NCPA - National Center for Policy Analysis


November 18, 2004

Health services regulation imposes an annual cost of $256 to $339.2 billion on the U.S. economy. This figure takes into account regulation of health facilities, health professionals, health insurance, drugs and medical devices, and the medical tort system, including the costs of defensive medicine, says researcher Christopher J. Conover (Duke University).

  • Even after subtracting $170.1 billion in benefits, the net burden of health services regulation is considerable, amounting to $169.1 billion annually.
  • In other words, the costs of health services regulation outweigh benefits by two-to-one and cost the average household over $1,500 per year.


  • The high cost of health services regulation is responsible for more than seven million Americans lacking health insurance, or one in six of the average daily uninsured.
  • About 4,000 more Americans die every year from costs associated with health services regulation (22,000) than from lack of health insurance (18,000).

The annual net cost of health services regulation dwarfs other costs imposed by government intervention in the health care sector, says Conover. This cost exceeds annual consumer expenditures on gasoline and oil in the United States and is twice the size of the annual output of the motion picture and sound recording industries.

Finding ways to reduce or eliminate this excess cost should be an urgent priority for policymakers. It would appear from this preliminary assessment that medical tort reform offers the most promising target for regulatory cost savings, followed by Food and Drug Administration reform, selected access-oriented health insurance regulations (e.g., mandated health benefits), and quality-oriented health facilities regulations (e.g., accreditation and licensure), says Conover.

Source: Christopher J. Conover, "Health Care Regulation: A $169 Billion Hidden Tax," Policy Analysis No. 527, Cato Institute, October 4, 2004.

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