The US Disease Management System
Why the United States spends trillions on healthcare yet produces the sickest population in the developed world
The United States does not really have a healthcare system. It has built the most sophisticated disease management system the world has ever seen. Roughly 60% of adults live with at least one chronic health condition and about 40% live with two or more in America.1 At the same time, the country spends trillions of dollars every year on healthcare and has totalled nearly one-fifth of the entire economy. Despite this extraordinary investment, American health outcomes consistently rank among the worst in the developed world.
These two facts are often treated as separate problems. They are not. They are two sides of the same system. American healthcare is frequently described as “broken.” But in many ways it is functioning exactly as designed. It is a system optimized to manage disease after it appears, not to prevent it from emerging in the first place.
Understanding why healthcare is so expensive requires stepping back from partisan talking points and examining the structure of the system itself. The causes are not singular. They are historical, economic, and institutional. Healthcare costs in the United States are the product of many overlapping incentives that, taken together, produce a system remarkably effective at treating chronic illness, and remarkably ineffective at preventing it.
The Transformation of Medicine
Most physicians enter medicine with a simple goal: to restore health and reduce suffering. Yet modern clinical practice increasingly places physicians inside a bureaucratic architecture dominated by billing codes, productivity quotas, and compliance metrics. Instead of spending time with patients, clinicians often spend hours navigating electronic medical records, insurance authorization requirements, and regulatory documentation.
Programs designed to measure quality can sometimes deepen the problem. As I discussed in a recent post, complex reporting systems can penalize physicians for incomplete data submissions or for treating higher-risk patients whose outcomes may appear worse on paper. Some clinicians respond by avoiding complex cases, over-documenting minor details, or hiring compliance staff simply to manage regulatory reporting requirements. The result is not merely inefficiency. It is moral injury.
Physicians increasingly find themselves in a system where administrative compliance matters as much as clinical judgment (if not more). Burnout, often framed as a workforce issue, is in reality a structural symptom of a system where the practice of medicine is increasingly subordinated to the mechanics of reimbursement.
The Physician Shortage That Policy Created
Another persistent myth surrounding healthcare costs is the belief that physician salaries are the primary driver of spending. In reality, physician compensation accounts for only about 8% of total U.S. healthcare expenditures, while administrative costs can consume 25–30% of spending in the fragmented insurance landscape.2 3 Meanwhile, the United States faces a growing physician shortage.
This shortage was not inevitable. It was largely created through policy decisions made decades ago. In the 1980s, policymakers restricted expansion of medical schools based on fears that an oversupply of physicians would drive up healthcare utilization and limit reimbursement.4 Later, the 1997 Balanced Budget Act capped Medicare funding for residency training, effectively limiting the number of new physicians entering the workforce each year.5
Since Medicare remains the primary funder of graduate medical education, these caps created a structural bottleneck. Medical school enrollment has expanded substantially in recent decades, but residency positions – the gateway to practicing medicine – have not kept pace.6
The result is a healthcare system attempting to serve a growing population with an artificially constrained workforce.
The True Cost Driver: Chronic Disease
Yet even these structural problems fail to explain the largest driver of healthcare spending. The real cost engine of American healthcare is chronic disease.7
Conditions such as obesity, diabetes, cardiovascular disease, and metabolic disorders account for the majority of medical expenditures. Managing these illnesses, through medications, procedures, hospitalizations, and long-term monitoring, consumes trillions of dollars annually. In effect, the healthcare system has become an enormous infrastructure for maintaining chronic illness.
The paradox is that many of these diseases are preventable or modifiable. Diet, environment, physical activity, and stress all influence their development. Yet prevention receives only a small fraction of healthcare investment. The reason is simple: prevention produces slow and diffuse returns, while treatment generates immediate revenue. The incentives therefore favor managing disease rather than eliminating it.
Prevention Exists – But Outside Medicine
Ironically, the infrastructure for prevention already exists. It simply lies outside the traditional healthcare system. Community-based lifestyle programs have demonstrated measurable success in reducing risk for conditions like diabetes and cardiovascular disease. In one widely cited study, local YMCA organizations successfully delivered a diabetes prevention program that helped participants achieve sustained weight loss and improved glucose tolerance through group-based lifestyle interventions.8 9 10
Programs like these are dramatically cheaper than treating the downstream complications of chronic disease. Yet they remain peripheral to healthcare financing because they do not fit easily within the existing reimbursement structure:
- Hospitals are paid for procedures.
- Pharmaceutical companies are paid for medications.
- Insurance companies are paid to process claims.
No one is systematically paid to prevent disease.
The Corporate Architecture of Healthcare
Beyond the clinical system lies another powerful force shaping healthcare costs: the corporate structure of the healthcare industry itself.
Over the past several decades, healthcare has undergone profound consolidation and financialization. Insurance companies have merged with pharmacy benefit managers. Hospital systems have acquired physician practices. Pharmaceutical firms have expanded marketing operations that rival or exceed their research spending. These changes reshape the incentives of the entire system.
Pharmaceutical companies, for example, often justify high drug prices by citing the costs of research and development. Yet spending patterns tell a different story. Marketing, advertising, and lobbying expenditures often rival or exceed investment in new drug development.11 12 13
Direct-to-consumer advertising – permitted in only two countries worldwide – creates demand for medications long before long-term safety data are fully understood. Meanwhile, industry lobbying expenditures reach hundreds of millions of dollars annually, influencing regulatory policy and pricing structures.
Insurance markets have evolved in parallel. Vertical integration allows large corporations to control multiple layers of healthcare delivery simultaneously: insurers, pharmacy networks, physician groups, and hospital systems. In such an environment, healthcare increasingly resembles an industrial supply chain rather than a public health institution.
