The National Academy of Medicine (NAM) today released guidance on how to align the U.S. health system’s financial incentives to achieve improved access, affordability, and better outcomes for every individual and community. The paper highlights the structural drivers of misaligned incentives and opportunities for discussion across the U.S. health care system.
According to the paper, prevailing payment structures, particularly fee-for-service, reward volume and intensity of services rather than prevention, coordination, or long-term outcomes. The result is systemic inefficiency, waste, persistent inequities, and gaps in care.
“Many innovative financing models have been tested over the past several decades, but most have remained limited to specific populations, care settings, or demonstration projects,” said David Muhlestein, CEO of Simple Healthcare. “We have an opportunity now to move beyond isolated programs and pursue broader changes that align financial incentives across the health system around better health, better care, and better value.”
The paper identifies three core drivers of the disconnect between incentives and desired performance: an overemphasis on illness treatment rather than prevention for which there is often a more firmly established evidence base, a fragmented and piecemeal system design, and inconsistent oversight and overlapping authorities. These structural issues reinforce a system in which accountability for results is difficultly distributed, thereby limiting the impact of even well-intentioned reforms.
To address these challenges, the paper outlines a set of potential policy and programmatic levers for government and private stakeholders. These include rebalancing payments to strengthen primary, specialty, and long-term care outcomes, advancing population-based payment models such as total cost of care, expanding insurance design innovations, improving coordination across federal and state agencies, and establishing stronger accountability mechanisms tied to health outcomes and affordability.
“This paper provides practical policy and market strategies that can help align health care financing with the long-term goal of improving health,” Carrie Colla, vice chair of The Dartmouth Institute for Health Policy and Clinical Practice at the Geisel School of Medicine. “By giving public and private leaders a common framework for action, we hope to accelerate the transition to a health system that works more effectively for individuals, communities, and future generations.”
The paper also emphasizes the importance of aligning financing with broader investments in population health and community well-being. Among the potential actions are strengthening incentives for early intervention and chronic disease prevention, supporting integrated and coordinated care models, improving transparency and oversight across payers, and creating financing approaches that better reflect long-term health outcomes rather than short-term service utilization. The authors note that no single intervention by government or the private sector will be sufficient; instead, meaningful progress will require coordinated, multi-sector action across public and private stakeholders.
Each policy lever presents tradeoffs, and implementation will depend on context, timing, and stakeholder will. Ultimately, the authors call for a shared commitment among policymakers, payers, providers, employers, and communities to realign financing with prevention, value, and population health, and to move collectively toward a system that delivers better outcomes for all.
“It is not sufficient to simply observe that our health care system is underperforming,” said Michael McGinnis, Executive Officer of the NAM. “In fact, with its fragmentation and adverse financial incentives, it is performing precisely according to its design. Our nation, our neighbors and our families cannot afford to sustain a system that continues to produce poor outcomes at escalating cost.”
Read the full paper: https://nam.edu/perspectives/anchoring-health-financing-on-better-outcomes-system-drivers-and-opportunities-for-reform
This paper is the third in a series produced by the National Academy of Medicine’s Commission on Investment Imperatives for a Healthy Nation. Established to reimagine a US health care system that puts people first, the Commission will release additional papers over the coming year outlining its vision for a new health system, the priorities that must be addressed, and the actions needed to turn that vision into reality. Authored by experts assembled under the charge of the National Academy of Medicine, the paper was completed with support from Healing Works Foundation, Doris Duke Foundation, and the Gordon and Betty Moore Foundation. The views presented are those of individual contributors and do not represent formal consensus positions of the sponsoring organizations, authors’ organizations, the National Academy of Medicine, or the National Academies of Sciences, Engineering, and Medicine.
