As Utah lawmakers debate pharmaceutical industry regulation and public health pandemic guidelines for their special legislative session, a new study, the World Index of Healthcare Innovation, ranked the United States healthcare system No. 4 in the world. A big reason for that top 5 ranking is America’s medical science and technology sector, and its prescription drug market in particular.

“The U.S. comes out ahead on the strength of its scientific research and medical innovation, particularly at academic institutions and in the pharmaceutical industry,” said Gregg Girvan, healthcare research fellow with the Foundation for Research on Equal Opportunity (FREOPP), which published the index. This gives Americans “quicker access to the latest drugs, many of which are first-in-class treatments for rare conditions.”

The index is a first-of-its-kind comparative ranking of 31 national healthcare systems across the world. In addition to using its index to compare national systems of health coverage and medical care, FREOPP analyzed government responses to the novel coronavirus pandemic. “One thing that is remarkable about the pandemic is the lack of any correlation between a country’s health care system structure and its success in containing the virus,” Girvan said.

We asked Girvan five questions to better understand FREOPP’s new index and find out what it could teach policymakers about their continued response to COVID-19.

Derek Monson, Sutherland Institute vice president of policy: What does the World Index of Healthcare Innovation tell us about our system of medical care?  

Girvan: The World Index of Healthcare Innovation is a first-of-its kind ranking primarily for two reasons. First, the index goes beyond traditional measures such as healthcare affordability and health outcomes by measuring factors such as patient choice of physician, speed in introducing new drug therapies to market, health digitization, and research and development. The second reason the index is unique is that we rank 31 high-income countries on these measures, capturing a wider variety of healthcare systems than other recent efforts have done.

More than anything, the index identifies each country’s strengths and weaknesses. This is no different for the U.S. In the aggregate, the U.S. comes out ahead on the strength of its scientific research and medical innovation, particularly at academic institutions and in the pharmaceutical industry. For example, Americans have quicker access to the latest drugs, many of which are first-in-class treatments for rare conditions. It is no surprise then that much of the world relies on the U.S. pharmaceutical industry for the development of new treatments.

On the flip side, Americans pay more for healthcare than any other nation, so the U.S. scores poorly on measures of fiscal sustainability and affordability of health insurance. In addition, the U.S. has room for improvement in providing more primary care physicians, nurses, and optimal hospital bed capacity.

Monson: The index explores universal health coverage. How do systems that rely on private health insurance achieve universal coverage?

Girvan: Switzerland, which holds the overall top spot in the index’s rankings, provides one of the best examples of a healthcare system that relies entirely on private health insurance to achieve universal coverage. Switzerland achieves universal coverage through a robust individual market composed of 26 regional health insurance exchanges. Like the U.S. individual insurance exchanges, each Swiss exchange has a wide range of plans with varying deductible levels, with a premium support system to help low income citizens afford insurance. 

An important difference is the Swiss system of premium support phases out at higher incomes. Therefore, the highest earners receive no government subsidy whatsoever. By contrast, our tax system offers the largest subsidies to the highest earners through the tax deductibility of health insurance premiums, regardless of need. This is a big reason why Swiss public health spending is half that of the U.S. 

The biggest flaw in the Swiss system is that the purchase of insurance is compulsory. However, coupled with reforms that give insurers more leverage to negotiate reimbursement rates with providers, Switzerland offers health insurance options that are more affordable than the U.S. I suspect that absent a mandate, insurance uptake in Switzerland would be near 100% anyway because health insurance there is affordable and offers great value.

Monson: What does your analysis of COVID-19 response have to say to states?

Girvan: One thing that is remarkable about the pandemic is the lack of any correlation between a country’s health care system structure and its success in containing the virus. Taiwan, which uses a single-payer system, has fared very well. But so has Japan, Hong, Kong, the Czech Republic, and Singapore, all of which feature varying consumer-driven and private insurance models.

These results indicate that success against SARS-CoV-2 is based on factors that have more to do with mitigation strategies throughout society rather than how a country pays for health care. Countries in the Pacific Rim have responded better in large part because those countries experienced the original SARS epidemic in 2003, and sprang into action early. We have also seen that success is often more about protecting the most vulnerable populations rather than enforcing a complete lockdown.

States and countries that have limited the spread of the virus in nursing homes, for example, have fared better in limiting hospitalizations and deaths while allowing the relatively young and healthy to resume daily activities that are lower risk. Utah’s fatality rate would be much higher if the state were experiencing widespread infections in nursing homes like many states did in the northeast.

Monson: Does the index point to ways that states can create a more market-driven system of medical care that incentivizes higher quality healthcare at lower cost?

Girvan: The index offers clues into how countries, and by extension states in the U.S., can create market-driven systems that increase the value of healthcare; that is, produce higher quality results for less cost. For example, many countries in the index scored poorly on the hospital bed occupancy measure, not because they didn’t have enough capacity, but because they had too much capacity, and therefore were not utilizing hospital resources efficiently.

The COVID pandemic notwithstanding, the U.S. overall suffers generally from too much hospital capacity in part because we have allowed the hospital market to consolidate with hospital groups operating as regional monopolies. That’s not a market-driven system. 

For individual states, they need to assertively foster competition among hospitals to drive efficiency and cost savings. Many states have enforced anti-competitive contracts through Any Willing Provider laws, requiring insurers to contract with every provider in the state regardless of what they charge. Restricting insurers’ ability to exclude high-cost providers and facilities, however, limits their bargaining ability necessary for a well-functioning market system. 

Monson: Should Utahns be optimistic or pessimistic about the current and future status of medical care and health coverage?

Girvan: I suppose it’s easy to be pessimistic about health care. There’s so much to be pessimistic about generally: the COVID pandemic, social unrest, a contentious election around the corner. And unfortunately, there is still a great distance between both parties in Washington on many key aspects of health reform.  

However, I have several reasons to be optimistic. First, there are things states can do to improve healthcare for their respective populations. And state lawmakers often do a better job of working with members on the other side of the aisle. But even at the national level, there are many areas of bipartisan agreement, including medical price transparency and prescription drug reform.

At FREOPP, we have put forth a health reform plan that relies not on Medicare as a model to achieve universal coverage, but rather relies on Medicare Advantage, the free-market alternative to traditional Medicare, as the basis of healthcare reform. It’s ‘Medicare Advantage for all,’ if you will. So yes, for these reasons and more, I am optimistic about the future of health care in the United States.