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Ellig: Playing Politics Leads to Regulatory Failure

Two years after its passage, the 2010 health care overhaul is still a topic of contention. Just this month, several state attorneys general filed an amicus brief supporting the law. This comes shortly after the Department of Justice filed merit briefs in the same case pending before the Supreme Court. Many more will be filed between now and oral arguments scheduled for March.

Although the Supreme Court case focuses on the constitutionality of the act’s individual mandate, the speed with which Congress passed the bill highlights another serious issue: how politics has caused a systemic failure in the federal regulatory process.

By using “interim final” rules to fast-track major health care regulations before Congress changed hands in 2010, the federal government undermined its own standards intended to ensure that agencies assess problems, examine alternative solutions and identify the pros and cons of the alternatives. The government fired before aiming and consequentially shot itself in the foot.

Because the analyses of these eight major regulations were rushed and incomplete, they presented no monetary estimates of benefits, overestimated the number of people who would benefit and underestimated costs, often by hundreds of millions or billions of dollars. The result of this low-quality regulatory analysis is that the federal government simply does not know how many people will benefit from these regulations, how much they will cost or whether regulators chose the most effective ways of improving Americans’ access to health care.

The health care overhaul is a prime example of why regulatory reform is needed. The analysis of these health care regulations falls well below the federal government’s standards outlined in Executive Order 12866 and Office of Management and Budget guidelines for regulatory analysis.

Essentially, the agencies wrote the regulations before the analysis was even done.

Unfortunately, this hasty decision-making is not limited to this particular instance or the Obama administration alone. Administrations of both political parties take shortcuts. The low-quality analysis of the health care regulations is very similar to that of the Bush administration’s early homeland security regulations.

In both cases, administrations rushed to implement signature priorities in the face of tight legislative deadlines. In both cases, the regulations were issued as “interim final” rules, which means the regulations were written and published without the benefit of public comments on proposed regulations.

The White House’s Office of Information and Regulatory Affairs could not effectively perform its customary watchdog function. The health care regulations, for example, were reviewed for an average of five days at OIRA; the longest was reviewed just 13 days. In contrast, OIRA reviewed major proposed regulations for an average of 56 days in 2008 and 27 days in 2009.

The health care debacle highlights how politics can get in the way of governance. Fundamental regulatory process reform is needed because history has shown us that administrations cannot be relied on to put their best analytical foot forward when dealing with landmark regulatory priorities.

Agencies should be required to assess the problem they’re trying to solve and evaluate alternative solutions before they decide which alternative to pick. The analysis and underlying data should be published for public comment before the agency proposes a rule. And the use of interim final rules that short-circuit this process should be limited to noncontroversial administrative decisions or significant, imminent threats to Americans’ health or safety. Politics should not count as an emergency.

Jerry Ellig is a senior research fellow at the Mercatus Center at George Mason University and co-author of “Beware the Rush to Presumption,” an assessment of the regulatory analysis accompanying the 2010 interim final health care regulations.

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