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the net cost - benefit of regulation is large

On the net cost of regulation:

One of the best indications and studies to examine the real net cost of regulation in the healthcare industry.   The result of the past 40 years of a growth of such regulation has left the healthcare industry as the most regulated in the US economy.  Is the supposition that with regulation comes a reduction of competition is a thesis that would seem to have much merit.

From Duke University: the results of a 3 year study:  Address by Dr. Conover

DR CONOVER: Good morning. It's a pleasure to be here. I have done work for various states on certificate of need regulation, hospital conversion regulation, and regulation of conversion of Blue Cross and Blue Shield plans before profit status.

Most importantly, I spent the last three years under a contract with the Department of Health and Human Services working on a global estimate of the cost and benefits of health services regulation. Preliminary findings from our work are contained in your handout.

We wanted to know in this study how much of the phenomenally high cost of medical care in the U.S. can be attributed to health services regulation. A related question of interest to me is how many uninsured might be covered where we could reduce this sizable regulatory burden.

We examined the literature for nearly 50 different kinds of federal and state health services regulations including regulation of health facilities, health professionals, health insurance, FDA regulation, and the medical tort system. These various regulations covered the gamut from mandated health benefits to state certificate of need requirements for hospitals and nursing homes.

We systematically tallied the benefits and cost associated with such regulations and found that the expected cost of regulation in the United States amounted to $339 billion in 2002. Our estimated benefit was $170 billion leaving a net cost of $169 billion.

We found that the states and Federal Government both have roles to play in order to reduce this regulatory excess. It was not the purpose of our study to make recommendations on specific regulatory reforms to be pursued. Instead, we were trying to provide something that has never before been achieved previously, a big picture view of the overall impact of health services regulation with the intent of identifying areas where regulation might be excessive.

For all of the areas so identified one would have to rely on further study or experts to sort through the best approach to reforming that aspect of regulation. In all likelihood only in some of these cases would experts conclude that we should dispense entirely with regulation.

How do these figures relate to the uninsured? Our figures imply that the net cost of regulation imposed directly on the health industry is 8.9 percent meaning that health expenditures and health insurance premiums are at least that much higher as a result of regulation.

Based on consensus estimates about the impact of higher prices on how many might drop health insurance, this increased cost translates into 6.8 million additional uninsured whose plight might be attributed to excess regulatory cost, or roughly one in six of the uninsured.

There is a different way of looking at the burden as well. Although our estimates are still preliminary and we are engaged in a careful process of updating them and ensuring that they are accurate, it seems unlikely that the adjustments yet to come would alter this central conclusion.

The overall excess cost of regulation in the U.S. exceeds by several orders of magnitude the amount that would be required to cover all of this nation's uninsured. In the context of the Institute of Medicine finding that 18,000 uninsured die every year due to lack of coverage, is maintaining our current regime of health regulation worth letting that continue?

I think this is a question worthy of serious consideration as we consider how to strike the proper balance between the benefits and cost of regulation. I welcome this opportunity to hear first hand from you how to do regulation better.