How to lead the world in health care innovation
Plus: Why NIH funding caps could mean more money for research; and reform proposals to benefit low-income taxpayers
Key findings from the 2024 World Index of Healthcare Innovation: Once again, Switzerland comes out on top in FREOPP’s World Index of Healthcare Innovation (WIHI), which ranks the health care systems in 32 high-income countries in five key areas: quality, choice, fiscal sustainability, and science and technology. While the Swiss system of universal private health insurance has consistently been the top WIHI performer, FREOPP Resident Fellow Gregg Girvan noted that many other countries changed positions in the rankings this year, with poor fiscal sustainability scores being the top driver of declines in performance. He also points out that, with four of the top five countries achieving universal coverage using private insurance, a “single-payer” government system is not the only way to ensure that everyone—regardless of means—has access to high-quality health care. In fact, private insurance systems are more fiscally sustainable, empower patient choice, and create room for insurers to organically evolve their benefit designs without having to wait for politicians or regulators to act.
Where does the U.S. fall in the 2024 WIHI rankings? After falling several places in past years, the U.S. rose to 7th place, primarily as a result of improved pandemic preparedness and modest increases in fiscal sustainability and choice.
Reining-in NIH spending is a good idea: The National Institutes of Health (NIH) has historically allowed universities to charge additional percentages on research grants, called “indirects,” meant to cover administrative costs. In reality, these fees can be used for any purpose, and some universities charge as much as 70-90%. Earlier this month, the Trump administration capped indirects at 15%, potentially freeing billions of dollars annually for direct research. FREOPP Visiting Fellow Grant Rigney writes that these caps are in line with percentages paid by the nonprofit sector, and that overpaying big universities wastes taxpayer dollars while diverting funds from scientific research. The change could also realign academic incentives by reducing the emphasis on grant size for promotions and forcing universities to streamline administrative spending. To mitigate the potential impacts on small universities, Grant recommends that policymakers consider a sliding scale based on endowment size, as well as phased implementation for new grants.
—> For more on NIH spending cuts—and why they are a win for government efficiency and scientific research—check out FREOPP President Avik Roy’s commentary in The Washington Post.
Reawakening the border adjustment: With certain provisions of the 2017 Tax Cuts and Jobs Act expiring this year, Congress has an opportunity to rework the tax system to increase efficiency and opportunity. FREOPP Visiting Fellow Jackson Mejia recommends reviving an old idea: destination-based cash flow taxes (DBCFT). A DBCFT system, which taxes goods and services based on where they are consumed rather than where they are produced, would simplify the tax code, encourage domestic production, and boost economic growth by allowing businesses to fully expense investments immediately. It also addresses issues like profit shifting and offshoring by multinational corporations, which current tax systems struggle to manage. While there are potential risks, such as currency appreciation and the possibility of the DBCFT resembling a value-added tax, Jackson argues that the benefits—higher wages, increased domestic investment, and reduced administrative burdens for small businesses—outweigh the drawbacks.
Redesigning technology to help low-income taxpayers: Although safety net programs play an important role in reducing poverty, many eligible Americans experience unacceptable barriers to accessing them. In a paper for FREOPP, Visiting Fellow Aparna Mathur highlights how technological improvements such as pre-filled tax returns, integration of benefit programs, and digital ID systems could reduce administrative complexity and streamline access to benefits. As the new administration looks for ways to help more American families get by while cutting waste, fraud, and abuse, modernizing the welfare system to ensure that eligible individuals get the help they need is an important place to start.
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