When federal regulators prepare regulations, they’re required to perform cost and benefit analyses prior to releasing the final rules. New rules are only supposed to go into place if regulatory agencies have considered other alternatives and determined that the benefits provided are worth the cost. In theory, this requirement is supposed to serve as a check on excessive, inefficient regulation. In practice, though, it sometimes becomes a way for agencies to justify regulations they are already determined to implement.
Case in point, the health policy regulations the Department of Health and Human Services and other agencies have drafted as a result of ObamaCare. As part of a multipart study of the law’s regulations, Christopher Conover, a health policy researcher at Duke University’s Center for Health Policy and Inequalities Research, and Jerry Ellig, a senior research fellow at the Mercatus Center, looked at eight of ObamaCare’s major regulations and found that “that the regulatory impact analyses (RIAs) for these regulations were seriously incomplete, often omitting significant benefits, costs, or regulatory alternatives.”
For one thing, the analyses tended to overstate the potential benefits. For example, based on state insurance data, the authors report that the number of children projected to benefit from the law’s pre-existing condition limitations was overstated by a factor of three to five. And in preparing the high-risk pool rules, regulators cherry-picked studies to inflate the mortality benefit of being insured far beyond minimal to nonexistent improvement most comprehensive reviews and syntheses report.
Meanwhile, an easy way to prove that the benefits are worth the cost is to downplay the cost. And that seems to have gone on too. The authors also conclude that the analyses were also “more likely to understate the magnitude of costs than to overstate them. All eight regulations appear to have understated the costs. In some cases, costs are understated by billions of dollars. The net effect of this pattern is to further contribute to the bias favoring regulation.” Regulators who’ve decided to pursue certain rules have probably already decided that those rules are a good idea, and end up using the required analyses mostly to justify what they’re already planning to do.