Economists from Duke University and George Mason University have reviewed all eight 2010 Obamacare regulations, giving each regulatory impact analysis an "F" grade because of troubling problems with cost benefit analysis, rushed review, and systematic bias in the favor of regulation. Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) and Subcommittee on Health Care, District of Columbia, Census and the National Archives Chairman Trey Gowdy (R-SC) have written separate letters to Health and Human Services (HHS) Secretary Kathleen Sebelius and Office of Information and Regulatory Affairs (OIRA) Administrator Cass Sunstein to determine why the Administration rushed the review and how it earned such a low grade despite President Obama's promises to conduct thorough and consistent quantitative and qualitative regulatory impact reviews.
Last week, economists Christopher Conover and Jerry Ellig released a series of papers about the quality of the Obama Administration's Regulatory Impact Assessments (RIA) for eight interim final rules issued in 2010 under the president's Patient Protection and Affordable Care Act. These studies found significant mistakes and troubling problems with the RIAs. The study found that the estimated benefits and net benefits of the regulations were systematically biased upward; the estimated costs of the regulations were systematically biased downward; the distinction between transfers and efficiency benefits was often confused; and that the analyses consistently ignored less expensive regulatory alternatives. The study was released by the Mercatus Center at George Mason University on January 9th and is available here.
The report found that the RIAs failed to account for efficiency loss of taxation (the losses to social welfare when individuals engage in less productive behavior in order to minimize their tax burden) although "such losses are very real and well-recognized in the literature on social-welfare economics." The RIAs also failed to account for both moral hazard and additional administrative costs, and overlooked the impact of program crowd-out (when subsidies go to health insurance plans that would have existed without the subsidy under the health care law) and thus significantly overestimated benefits for several of the regulations. Of greatest concern, given the importance of an impartial review, the authors found that the Obama Administration "selectively cited literature" that supported its preconceived regulatory aims.
"We have several questions about the failure of your department to conduct accurate and careful cost-benefit analyses. We are concerned that the 2010 [health care law] regulations failed to meet the criteria of President Obama's Executive Order 13563. We also have several questions about HHS' RIAs as well as how HHS is going to improve the regulatory process moving forward for the many future [health care law] regulations that have yet to be issued," Issa and Gowdy wrote to Secretary Sebelius.
"President Obama's health care program was rushed into law, and now it would appear that the review process--designed to be a check against flawed regulations--was rushed as well. Flawed and rushed regulatory processes make for bad policy and create uncertainty for the businesses, consumers and taxpayers who will be impacted by and pay for these regulations. HHS and OIRA owe them and this committee answers to explain how they earned an "F" grade on an assignment that is the Administration's top policy priority," Issa and Gowdy added.
Issa and Gowdy submitted 17 detailed questions to be answered by HHS and 25 detailed questions for OIRA, with a deadline of January 24.