Netherlands: #2 in the 2021 World Index of Healthcare Innovation

Introduction

The Dutch health care system ranks #2 in the 2021 World Index of Healthcare Innovation, with an overall score of 62.99, behind only first-ranked Switzerland (65.15). Most impressively, the Netherlands scored well across the board, ranking no lower than 5th for any dimension (for both Science & Technology and Fiscal Sustainability).

Holland’s best performance was in Choice (#1, 73.31), where Dutch residents not only enjoy choice among dozens of health insurers, but also broad choice of providers and innovative drugs. The Netherlands also performed strongly in Quality (#4, 62.65).

Background

The Dutch health care system shares many common features with Germany’s, because during World War II, occupying Germans installed in the Netherlands a private health insurance system identical to that of Germany’s for those with incomes below a certain threshold.

In 2006, in collaboration with Stanford economist Alain Enthoven, the Dutch government enacted a significant health reform package. “At the end of the 1990s,” recalled then-Dutch Health Minister Ab Klink, “the budgetary system for health services [didn’t] work anymore. It was far too regulatory, because the government fixed all the prices. We became aware that it blocked innovation.”

The Dutch replaced the old system with one of “managed competition,” in which multiple private insurers compete for market share, on the basis of price and quality. Insurers are required to take all applicants and must adhere to a basic benefit package, but can offer additional benefits on top of the required ones. Residents are required to buy coverage, and pay premiums equivalent to 6.5% of their first €30,000 in annual income. The premiums are automatically deducted from workers’ paychecks by their employers.

Prescription drug formularies are managed by the insurers under this competitive system. Coverage of some drugs is mandated by the Ministry of Health, which is advised on coverage decisions by the Netherlands Healthcare Institute (Zorginstituut Nederland). While drug prices float based on insurer-manufacturer negotiations, and insurers can increase or decrease deductibles for drugs based on their value, the government protects against monopoly drug pricing by setting price ceilings. Like the U.S., generic drugs enjoy high market share in the Netherlands.

The largest innovative health care company in the Netherlands is Philips NV, which has a large medical equipment division. The Netherlands is also home to a large early-stage biotechnology industry. Organon, a mid-sized pharmaceuticals company, was sold to U.S.-based Schering-Plough in 2007 (later acquired by Merck).

Quality

The Netherlands ranks #4 overall for Quality. While it has room for improvement on certain measures such as treating cancer, it is the best country in the Index at providing care that is patient-centered and features a relatively robust health care infrastructure (#9). However, the country has resorted to a high lockdown stringency to contain COVID-19 (#22 for pandemic preparedness and response), especially given its lower vaccination rate that has been typical of much of continental Europe.

Choice

The Netherlands takes the top spot for Choice in this year’s rankings. One main reason is that despite its smaller population, the Netherlands has access to innovative drugs on par with other major economies in Europe, including Germany and the United Kingdom. In addition, the country values individual freedom to choose health care services (#2), including offering a wider variety of insurance plans and designs than all but three countries in the Index.

Science & Technology

The Dutch value advancements in Science and Technology as well, ranking #5 overall in the Index. Its ranking is driven primarily by universally adopted health digitization across all provider types. In addition, the Dutch rank highly for scientific discoveries (#5), having a significant body of oft-cited research in biochemistry, genetics, and molecular biology. Investments in pharmaceutical research and development are low for a country as advanced as the Netherlands, but it makes up for it with a high number of health care patents, especially in the medical technology sector.

Fiscal Sustainability

The Netherlands excels in providing universal care, while still maintaining a strong Fiscal Sustainability ranking at #5. With a debt-to-GDP ratio of 48%, the country’s national solvency (#14) is manageable. In addition, with a reliance on universal private insurance, the Dutch have kept public health spending low (#5). In fact, The Netherlands has managed to reduce its public health spending as a percentage of GDP over the last 10 years.