Laws Come At a Cost

Do we adequately study the economic impacts of the laws we pass? Some states now require economic impact statements on each legislative bill. Such statements are now routine parts of federal bills. But sometimes these statements are little better than optimistic narratives by the bill’s sponsors.

We need to wake up and realize that every new law has some kind of economic impact. Unfortunately we sometimes ignore the long-term effects of proposed laws in the passion of the moment. Let’s look at one example. Wait times in emergency rooms have increased exponentially over the past decade. Why?

This article explains that multiple factors have driven up ER wait times and costs. A big reason is that some people go to the ER instead of to their family physician for routine or chronic issues. Why? It’s sometimes difficult to see your doctor. I contend that this is partially the result of a payment system that obfuscates the customer-provider relationship. But well-meant legislation is also a major basis for the problem.

In 1986, indignant politicians passed an anti-dumping law that prevents ERs from transferring stabilized (often disadvantaged) patients to other facilities. The result has played out to be an annual loss of $4.2 billion revenue for hospitals. We pass the compassion test with flying colors, but the revenue loss has caused ERs to shut down in record numbers, especially in economically disadvantaged areas. Today there are 14% fewer ERs than 12 years ago. Fewer facilities means overcrowding at remaining ones, resulting in increased wait times.

Another well-meant piece of legislation imposes patient privacy rules that we all want. However, as one administrator notes, “people may be unaware of the resources that educating on and complying with federal regulations consumes nationally, and these valuable dollars become consumed by generating required paperwork instead of taking care of patients.”

The point is that we often pass legislation that most people think is important without understanding the long-term impact. Sure, there were egregious examples of patient dumping. Yes, we all want our medical records secure. But would we have passed the laws the way they are written had we understood how much they would contribute to higher costs and reduced availability?

Proponents of legislative bills are usually not the best people to look critically at all sides of the issue. We need elected representatives that are willing to flush out future effects of consumer adverse proposals so that decisions can be reached with more complete information. In effect, we need a better cost-benefit study system in our political process. At least we should understand the true cost of proposed legislation before we buy it.