United States: #4 in the 2020 World Index of Healthcare Innovation

Introduction

The United States ranks 4th in the World Index of Healthcare Innovation, with an overall score of 54.96, behind only Switzerland, Germany, and the Netherlands. Americans are usually the first to gain access to major new medical advances, advances often discovered at American universities and developed by American companies. As a result, the U.S. ranked first for both Choice (57.65) and Science & Technology (75.14).

On the other hand, the U.S. ranked second-to-last in Fiscal Sustainability (#30, 27.33), because it is the country with the highest amount of government health care spending per capita, spending that is growing at an unsustainable rate. In 2020, trillions of dollars in COVID-19 related spending have made this problem even worse.

Background

The modern U.S. health care system was created by accident. During World War II, President Roosevelt imposed wage controls on U.S. employers, strictly regulating what they could pay their workers. But because the wage controls did not govern fringe benefits like health insurance, businesses started offering generous health coverage to attract workers. In the 1950s, the Internal Revenue Service enshrined this accident into the tax code, excluding employer-sponsored health insurance from federal, state, and local taxation. Rapid adoption of health insurance—and rapid health care price inflation—soon followed.

In 1965, Congress amended the Social Security Act to create Medicare, a single-payer health care program for the elderly; and Medicaid, a single-payer health care program for the poor. Medicare was built off of the employer-sponsored system, with its benefit package based on the Blue Cross plans of the era. The American Medical Association, which had previously opposed efforts to establish large federal health care programs, assented to Medicare because then-president Johnson agreed to exclude cost controls from the program. Instead, Medicare would pay the “usual, customary, and reasonable rate,” as doctors chose to define it.

This combination of factors made American consumers extremely price-insensitive. In the employer-based market, workers are not only divorced from the cost of the health care services they use, but also from the cost of the insurance their employers purchase for them. While Medicare and Medicaid prices have grown at a slower rate than those of employer-based coverage, they remain unsustainably high. Inclusive of the tax subsidy for employer-sponsored insurance, U.S. public subsidies per capita are the highest in the world.

On the flip side, America leads the world in both medical and scientific innovation, and routinely develops therapies for previously untreated diseases. America’s innovative health care sector is by far the largest in the world, and including biotechnology pioneers Amgen, Genentech, and Biogen, along with medical device leaders Johnson & Johnson, Medtronic, and Boston Scientific.

Quality

The United States ranks 14th in the Index on Quality. A strong performance in patient-centered customer service, including relatively low wait times for care and good involvement in medical decisions, was balanced out by a lack of primary care physicians per capita (ranking worst in that category, at 0.31 primary care doctors per 1,000 residents). The U.S. ranked 7th in measures of 5-year cancer survival rates, despite having access to every new drug designed to treat cancer.

Choice

The U.S. ranked first for Choice, driven by Americans’ world-leading access to new medical technologies, and the growing role of choice in private health coverage. However, the U.S. ranked last on affordability of health insurance, due to its extremely high health care prices. Choices are most meaningful when care is affordable.

Science & Technology

The U.S. also ranked first in Science & Technology. Indeed, the margin between the U.S. and second-place Denmark was by far the highest recorded in any dimension of the Index, driving America’s overall ranking. The U.S. ranked first in the number of new drugs & medical devices gaining regulatory approval; first by a wide margin in Nobel prizes in chemistry or medicine per capita; and second in scientific impact as measured by citations. The U.S. also ranked fourth in R&D expenditures per capita. This leadership in scientific impact directly translates into treatments that are developed by nearby pharmaceutical and biotechnology companies, especially around hubs such as Boston and the San Francisco Bay Area.

Fiscal Sustainability

The U.S. ranked second-to-last, ahead of only Japan, in fiscal sustainability, owing to world-leading level of government health spending ($8,949 per capita). For context, the second-highest country in public spending is Norway, at $5,288 per capita. U.S. government health care spending is growing at a very high rate as well. From 2009 to 2019, growth in public spending amounted to 1.6% of GDP, second only to Japan at 1.8%. (Among WIHI-ranked countries, the median 10-year growth rate in public health care spending was 0.33%.)