Difficulty setting should not be a basic damage/health modifier to you and enemies!
This is the most antiquated relic in gaming to date. I've made 2 suggestions here, one to cover randomly generated and non-narrative enemies. And one to cover NPCs with a higher importance in the narrative.
1: Non-important enemies when it comes to narrative. In this chart, enemies get randomly seeded gear, stats and traits based on probability. The probability for enemies getting better gear and traits in each category increases for each difficulty level. An enemy first goes through weapon, then armor etc. The result is enemy encounters that will never be the same on any playthrough, because this is a dynamic system. The higher the difficulty, the higher the odds are at the enemies having better gear and traits.
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2) Narrative characters should be handcrafted for their difficulty level. Let's say you decide to fight a gang leader on normal. CDPR gives her a cloaking field and a machine gun. On hard however, they might also give her higher health, additional drugs and a grenade. On very hard, they might give her bonus traits (fast reloader, 33% faster reload speed + Marksman, +X% chance to hit) on top of what she has on the lower difficulties.
By "upgrading" NPCs per difficulty slider. CDPR can give each NPC lore-friendly upgrades and difficulty layers that makes sense when it comes to their character.
Say you fight an implant addicted tech-freak.
Easy difficulty: Has a standard gun, a robot and some good implants.
Normal: Has an additional robot and tougher armor.
Hard: Has upgrades for his implants and an upgraded weapon.
Very hard: Robots both have combat upgrades, one has poison launcher, one has tracking rounds.
So yeah... that's what I got
Just... for the love of god no "DMG/HP" adjustment for difficulty, it is so lame.
Be more creative than that! Not saying my idea is "The uberness" here but, something... anything but "yo lol, lets just make enemies tougher and you take more dmg".