The crux of the issue is that the middle ground is no man's land. So, teams are rewarded for a fire sale and a restart.
The solution has to lie in removing this incentive. If a fire sale makes sense, then the system is broken. If losing is incentivized then the system is broken.
I would be down for extending the trend the league made regarding the lottery odds balance by equalizing it so the midlevel teams have a greater shot at the lottery. I would also make it so the lottery includes the top 5 picks and not the top 3. By doing so, a mid-tier team that just misses out on the playoffs has greater chance of leapfrogging. Let's say the incentive for the best pick goes as follows:
10% chance for the worst team
10% for the next team
10% for the third worst
...8%
...7%
...7%
...6%
...6%
...6%
...5%
...5%
...5%
...5%
...5%
...5% for the 15th worst team that just missed out on the playoffs.
Now what is the incentive to lose? A 5% increased chance at the lottery? Super not worth it.
Those odds all increase a bit with each pick. Now make 5 total picks into lottery selections and you have yourself little incentive to tank. Teams that suck will just need to build from the ground up. But why would a team like New Orleans tank? For a 5% increased chance? No way.
Surely you could play with these numbers a bit but ultimately if the top 5 picks are up for grabs AND the weighted values aren't there, mid-tier doesn't look so bad.