How Payers' Short-Term Focus Undermines U.S. Life Expectancy

The United States is falling behind. Since the mid-1980s, improvements in U.S. life expectancy have slowed compared with other wealthy nations. From 2010 to 2020, life expectancy in the United States stagnated, while peer countries continued to make gains. When COVID-19 struck, U.S. life expectancy dropped sharply than in comparable countries.

This isn't just about the pandemic. A new study finds that "avoidable mortality" — deaths that could be prevented through timely and effective health care or public health measures — has been worsening in the United States since 2009 while improving in most other high-income countries. The United States is diverging in ways that suggest structural failings.

Social and policy factors — gun violence, vehicle fatalities, drug overdoses, suicides — are clearly part of the story. But so, too, are the incentives embedded in the U.S. health care system, particularly among employers, MCOs, and PBMs. These actors, under pressure to manage costs, have commonly focused on short-term spending. That focus may unintentionally contribute to America's life-expectancy crisis.

Long-term health investment models

Kaiser Permanente offers a glimpse of what health care could look like if long-term health outcomes were the goal. As an integrated system with aligned insurance and care-delivery arms, Kaiser operates differently from traditional MCOs. Its members tend to stay enrolled for longer periods, reducing churn and enabling long-term care strategies. This stability is evident in Kaiser's Medicare Advantage plans, which experience 2% to 4% annual turnover compared with the 10% industry average, demonstrating how integrated delivery models can achieve the member retention necessary for long-term health investments.

This alignment creates a financial and organizational incentive to invest in preventive care and chronic-disease management. Kaiser's model includes robust use of electronic medical records, salaried physicians who are incentivized toward quality rather than volume, and significant investments in community health. For example, in 2023, it committed $5 million toward affordable-housing initiatives in Maryland, recognizing that housing stability is tightly linked to health outcomes.

Kaiser's results bear out this investment mindset. Kaiser Permanente’s cancer screening rates (per HEDIS scores) are 10%, 12%, and 20% higher than national averages for cervical, breast, and colorectal cancers, respectively. Kaiser is 25% above the national average when it comes to members whose hypertension is controlled. The return on this investment? Kaiser enrollees are 20% less likely to experience premature death due to cancer and 33% less likely to die early from heart disease. Its members’ life expectancy is 6 years longer than the national average.

While Kaiser is rare among health plans, it is not the only model of long-term orientation. Some self-insured employers — particularly those with stable, long-tenured workforces and retiree coverage — have operated with a long-range view of employee health. These employers are financially responsible for the long-term outcomes of the people they insure, creating strong incentives to invest in preventive care, chronic disease management, and wellness programs. Some employers pioneered data-driven population health strategies long before public programs or MCOs adopted similar approaches.

These investments often demonstrate measurable returns over multiyear periods. Johnson & Johnson's wellness program delivered a return of $2.71 for every $1 spent from 2002 through 2008, demonstrating long-term value.

However, employers that focus on the long term represent a small fraction of the market. Most employer-sponsored plans experience significant annual member turnover, particularly in industries with high employee mobility or seasonal employment patterns.

Short-term thinking dominates health care

 Outside of integrated systems like Kaiser, the dominant model in U.S. health care is reactive and transactional. Payers, particularly MCOs and PBMs, are judged by how well they control short-term costs.

High member churn undermines incentives for payers to invest in long-term health outcomes, as the benefits may not be realized before members switch to different plans. Churn rates in Medicaid, where income limits often force enrollees to come and go with frequency, are approximately 10%. Commercial insurance churn varies significantly by market, with individual marketplace plans experiencing the highest turnover rates. In California's ACA marketplace, more than 40% of enrollees disenroll within their first year. This constant churning creates a fundamental misalignment between the timeline for health investments to pay off and payers' financial responsibility for outcomes.

This short-term orientation is reflected in leading industry reports. Leading industry reports — from IQVIA's medicine spending analysis to Milliman's cost trends — track spending and pricing but contain no systematic analysis connecting expenditures to health outcomes.

The pattern extends beyond drug spending. PwC's Health Research Institute reports on medical cost trends emphasize year-over-year spending increases and their drivers — from hospital price inflation to new technology adoption — but frame these primarily as cost-management challenges rather than value-creation opportunities. Missing from these influential reports are analyses of spending effectiveness: whether higher-cost regions achieve better population health, how cost-containment strategies affect long-term outcomes, or what return on investment different health care expenditures generate in terms of quality-adjusted life years.

Countries with more integrated, long-term oriented health care financing — from Germany's statutory health insurance to the UK's NHS — have maintained more consistent progress in population health metrics, suggesting that financing structure and investment horizons may contribute to health outcomes at the population level.

Reorienting incentives toward long-term health

To make meaningful improvements in life expectancy, the United States would have to realign its health care financing system toward outcomes, not transactions. That would require:

• Shifting metrics: Move beyond spend-and-trend dashboards and begin linking payer performance to life expectancy, avoidable hospitalizations, or chronic disease control.
• Reducing churn: Encourage longer enrollee-payer relationships, especially through public programs or value-based contracts, so long-term investments make financial sense.
• Redirecting resources: Invest more in behavioral health, prevention, and social determinants of health and less in short-term cost-containment.

Improving life expectancy in the United States would require a fundamental shift from short-term cost containment to long-term health investment. While Kaiser Permanente and certain self-insured employers demonstrate the viability of such an approach, these remain isolated exceptions in a fragmented system largely shaped by member churn and short-term cost pressures.

Realigning incentives to prioritize long-term health outcomes faces formidable structural barriers. The current system's emphasis on quarterly earnings, annual contract renewals, and member turnover digs deeper trenches between short-term incentives and long-term health. Payers have little financial motivation to invest in prevention or chronic disease management when competitors can free-ride on those investments, chipping away at any incentive for long-term thinking.

Without fundamental restructuring (e.g., a seismic shift toward a single-payer system), incremental policy changes will continue to bump against the inherent misalignment between short-term financial incentives and long-term health improvement. Americans will likely continue paying more for health care while dying younger than their international peers — a tragic but predictable outcome of designing a system around short-term cost reductions rather than long-term health.