In 1961, President John F. Kennedy told the nation, “We choose to go to the moon.” It’s often remembered as a moment of national ambition. In reality, the United States was locked in a Cold War with the Soviet Union, and the fear of falling behind in technological dominance made the mission unavoidable.
Today’s space race is driven by a different force. Governments and private companies are investing billions to capture economic advantages, from satellite infrastructure to advanced computing to the next frontier of resource extraction.
Moonshots don’t happen simply because leaders “choose” to pursue them. They often happen when fear or financial motivation grows so strong that inaction becomes riskier than action.
Those same motivations will determine whether the U.S. government or private companies choose to address healthcare’s growing affordability crisis. The challenge? Solving it will require the equivalent of a moonshot.
A crisis too big for small fixes
The scale of the cost crisis makes incremental fixes ineffective.
The United States spends roughly $15,000 per person each year, nearly double what peer nations spend. Employer-sponsored family coverage now averages $27,000 annually, with workers paying almost $7,000 out of pocket. Projected increases of 7% to 9% will increasingly constrain wages, benefits, and hiring.
Although many factors contribute to rising costs, they all share a common foundation: how medical care is reimbursed. Until the nation changes how doctors and hospitals are paid, costs will keep rising.
American healthcare runs on two models: fee-for-service, which rewards volume, and pay-for-value, which aims to reward outcomes. Neither is working as intended. Fixing either will require a system-wide change on a scale comparable to a moonshot.
A moonshot to fix fee-for-service
For 90% of working Americans, care is paid through fee-for-service.
Doctors and hospitals are reimbursed for each service: visits, tests, procedures, and prescriptions. The more care they deliver, the more revenue they receive—regardless of whether it improves patient outcomes.
This pay-for-volume approach works in many industries. But not in healthcare. That’s because providers of medical care (not patients) drive most clinical decisions, usually without price transparency. Plus, the incentives are perverse. Seeing a patient twice instead of once doubles revenue, and more complex procedures generate significantly more income, even when simpler alternatives are equally effective.
The only way a fee-for-system methodology can control costs is if there is either (a) robust competition or (b) strict price controls. Neither exists today.
Over the past two decades, consolidation has reduced competition across hospitals, physician groups, and drug purchasing, driving up costs. In parallel, pharmaceutical companies have used patent protections to launch ever-higher-priced drugs. Currently, the average annual list price for new medications is $370,000.
Although Congress can impose price limits and regulators can challenge monopolies, the political risk of those actions has long outweighed the cost of doing nothing. That will change only when growing unaffordability causes voters to replace elected officials who fail to implement solutions to lower medical costs.
The pay-for-value model’s moonshot
Pay-for-value was designed to fix fee-for-service’s core flaw: rewarding volume instead of superior medical outcomes.
In its simplest form, the model pays providers to keep patients healthy rather than to deliver more services. At its most advanced, it relies on capitation: a fixed payment to a group of doctors to manage care for a defined population.
In theory, this should reduce hospitalizations, improve chronic disease management, and lower costs. In practice, it has not.
In most cases, insurers (not providers) receive the capitated payment and, instead of passing those funds directly to clinicians, they continue to pay for care using fee-for-service. Thus, the same perverse incentives persist.
Research shows that clinicians don’t change how they practice until roughly 63% of their revenue comes from fully capitated payments. Below that threshold, fee-for-service incentives are more lucrative and dominate.
Making pay-for-value work requires structural change. Providers need to organize into groups large enough to manage care across large populations and share financial risk. That shift requires leadership, capital, and investment in data systems.
Those investments will not happen simply because the model is better. They will happen only when insurers and entrepreneurial companies view the financial rewards as too big to ignore.
What would launch a healthcare moonshot?
A healthcare moonshot, like a voyage into space, would involve accepting significant risk.
One possible motivation is fear. When the next recession begins (perhaps sooner than later, according to historical analyses), employers are likely to scale back coverage for the 160 million Americans who rely on job-based insurance. Impacted workers may vote out incumbents, creating fear in those who remain.
Another possibility is reward. In this scenario, advances in generative AI would improve the management of chronic disease, which affects 3 in 4 Americans. The CDC estimates that up to half of all heart attacks, strokes, and kidney failures could be prevented through effective chronic disease control, generating savings approaching $1 trillion. For insurers or new entrants, capturing even part of that opportunity would create a powerful incentive to act.
Moonshots don’t happen because they are the right thing to do. They happen when fear of loss or the promise of financial gain outweighs the risks involved. Healthcare has not yet reached that point, but medicine’s growing affordability crisis is bringing our nation closer than ever.
Robert Pearl, the author of “ChatGPT, MD,” teaches at both the Stanford University School of Medicine and the Stanford Graduate School of Business. He is a former CEO of The Permanente Medical Group.
