugs for the rest of your life. A child diagnosed with diabetes, for instance, represents $560,000 in lifetime revenue for pharma. That’s just for one condition. Multiply that across millions of patients, and you get why there’s no rush to cure anyone.
I have a friend who’s struggled with weight all his life. At the age of 50, he found himself pushing 400 pounds and received his Type 2 Diabetes diagnosis. He is an engineer, very technical, and eternally curious. So, he decided he was going to put his Diabetes into remission with diet and exercise.
“This was really the wake-up call I needed,” he told me.
He cut out all ultra-processed, refined foods from his diet and worked to keep carbohydrate consumption under twenty net (carbohydrate minus fiber) per day. His blood sugar levels and A1C score were normal within four months.
When he returned for his follow-up visit, his doctor, impressed with the results, asked him how his body tolerated Metformin and how much insulin he was taking daily.
“None,” he replied.
The doctor was astonished.
“How did you do this?” He asked.
My friend explained his diet and daily walks. The doctor commented,
“Wow, you are kind of restoring my faith in patients.”
The average American adult fills 12-19 prescriptions a year. And the new designer drugs like Ozempic and Wegovy for Type 2 Diabetes and weight loss? They’ll cost you about $1,000 a month. The same drugs are available in Europe for $280. But hey, who’s counting when you’re the world’s biggest healthcare market?
Now, let’s add in the fact that 42% of Americans are obese. If we put all of them on these drugs (which many “health” experts now support), it would add $1.67 trillion to U.S. healthcare costs, or about 37% more than we’re already spending. Think about that the next time a drug ad pops up between Netflix episodes.
Politicians and Government Agencies: Keep the Machine Well-Oiled
With healthcare and insurance as the #1 employer and the biggest lobby in the U.S., you better believe politicians are more than happy to keep the system chugging along. After all, a bloated healthcare budget ($4.5 trillion a year) means more domestic spending, and that boosts GDP. Who cares if it’s completely unsustainable as long as it makes the economy look good on paper, right?
Federal bureaucracies like Obamacare, Medicare, Medicaid, HHS, NIH, FDA, CDC, Indian Health Service, the USDA, and VA are like bureaucratic black holes—they suck up more money and power as the healthcare crisis deepens. And the deeper the problem, the bigger the budgets. Isn’t it adorable how dysfunction fuels growth in governmental systems?
Brokers: We’ve Rebranded, But We Still Don’t Work for You
Ever notice how the people selling your company's health insurance seem to have a new title every few years? Brokers, agents, consultants, advisors—take your pick. They’re all the same. These folks overwhelmingly aren’t incentivized to save you money; their commissions grow as your premiums do. Add in that the largest brokerages enjoy secret kickbacks from the big insurers called “overrides,” and sometimes even a taste of the pharmacy plan rebates that should be solely returned to the plan sponsor, and you have another macro-misaligned actor.
They’re so embarrassed by their own profession that they keep trying to rebrand themselves. But no matter what fancy title they come up with next—Whisperer? Recommender?—the truth remains: they profit by keeping you and your employer locked into higher premiums and overpriced drug plans.
Medical Groups: The Disappearing Independent Doctor
Once upon a time, most doctors were independent. In 1980, about 75% of them were. But then came the era of corporate consolidation. Today, that number is down to 30% and dropping fast. What’s left? Medical groups selling out to insurers, hospitals, and private equity firms, all driven by the need to maximize profits—not to provide the best care.
This isn’t an attack on individual doctors. Many of them are as frustrated as you are. The problem is the growing trend of corporatization, where doctors become cogs in a machine that values dollars over patients.
Employers: The Last Line of Defense (and Your Only Hope)
Here’s the kicker: Employers stand alone as the only stakeholders in the U.S. healthcare system actually motivated to promote health and reduce costs. They’re not in on the racket. In fact, they’re the only ones trying to put a lid on this mess. While everyone else is cashing in on the sick-and-sicker economy, they’re paying the price—literally. And guess what? If anyone is going to fix this rigged system, it’s them.
