Heritage Foundation Leadership for America

?The net burden of health services regulation amount[s] to $169.1 billion annually,? calculates Duke professor Christopher Conover in a new Cato analysis, ?even after subtracting $170.1 billion in benefits? from the $339.2 billion annual total cost of regulation.

Compiling two years of exhaustive research, Conover ?made every effort to estimate the total social cost of health services regulation,? defined as ?the value of goods and services lost by society resulting from the use of resources to comply with and implement the regulation, and from reductions in output.?

The results are nothing short of shocking.

Tabulating government not only compliance costs but also the regulatory costs, social welfare costs, and indirect costs of five different types of regulation, Conover generated the following bottom-up, ?conservative assessment of the size of the regulatory cost burden in health care?:

How much is $169.1 billion a year?: 1.7 percent of the U.S. gross domestic product; ?more than the federal share of the Medicaid program;? more than ?total corporate tax collections; more than ?the budget deficit in 2002;? and ?more than U.S. consumers spend on gasoline and oil.?

This regulation has a sizable impact on the typical American consumer, ?cost[ing] the average household over $1,500 per year.? And by ?add[ing] an average 8.9 percent to the cost of all personal medical expenditures,? regulation prevents millions from being able to afford health insurance:

If the annual net cost of regulation imposed directly on the health industry itself is 8.9 percent, this implies that health expenditures (and prices for medical items, including health insurance premiums) are at least that much higher than they would be absent regulation. Based on consensus estimates about the impact of higher prices on how many would likely drop health insurance, this increased cost implies a 3.8 percent reduction in the demand for coverage. This translates into 6.8 million uninsured whose plight arguably might be attributed to excess regulatory costs, or roughly one in six of the average daily uninsured.

It gets worse:

A variety of studies have established a trade-off between income and mortality: as income rises, mortality falls because people are able to purchase more health and safety?The median estimate from four such studies shows one statistical death for every $7.6 million reduction in societal income (in 2002 dollars). This implies that $169 billion in health services regulation costs could itself induce upwards of 22,200 deaths a year?over 4,000 more?than die due to a lack of health insurance.

Conover concludes, ?the potential savings from regulatory reform in health services are far too great to be ignored.?

We feel that?s putting it mildly! If regulations are ultimately intended to ensure consumer safety and to reduce transaction and coordination costs, then in the domain of health care, the current regulatory approach is a total failure.