Even executive compensation reflects this transformation. Across multiple sectors, including healthcare, CEO pay now exceeds that of typical workers by hundreds of times, reflecting a system that rewards financial extraction over long-term stewardship.
From War to Wards
The forces shaping health rarely originate inside hospitals. Conflicts that disrupt food systems, energy markets, or global trade can reverberate through human biology for decades. In one of my previous essays examining the strategic importance of the Strait of Hormuz, we explored how geopolitical instability threatens global fertilizer, energy, and grain supply chains. When these systems fracture, the immediate result is rising food prices and food insecurity. But the deeper consequences unfold slowly.
In last week’s post we explored how periods of famine and nutritional deprivation leave biological fingerprints across generations. Studies of the Dutch Hunger Winter during World War II demonstrated that prenatal exposure to famine altered metabolic programming in children who later developed higher rates of cardiovascular disease, diabetes, and other chronic illnesses. What begins as a geopolitical shock can ultimately become a public health crisis decades later.
This is the uncomfortable reality of modern health: the conditions that shape disease often originate far upstream in agricultural policy, economic systems, environmental exposures, and political decisions. The American healthcare system is therefore not simply managing illness. It is managing the biological consequences of these upstream failures.
Each of the forces discussed here – medical workforce shortages, administrative complexity, chronic disease, prevention infrastructure, and corporate consolidation – deserves deeper examination. In future essays, I plan to explore these forces individually, because understanding them in isolation helps reveal how the broader system produces both extraordinary medical innovation and extraordinary levels of preventable disease.
The System Behind the Symptoms
Viewed together, these forces reveal a healthcare system shaped by structural incentives rather than clinical priorities. Physician shortages limit access. Administrative complexity inflates costs. Chronic disease drives demand. Prevention remains underfunded. Corporate consolidation reshapes financial incentives. None of these problems exist in isolation. Instead, they reinforce one another.
Healthcare costs therefore cannot be explained by a single villain, whether physicians, insurers, patients, or government policy. The system is expensive because it was built to be expensive. It rewards intervention over prevention, treatment over transformation, and revenue over resilience.
In the previous essay, we explored how environment and social conditions can shape human health before birth through epigenetic mechanisms. Exposure to famine, stress, and instability during pregnancy can alter gene expression in ways that influence disease risk decades later. Those findings reveal an uncomfortable truth: health does not begin in hospitals; it begins in the environment.
Food systems, housing stability, pollution exposure, economic inequality, and political decisions all shape the biological conditions in which human bodies develop. When those systems deteriorate, the effects eventually appear in emergency rooms, oncology clinics, dialysis centers, and cardiology wards. Healthcare workers then confront the aftermath.
The healthcare system we have built is, in many ways, an emergency response network for a society that has lost control of its upstream conditions. We treat diabetes that originates in food systems. We treat respiratory illness that originates in pollution. We treat cardiovascular disease that originates in chronic stress and inequality. And because the underlying causes remain unchanged, the system must continue expanding to absorb the damage.
This is why healthcare spending continues to rise even as medical technology advances. The system is not merely expensive; it is compensating for failures occurring far beyond the walls of medicine. Understanding this does not solve the problem. But it clarifies the real question we must confront next.
If the healthcare system is not simply broken, but functioning exactly as the surrounding society requires it to function, then the real problem may not lie within medicine at all. It may lie in the systems that produce disease in the first place.
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Sources and Additional Material
Centers for Disease Control and Prevention. Chronic Disease in America: Data & Statistics. CDC.gov. Published 2023. https://www.cdc.gov/chronic-disease/data-research/facts-stats/
Himmelstein DU, Jun M, Busse R, et al. A comparison of hospital administrative costs in eight nations: US costs exceed all others by far. Health Aff (Millwood). 2014;33(9):1586–1594.
Tseng P, Kaplan RS, Richman BD. Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA. 2018;319(7):691–693.
Cooper RA. There’s a shortage of specialists. Is anyone listening? Acad Med. 2002;77(8):761–766.
Iglehart JK. The Residency Mismatch. N Engl J Med. 2013;369(4):297–299
Association of American Medical Colleges (AAMC). The Complexities of Physician Supply and Demand: Projections From 2021 to 2034. AAMC; June 2021.
Centers for Disease Control and Prevention (CDC). Fast Facts: Health and Economic Costs of Chronic Conditions. Updated Aug 2025. https://www.cdc.gov/chronic-disease/data-research/facts-stats/index.html
Ackerman R, et al. Translating the diabetes prevention program into the community. Am J Prev Med. 2008;35(4):357-63.
Ackermann RT, Marrero DG. Adapting the Diabetes Prevention Program for Delivery in the Community: The YMCA Model. Diabetes Educ. 2011;37(3):357–365.
Albright AL, Gregg EW. Preventing Type 2 Diabetes in Communities Across the U.S.: The National Diabetes Prevention Program. Am J Prev Med. 2013;44(4 Suppl 4):S346–S351.
Rosenthal, E. The soaring cost of a simple breath. The New York Times. October 12, 2013. https://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-simple-breath.html
Sachs J. Big pharma’s grip on American health care. Common Dreams. Mar 6, 2023. https://www.commondreams.org/opinion/big-pharmas-grip-on-american-health-care
Sismondo S. Ghost-managed Medicine: Big Pharma’s Invisible Hands. Mattering Press; 2021.
This is an excellent summary. I completely agree with your assessment. Now, the question is how each of us can effectively organize change while managing a busy practice and family life. My focus, at least, is to continue to promote healthy lifestyle changes to reduce the risk of cancer.
In reality, physician compensation accounts for only about 8% of total U.S. healthcare expenditures, while administrative costs can consume 25–30% of spending in the fragmented insurance landscape.
This is just such an insane stat. I can’t think of another industry with more middlemen.