But let’s not kid ourselves. Taking on the healthcare cartel is no small feat. It’s entrenched. It’s bloated. And it’s fiercely protected by an alliance of insurers, hospitals, pharmaceutical companies, and lobbyists. But don’t despair, because here’s the good news: you can fight back, and there are real, tangible ways to do it.
So, how do we fix it? The same way you dismantle any cartel—one brave employer, family, and individual at a time.
Start by ditching the traditional insurance model where you can and partially self-fund your healthcare. Yeah, it sounds scary, but the reality is you can take back control and cut out the middlemen who are eating away at your bottom line.
Here are a few ways to make a real dent:
Use Reference-Based Pricing (RBP): Instead of paying whatever random price a hospital decides to slap on a procedure (which, remember, is typically 600% over Medicare rates), RBP allows you to pay a fixed percentage above what Medicare would pay. Hospitals might not like it, but tough luck—it works, and employers that adopt this strategy save 20% to 40% on overall healthcare spend in the first year alone.
Cash Payment Options: We’ve all heard it—"cash is king." Well, guess what? That applies in healthcare too. Cash payments, particularly for high-cost procedures, often come with significant discounts. Some hospitals will give you a better deal for cash upfront just to avoid the administrative circus that comes with billing insurers.
Direct Contracts with Facilities: Cut out the middleman (a.k.a. insurers) and negotiate directly with hospitals and medical providers. When you contract directly, you control costs, and your employees get quality care without the inflated prices. Think of it as healthcare’s version of going farm-to-table.
Free-Market PBMs: Pharmacy Benefit Managers (PBMs) are the gatekeepers for prescription drugs, and they’re raking in money from behind-the-scenes deals (rebates, anyone?). Find a PBM that operates transparently, doesn’t keep rebates, and allows you to adjust your formulary based on what makes sense for your business—not what makes sense for their bottom line. You’re looking for a PBM that has nothing to hide, and no, that’s not an oxymoron.
Institute Direct Primary Care (DPC) Where Available: This is one of the most effective ways to break away from the fee-for-service hamster wheel. With DPC, your employees get unlimited access to their doctor for a flat monthly fee, often with no copays. The doctor works for the patient—not the insurance company—and the results are healthier employees and lower healthcare costs. It's healthcare at its most fundamental: direct and personal.
Use the Government’s Byzantine Rules to Your Advantage: If you’re stuck working within this flawed system, at least make it work for you. Utilize tax-advantaged strategies like 501r regulations, which allow you to lower hospital costs for low-income employees, or the 340b pharmacy program, which can significantly reduce drug costs for qualifying hospitals and providers. If the government’s going to make the rules confusing, you might as well use them to your benefit.
Partner with Independent Disruptor Consultants: Find consultants who aren’t in bed with the insurers, boated brokerages, and PBMs. These are the disruptors willing to forgo carrier kickbacks and shady deals for Rx rebates. They’re the ones helping employers like you implement strategies that actually lower costs and improve care—no smoke, no mirrors, no hidden commissions.
The Future of Healthcare Depends on You
Employers, this is where the rubber meets the road. You have the power to disrupt the system. While hospitals and insurers are scheming to increase profits, and politicians are too busy collecting lobbyist checks to care, you’re the only ones left with a real motivation to change things. You want healthier employees. You want lower costs. And you want your healthcare dollars to go toward actual care.
The bad news? The system will resist change with every fiber of its bloated, bureaucratic being. Hospitals, insurers, PBMs, and pharma companies have zero interest in letting go of their stranglehold on your wallet. But the good news? Every small step you take to self-fund, negotiate directly, and cut out conflicted middlemen chips away at the cartel. And that’s how we’ll bring this beast to its knees—one employer, one family, one brave decision at a time.