NCPA - National Center for Policy Analysis


November 23, 2004

Doing away with outmoded and questionable health care regulations would significantly lower health care costs, concludes Christopher J. Conover, an assistant research professor at Duke University. Moreover, he found that while regulations provide some marginal benefits, they also make coverage unaffordable for millions of Americans and even cause premature deaths.

After reviewing 47 health care regulations, Conover found that the cumulative red tape cost society a net $169.1 billion in 2002. Thus, over the next ten years, the net cost of health care regulations will be more than three times the $534 cost of the new Medicare prescription drug benefit program. Specifically:

  • In 2002, medical liability amounted to a net cost of $80.6 billion; all told, 5.2 percent of health care expenditures are spent on overly generous lawsuits awards and measures taken by businesses to avoid liability risk.
  • The Food and Drug Administration's (FDA) regulation of pharmaceuticals and medical devices imposed a net cost of $41.8 billion in 2002.
  • Regulation of hospitals and other health facilities cost $25.1 billion, mostly due to hospital accreditation and licensure requirements.

While FDA rules governing new drugs protects society against faulty pharmaceuticals, they also cost the lives of those that must wait for better pharmaceuticals to be approved. Moreover, the study estimates that by making Americans $169.1 billion poorer each year, health care regulations induce 22,205 deaths annually, says Conover.

Source: Christopher Conover, "Health Care Regulation: A $169 Billion Hidden Tax," Cato Institute, October 4, 2004.

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