Most industries enjoy a luxury that U.S. healthcare does not. In professional services, retail, logistics and software, leaders can respond quickly when conditions change. Companies can shrink or expand the workforce, adopt innovative technologies or reconfigure operations within months.
Healthcare lacks that flexibility. Training new physicians takes a decade, making it difficult to adjust workforce supply to meet changing demand. And unlike other industries, hospitals cannot rapidly cut services or reduce capacity. In fact, most clinical service changes require regulatory approval, turning cost reduction into a multiyear process.
With timelines like these, course correction in healthcare is inherently slow. Problems that might have been manageable persist. And by the time leaders act, threats frequently become too large to reverse.
Three of the nation’s most pressing healthcare problems now face this reality:
Threat 1: The affordability cliff
Over the past 25 years, the nation’s total healthcare spending has climbed from $2 trillion to $5.3 trillion.
Businesses and the government have played “hot potato” in response to these rising costs. Employers slowed wage growth and switched to high-deductible health plans to offset ever-higher premiums. In parallel, Medicare and Medicaid set payment increases below the rising cost of delivering care, driving hospitals and physicians to make up the difference through higher charges in the private market.
The financial impact on families has been devastating. With healthcare costs rising faster than wages, half of Americans say they cannot afford their out-of-pocket expenses should they experienced a major illness.
For businesses, the government and families, these financial challenges are mounting with no relief in sight. In 2024, U.S. medical costs rose more than 7% for the second consecutive year, pushing healthcare’s share of the economy to roughly 18%. Out-of-pocket spending by consumers climbed 7.2%, exceeding $500 billion, as demand for hospital care, prescription drugs and physician services outpaced insurer projections. Moreover, insurance premiums are projected to rise by roughly 9% this year.
Congressional action (and inaction) is amplifying these pressures. The expiration of enhanced subsidies on the insurance exchanges is driving double- and even triple-digit percentage premium increases for roughly 20 million enrollees. And beginning this year, another 8 to 10 million Americans could lose Medicaid coverage as new eligibility restrictions take effect.
Absent major intervention, healthcare spending is projected to exceed $7 trillion by the end of the decade, consuming more than one-fifth of the U.S. economy. At that point, small businesses will have dropped coverage for millions of employees, and a growing share of federal spending will be diverted to interest payments on the national debt, squeezing Medicare, Medicaid and other healthcare programs as demand for medical care rises.
As long as the economy stays strong, businesses and policymakers will respond with incremental changes that dull the pain but fail to address the cause. Consequently, when the next recession begins (perhaps sooner than later, according to historical analyses), the economic crisis will become so large that solutions dependent on improving patients’ health will be too small and take too long to succeed. That brings up the second major challenge.
Threat 2: The chronic disease epidemic
Since the final decade of the 21st century, the United States has experienced a sustained and worsening epidemic of chronic disease.
According to the Centers for Disease Control and Prevention, roughly 194 million U.S. adults now live with at least one chronic condition. About 130 million report multiple chronic diseases.
You might assume that if the healthcare system could prevent younger generations from developing these conditions, total costs would fall. But prevention alone cannot offset the cumulative burden of chronic disease already embedded in the American population.
To understand why, consider a single condition: diabetes.
A patient newly diagnosed with diabetes can usually control it and avoid serious, costly complications through lifestyle changes and relatively low-cost medications.
But when diabetes remains poorly controlled for a decade, biological damage accumulates. Each year, the risk of kidney failure or heart attack rises significantly. As a result, the cost of caring for a single patient with long-standing diabetes outweighs the savings that result from preventing diabetes in multiple newly diagnosed patients.
The math: On average, people with diabetes incur medical costs about 2.6 times higher than those without the disease (around $25,000 more per patient each year).
But when diabetes progresses to kidney failure, spending jumps into an entirely different category. Medicare costs for one patient’s hemodialysis treatment is approximately $100,000 annually. That’s not accounting for the cost of treating a patient’s likely cardiovascular disease, the leading cause of death among people with diabetes.
As such, to offset the medical care costs for a patient with a history of diabetes, our nation would need to prevent four new cases.
Add all these pieces together and diabetes alone accounts for more than $300 billion in direct medical costs each year, plus another $100 billion in indirect costs from disability and lost productivity.
Furthermore, effective chronic disease control requires large upfront investment, while the financial returns arrive years later. Act now, and the returns will be substantial. Based on CDC estimates, better prevention and control of chronic disease could avert up to half of all heart attacks, strokes, cancers and kidney failures, reducing national healthcare spending by $1 to $1.5 trillion each year. But if policymakers wait (while healthcare spending rises 7% or more annually), by the time they confront the crisis, they won’t be able to proceed financially since the required investment will be far more expensive than the payoff, at least in the short run.
Finally, if the U.S, wants to effectively prevent and control chronic disease as the means to reduce healthcare costs, there’s a third challenge our nation will need to address.
Threat 3: Training doctors for the wrong future
Ask medical leaders what they view as the greatest threat to high-quality care in the United States, and most will point to the growing physician shortage.
The Association of American Medical Colleges projects a shortfall of up to 86,000 physicians by 2036, with nearly half of that deficit in primary care. But those projections rest on a false assumption: the way doctors deliver care will be the same in 2036 as it is today.
If the United States has any hope of containing healthcare costs and reversing the chronic disease epidemic, it won’t happen by simply training more physicians.
Instead, countering those threats will require a transformation in how care is delivered. And generative AI will play a central role. But how?
Today, advances in medical knowledge allow physicians to effectively follow well-defined, evidence-based pathways for managing chronic disease in all but the most complex cases. As a result, most routine management tasks (monitoring, medication adjustments and decision support) are primed for generative AI. This transition has already begun.
A San Francisco startup, Mercor, recently earned a $10 billion valuation after recruiting more than 30,000 clinicians to help train AI systems to perform specialized medical tasks. Meanwhile, Utah just became the first state to launch a pilot allowing an AI system to renew prescriptions for 250 commonly used, non-controlled medications under physician oversight.
The implications for medical practice are clear. We can expect that generative AI will take on more routine chronic disease management, leaving primary care physicians more time to focus on complex clinical tasks. With AI support, they will increasingly care for patients who today are referred to specialists.
Specialists, in turn, will spend less time on evaluation and follow-up visits and more time performing procedures and advanced interventions that require human judgment and technical skill.
The combination of healthier patients and the redistribution of work (enabled by generative AI) will ease the physician-shortage problem. To prepare for this outcome, medical schools and residency programs will need to quickly integrate generative AI into every aspect of training. If not, physicians in many specialties will find themselves trained for the roles of the past, not the skills they will require a decade from now.
When Systems Fail, They Fail Together
When chronic disease becomes widespread and clinicians are overwhelmed, America’s health deteriorates, complications ensue and healthcare costs surge.
When chronic disease is managed effectively, the opposite occurs: hospitalizations fall, costly complications become rarer and the demand for specialty care declines.
For decades, healthcare has consumed an ever-larger share of GDP, while clinicians practiced medicine much as their mentors have for generations.
That era is ending. With costs accelerating and incremental fixes exhausted, healthcare is approaching a breaking point. Act aggressively, now, and the nation can prevent and better control chronic disease, avert hundreds of thousands of heart attacks, strokes and kidney failures, and flatten healthcare inflation.
By contrast, wait another decade and there will be no way to rein in spending or chronic disease. And if workforce adaptation is delayed, as many as 30% of physicians will find themselves trained for a version of medicine that no longer exists.
We still have a choice, but the clock is ticking.
HENRY KOTULA 