News Release

October 4, 2004

Media Contact: (202) 789-5200

Over 7 million uninsured lack coverage due to health care regulations
Medical liability, FDA reform hold most promise for regulatory savings

WASHINGTON--Health care regulation costs Americans $169 billion per year, and makes health insurance unaffordable for over seven million Americans, a new Cato Institute study argues. The costs of health care regulations outweigh the benefits by 2-to-1 and induce more deaths each year than the Institute of Medicine estimates are caused by a lack of health insurance.

In "Health Care Regulation: A $169 Billion Hidden Tax," Christopher J. Conover, an assistant research professor at Duke University, writes that health services regulations cost the average household an estimated $1,546 in 2002 and that roughly one out of six of the average daily uninsured owe their plight to excess regulatory costs.

"Americans would be better off taking their chances on less regulation and instead saving 22,200 lives for certain by keeping [the $169 billion] in the hands of consumers, thereby enabling them to purchase safer products (cars, homes, etc.) or to make other investments to improve their health," Conover argues.

He says that the most promising target for regulatory cost savings is medical liability reform. He found that the medical liability system imposes costs of $113.7 billion but provides benefits amounting to just $33 billion.

Conover adds that other ways to reduce excess costs would be to deregulate the Food and Drug Administration, health insurance (e.g., continuation-of-coverage mandates and mandated health benefits), and health facilities (e.g., accreditation and licensure).

"FDA regulation imposes an annual cost on society of $49 billion and annual benefits of $7.1 billion. The lion's share of this cost represents the value society places on the lives that are lost while waiting for better pharmaceuticals to be approved (after subtracting the number of lives saved by FDA safety regulation)," Conover writes. "Continuation-of-coverage mandates (predominantly stemming from federal regulations) have a net cost of $15 billion, while benefit mandates have a net cost of $13.5 billion."

Policy Analysis no. 527