by James Lyons-Weiler, PhD, Popular Rationalism, ©2025
(May 31, 2025) — The American healthcare system is bloated, over-medicalized, and trapped in a regulatory framework that incentivizes illness instead of health. While the nation spends nearly 20% of its GDP on healthcare, we rank last among peer nations in virtually every major health outcome: chronic disease burden, avoidable mortality, life expectancy, and care equity. The culprit is not merely inefficiency. It is a system structurally designed to reward intervention, not prevention; fragmentation, not integration; and profit, not wellness.
Effective deregulation of medical finance must do more than remove red tape. It must strategically dismantle and replace structural features that reward the wrong outcomes. At the heart of this reform is a concept called “Wellcare”—a model that realigns financial and operational incentives to prioritize wellness over volume, prevention over procedure, and personalized care over industrial standardization.
The Problem: Misaligned Regulatory Incentives
The current architecture is governed primarily by three federal regulatory frameworks:
- 42 C.F.R. Part 412: The Medicare Inpatient Prospective Payment System (IPPS), which reimburses hospitals based on diagnosis-related groups (DRGs). This locks providers into a fee-for-service logic that rewards admissions, not health maintenance.
- 42 C.F.R. Part 438: Medicaid Managed Care, which pays insurers based on actuarial risk scores and encounter data, not improved outcomes. This model discourages preventive care and penalizes efficient providers.
- 45 C.F.R. Part 170: Health IT Certification Criteria, which restrict how certified EHRs operate and report, limiting the use of modern machine learning and real-time feedback loops in adaptive care systems.
These structures were originally introduced to control costs and standardize reimbursement. Today, they function as barriers to innovation and health equity. They disincentivize subscription-based models, suppress holistic health practices, and enshrine the dominance of insurance intermediaries who prioritize utilization controls over long-term wellness.
The Case for Deregulation
Statutory Inconsistencies
The current regulations conflict with statutory intent. For instance, while the Affordable Care Act defines essential health benefits (42 U.S.C. § 18022) to include wellness and chronic disease management, CMS implementation interprets “medical necessity” to exclude nutrition counseling, lifestyle coaching, trauma-informed therapy, and integrative care. This undermines the law’s own public health goals.
Economic Waste
Administrative waste and over-treatment now account for over 30% of U.S. healthcare spending. DRG and encounter-based models inflate costs without improving outcomes. Risk adjustment algorithms (e.g., HHS-HCC in Medicare Advantage) reward coding severity, not reversing disease. Providers face burnout, patients face debt, and the public gets poor returns on investment.
Technological Obsolescence
Federal rules have failed to keep up with clinical technology. Real-time analytics, wearable monitoring, and machine-learning-based prediction tools are either excluded or discouraged under current EHR certification standards. These tools could reduce costs and improve care, but the rules haven’t budged.
Policy Failure
The current regulatory system was rational when it was created. But now, it is demonstrably bad policy. It rewards fragmentation, discourages long-term relationships between providers and patients, and limits access to care that could actually reverse chronic illness. In ethical terms, the system fails both patients and clinicians.
Equity and Disparate Access
The existing structure perpetuates disparities in access, particularly for rural, low-income, and minority populations. Subscription-based care models that could offer unlimited wellness check-ins for as little as $10 per week remain legally and financially non-viable under Medicare and Medicaid regulations. These communities are systematically denied innovative care models that could better serve them.
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