Material Omissions in Regulatory Analyses of the Affordable Care Act

January 17, 2012

Scholars of health policy view the enactment of the Affordable Care Act (ACA) as a historic achievement.  Because of the importance of this signature piece of legislation to President Obama's legacy, one might have expected the highest level of care and diligence would be invested in writing the myriad rules required by the ACA.  However, a review of the eight major ACA regulations issued as "interim final rules" in 2010 suggests otherwise.  These eight rules encompassed nearly all the major components of the ACA scheduled to go into effect prior to 2014, say Christopher J. Conover of Duke University and Jerry Ellig of the Mercatus Center at George Mason University.

The eight rules are:

  • Early retiree reinsurance program.
  • Dependent coverage for children up to age 26.
  • Grandfathered health plans.
  • Preexisting condition exclusions, limits and so forth.
  • Coverage of preventive services.
  • Claims appeals and external review processes.
  • Preexisting condition insurance plan.
  • Medical loss ratio requirements.

The primary complaint levied against the regulatory agencies responsible for these provisions is that their cost-benefit analysis was incomplete and superficial.  A recent study conducted by the Mercatus Center reconsidered the costs and benefits associated with each provision:

  • For all eight regulations, costs were underestimated, usually because regulators had failed to account for an entire category of costs such as efficiency losses due to increased taxation.
  • For four of the eight regulations, potential benefits were overestimated -- this stemmed from a tendency to overestimate the number of consumers who would benefit from ACA.
  • Repeatedly, regulators failed to consider more cost-effective alternatives, as they did when they set dependency coverage at age 26 without considering standard, IRS-defined age limits.

The cursory work that was done in regulatory analysis exhibits an attempt to exaggerate benefits and disguise costs.

Source: Christopher J. Conover and Jerry Ellig, "Beware the Rush to Presumption, Part A: Material Omissions in Regulatory Analyses for the Affordable Care Act's Interim Final Rules," Mercatus Center, January 2012.

For text:

http://mercatus.org/sites/default/files/publication/Beware_the_Rush_to_Presumption_PartA_ConoverEllig.pdf

 

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