Healthcare Law Highlights Problems With Regulatory Process

The major regulations issued to implement the Affordable Care Act serve as ugly poster children for the regulatory reform movement.

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Jerry Ellig is a senior research fellow at the Mercatus Center at George Mason University. Ellig is a cocreator of the Mercatus Center Regulatory Report Card.

While the Supreme Court weighs the constitutionality of the Affordable Care Act, Congress is holding hearings on the federal regulatory process. The two topics are more closely related than you might think. The healthcare law required many regulations, and thus far, the major regulations issued to implement the Affordable Care Act serve as ugly poster children for the regulatory reform movement.

Regulations like those implementing the healthcare law have major effects on Americans' healthcare choices and cost hundreds of millions of dollars. But when agencies don't even take the time to understand the problem, consumers may have to sacrifice personal freedom and precious dollars for an ineffective solution.

[See a collection of political cartoons on healthcare.]

For decades, executive orders have required agencies to identify the problem the regulation seeks to solve when they issue major regulations. But the healthcare regulations don't do this—and neither do many others.

For example, the analysis of the regulation that mandated coverage of preventive services asserted people fail to take advantage of preventive services frequently enough. It offered some conjectures about why, but it never actually defined the right amount of preventive care or showed evidence that people use less than this amount. That's hardly enough to justify a sweeping regulation that requires all of us to pay higher premiums for dozens of services that we may or may not want. And this is the healthcare regulation that has offered the best analysis of a problem so far.

The agency's analysis of the problem accompanying major regulations fails to meet the government's own standards, as documented in the Mercatus Center Regulatory Report Card. The major Affordable Care Act regulations issued in 2010 earned an average of just one point out of a possible five for analyzing the problem. That means that the problems they were trying to solve were vaguely asserted with no proof of their existence or size.

[Read the U.S. News debate: Should the Supreme Court Overturn Obama's Healthcare Law?]

Unfortunately, the healthcare rules are just an extreme example of a more general deficiency in federal regulatory analysis. From 2008 through 2010, major regulations earned an average of about two out of five possible points on the report card for analysis of the systemic problem. That's better than the healthcare regulations, but still a failing grade.

Regardless of which party controls the White House, analysis of the systemic problem has been insufficient. The Bush administration's early homeland security regulations, for example, had no better analysis than the Obama administration's healthcare regulations. The inadequacy is an institutional failure that will only be solved by changing the federal regulatory process.

Often, agencies merely cite the legislation authorizing the regulation, as if this absolves them from the need to actually understand the problem Congress told them to solve. But citing a statute is not the same thing as analyzing a problem.

[Rick Newman: The Real Reason Obamacare Scares People]

After more than three decades of presidential orders, why do agencies still fail to properly analyze the problem before trying to solve it?

The Office of Information and Regulatory Affairs, which oversees executive branch regulatory analysis, faces strong pressure to let things slide when good analysis might undermine an administration's policy decisions. This leads to regulatory analyses that read like attempts to justify decisions, rather than inform them.

To improve this process, a stronger and more credible enforcement mechanism is needed. It might take the form of judicial review to ensure that agencies produce regulatory analysis meeting minimum quality standards. Or perhaps it could be a body independent of the executive branch that could block regulations if the underlying analysis is inadequate.

The key point is that the entity that reviews the regulatory analysis should be independent of the administration that conducted the analysis. That way, regulations implementing presidential policy priorities like healthcare won't get away with skimpy analysis. Perhaps then we'll get regulations that clearly address the actual causes of proven problems.

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