The main thing being done about squatters is that squatting costs money. Not much, but when you multiply it by thousands of domain names, it adds up. If you have a thousand domain names, and you can only sell one a year, it will force you to charge tens of thousands of dollars for that one you sell just to break even. And that keeps people from buying your domain.
It does lead to a deadweight loss: people squat, looking for an easy payday, losing money while costing everybody else the opportunity to use a domain for something useful. That sucks. But there isn't any way to improve it that doesn't make something else worse, so we live with it.