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How Regulation Affects Quality, Cost, Autonomy and Access to Health Care


by Ronald W. Chapman

The United States spends more on health care than any other country and yet ranks toward the bottom in almost every measurable aspect of healthcare except regulation of health care and, arguably, the advanced delivery of health care for the treatment of major diseases and illnesses such as Ebola or cancer surgeries, etc. Many people involved in American politics believe the idea of spending more money and regulating an industry creates a better product. Of course, the premise of this argument is that the regulators and spenders know more about the product than the providers. More often than not the fallacy and inaccuracy of this assumption is destroyed before the new legislation leaves the floor.

In his essay, “The History and Future of Health Care Law: An Essential View”, Mark A. Hall does a good job tracing the history of health care law from its inception in the early 1960’s to modern day health law. After tracing the origin, he states, “[T]he main concerns of health law are usually grouped and summarized as quality, autonomy, access, and cost.” Hall, supra p. 353. Our focus is on the likely effect of regulation on each of the main concerns of health law: quality, autonomy, access, and cost.

The legislative and executive branches of state and federal government bend over backwards to regulate, via statutes and administrative rules, all areas of health care. Gone are the days of the simple home health visit by your physician to perform a simple procedure or possibly do some minor surgery. The State of Florida alone has at least 10 to 15 regulations or administrative rules that prevent such an event from happening. For example, all places where surgery is performed must be registered, inspected and have a hospital transfer agreement in place. Imposing such a series of regulations on physicians begins to erode their autonomy and infringe on the patient-physician relationship. In 2009, the State of Illinois decided to empower advance practice nurses and physician assistants by authorizing them to provide schedule II controlled substances. Yet, the DEA prevented such an action, thus destroying the autonomy of the local boards and the professionals. The DEA determined that their wisdom was best. See Hinshaw Health Law Alert, Feb. 5, 2010. Administrative boards at the state and federal level believe it is their mission to prevent harm to the public, and in the process they seriously limit the autonomy of the profession and cause providers and patients to make decisions that are not always in the best interest of the patient.

Cost is a favorite target of regulators. Somehow the federal government believes that it has a superior ability to negotiate pricing and in some perverse way prevent price increases. This seems strange to me in light of the 1890, passage of the Sherman Antitrust Act, 26 Stat. 209, 15 USC §§ 1-7. Back in 1890 the legislature figured out that when one industry controls a market, it tends to create inefficiencies, reduce innovation, and drive up the overall cost. This is exactly what Washington and state legislatures are doing. In a 2013 Heritage Foundation article by Christopher Pope, “Legislating Low Prices: Cutting Costs or Care?”, he states:

“[O]ver the past half century, real per capita spending on health care in the United States has risen steadily—doubling roughly every 17 years. Several factors have combined to bloat the cost of health care. Technological improvements have vastly increased the opportunities to heal the sick, while medical progress has allowed people to live for years into illnesses that would once have led to a swift (and cheap) death. Federal and state legislatures have expanded public entitlements for this care, while restricting cost sharing and inhibiting market innovations that might constrain its cost, but threaten entrenched providers. Even before the full rollout of the Affordable Care Act (ACA or Obamacare), government health care spending had soared from 3.5 percent of gross domestic product ($165 billion) in 1987 to 8.4 percent ($1,215 billion) in 2011.

Pope goes on to argue that hospital regulation and government intervention leads to inefficiency, less innovation, higher costs, and the continued existence of hospitals that the marketplace forces otherwise would close, but for government stimulus and support. The government’s desire to ensure hospitals in every city and location actually works against itself by creating inefficient marketplaces. The idea that creating more hospitals and regulating when and where they are constructed by the certificate of need process actually works to reduce access and increase the cost of health care. In the free market system the government should step back and allow the providers the autonomy to determine what services are actually needed for a specific area and then provide those services. The free market system would weed out the inefficient and less innovative providers and reward those that address the needs of the people. The system should encourage, not discourage, competition to create greater access, lower cost, better quality, and greater autonomy.

Quality health care is essential for the benefit of all Americans! Yet the over regulating and artificial pricing of services does not encourage quality or innovation. For example, the Medicaid reimbursement system artificially sets pricing without regard to the cost of the service and then automates the system in such a way that fraud and abuse goes undetected, exponentially increasing the actual delivery cost to legitimate providers and increasing the overall cost to the consumer. Does anyone really think the time value of a medical provider’s 15 minute office visit is worth only $38? Yet, at this artificially low rate the internist or family practice physician would make a gross profit of $150 per hour. Assuming 60% for overhead charges and an average work year of 1800 hours, the provider will make a gross annual wage of $108,000. At the same time The Henry J. Kaiser Family Foundation on April 28, 2014 reported the current primary care health professional shortage in the USA at 39.59%. Put another way, the artificial reduction in per visit compensation is in large part responsible for the dwindling numbers of primary care physicians and the corresponding reduction in preventive care. Young medical students are increasingly going into specialty care and avoiding internal medicine and family practice for the more lucrative specialties of orthopedics, oncology, cardiology, etc. At the same time the quality of preventative care and primary care is suffering. The artificial reimbursement system is reducing innovation and overall access to primary care, while stripping the physician of the autonomy to practice medicine by developing a one on one relationship with the patient.