Why prevention and transparency won’t fix U.S. healthcare

MedPAC advises Congress on Medicare payment policy and focuses on micro-questions rather than broad policy prescriptions. However, Chernew was willing to take a big‑picture approach and address complex, sometimes contested issues.

The prevention paradox

“Prevention saves money” is almost axiomatic in healthcare circles. The U.S. spends only a small percentage of its massive healthcare budget on prevention while dedicating more than 90% to treating chronic conditions.¹ One widely held assumption is that finding better ways to invest in upfront prevention and primary care will reduce downstream costs.

Chernew wasn’t buying it. “Prevention doesn’t work,” he stated, and pointed specifically to population health approaches. “You take a bunch of people and give them a lot of services you think will lead to prevention, but most of them actually don’t end up that much healthier.” While you might help a certain percentage of people avoid a heart attack or diabetes, many more will receive interventions they wouldn’t otherwise have received. Counterintuitively, screening and prevention programs often increase costs by pulling more people into the healthcare system.

Johnson pushed back with the argument that other countries, which devote more to prevention and primary care, spend a fraction of what the U.S. does per capita but achieve better health outcomes. In addition, companies like Sword, which manages musculoskeletal conditions, go fully at risk because preventing just one orthopedic surgery can cover care costs for many individuals. Moreover, as AI and synthetic biology enable molecular-level disease prediction, prevention could potentially transform healthcare economics.

Chernew had ready responses. International comparisons are misleading — other countries spend less primarily due to lower prices, not superior prevention strategies. And Sword’s model isn’t really prevention — it’s about preventing low-value care, which is something entirely different. True prevention — keeping healthy people healthy through lifestyle interventions — rarely generates ROI. What does work is eliminating unnecessary care: surgeries, expensive treatments, and tests. “If you can prevent people from using services that they don’t need or send people to cheaper sites of care, you save money for sure,” Chernew said. “But that’s not prevention.”

When Johnson polled the audience of investors, entrepreneurs, and bankers on whether prevention efforts would change healthcare in five years, not a single hand went up. Johnson couldn’t believe the response and encouraged the audience of investors to dig deeper on the topic.

The transparency trap

The second idea Chernew challenged was price transparency. If only patients knew what healthcare services actually cost, the theory goes, they would shop around, driving competition and lowering prices. Chernew’s assessment was blunt: “There’s been a long history of companies that have tried to build such tools and they haven’t worked. That doesn’t mean they can’t work. It just means they haven’t worked.”

His objection is rooted in where healthcare dollars actually flow. “Getting a 40-year-old to shop for where they need to go if they fall ice skating isn’t the core problem of the American healthcare system,” he explained. “Most of the money is being spent by a small number of people. But somebody who has cancer is not thinking about which oncologist will be cheaper. That’s not how people engage the healthcare system.” In addition, out-of-pocket maximums in insurance plans limit consumer exposure to actual costs. Once consumers hit their max, price sensitivity disappears. Instead, Chernew saw other factors as having more influence. “I think ultimately most of the expensive care is driven by system decisions, doctor decisions, hospital decisions.”

Johnson countered with examples from major health systems like Baylor Scott & White and AdventHealth, which are betting their futures on end-user experience. Consumer experience and transparency should matter for attracting and retaining patients, he argued.

Chernew acknowledged the point. “You can attract patients if you do a better job. Even more importantly, you can lose patients if you do a worse job. Little things like parking matters, rooms matter, staff matters.” But he distinguished between improving patient experience and expecting price transparency to drive systemic change. “I think there are a lot of services that are shoppable. If you could get people to choose the right primary care doctor or the right system, but that's more than just transparency. You need to build your network design and a whole bunch of other things around that.” In other words, transparency needs to be part of a comprehensive strategy.

When asked if transparency would be more important to healthcare in five years, most audience members raised their hands. But Chernew maintained it won’t work without broader reforms. 

What actually drives healthcare costs

Chernew and Johnson agreed that financial incentives fundamentally shape the behaviors that drive healthcare costs. They discussed how complexity baked into the U.S. healthcare system has spawned entire sectors, solutions, and counterstrategies to either increase revenues or put the brakes on spending. Revenue cycle management, which has no parallel in other healthcare systems around the world, is the perfect example.

Moreover, technology shows every sign of accelerating that arms race. Ambient scribe tools will increasingly capture previously missed diagnoses to “improve” coding accuracy and drive revenue. Other AI tools will push back with sophisticated utilization management.

As Chernew said, “One organization’s costs are another organization’s revenues.” Chernew believes that cost-cutting alone doesn’t work. “It is not the case that if I take 10 percent of revenue from a health system, it will suddenly become more efficient. That system will close. Or merge. Or stop some services. Or be forced to do something. But it's not clear that ‘something’ will be good.”
 

Conclusion: Bold predictions

To end the conversation, Johnson tasked Chernew to come up with his own remedies. He offered three:

1. Standardization and simplification.
   “I would simplify by looking for places where you can standardize things. We have a lot of complexity built into the nooks and crannies of our system. The problem with standardization, however, is that it can prevent a lot of innovation. You need some level of nuance.”
2. Reform Medicare Advantage.
   “I would reform the way we pay for Medicare Advantage.” Specifically, Chernew would slowly lower Medicare Advantage payment rates through technical fixes and reduce the weight placed on codes from risk assessments and chart reviews. The current system focuses on coding rather than care. Chernew would find a different risk adjustment mechanism and make the program “less generous, but a lot easier to use.”
3. Get employers out of healthcare.
   Chernew said that insurance coverage should no longer be purchased by employers. Instead, coverage should shift to individual exchanges with more standardized benefits and navigators deployed to help people make their coverage choices. This would reduce some of the complexity and dislocation in our current system and put economic and care choices more in the hands of individuals.

That was a bold vision capping a provocative discussion. Chernew and Johnson left the audience with lots to ponder about the complexity of U.S. healthcare and its future. As Chernew acknowledged, entrepreneurs and investors are fundamentally forward-looking and focused on potential while academics and economists tend to focus on historical patterns. His own skepticism on prevention, transparency, and cost-cutting efforts doesn’t mean that innovators can’t or won’t find ways to make them work. A reality-based examination of healthcare’s challenges is essential for moving forward.

A podcast recording of the full conversation accompanies this article.