A Public Choice Analysis of the Affordable Care Act’s Interim Final Rules

Christopher J. ConoverResearch Scholar

Center for Health Policy and Inequalities ResearchDuke University

Jerry ElligSenior Research Fellow

Mercatus CenterGeorge Mason University

• Dependent Coverage for Children up to Age 26

• Pre-Existing Condition Exclusions, Limits, etc.

• Coverage of Preventive Services

• Claims Appeals and External Review Processes

• Medical Loss Ratio Requirements

• Grandfathered Health Plans

• Early Retiree Reinsurance Program

• Pre-Existing Condition Insurance Program

2010 ACA Interim Final Regulations

1. Define and identify the root cause of the systemic problem the regulation is supposed to solve

2. Define and measure the desired outcome and show how the regulation will achieve it

3. Develop a wide variety of alternatives and assess their effectiveness

4. Assess costs, benefits, cost-effectiveness, and net benefits of alternatives

Note: Each step should include cause-and-effect theory and systematic empirical evidence

Major Elements of Regulatory Impact Analysis

• Benefits overestimated for 4

• Costs underestimated for all

• Alternatives ignored

• “Equity” not defined – rhetoric rather than analysis

Major Omissions from the Analyses

• Qualitative evaluation with numerical scores

• 12 criteria from E.O. 12,866 and Circular A-4

• 5 points per criterion, 60 points maximum

• 3 categories: Openness, Analysis, Use

• 8 ACA regs compared with all major regs from 2008 and 2009

• Includes RIA and entire Federal Register preamble

Numerical Scoring

Score Results

• Presidential policy priorities

• Congressional politics

Why? 2 Intertwined Factors

Executive Branch Rulemaking

Interim Final Rules

Interim Final Rules for Presidential Priorities

• Decisions made at White House and top of agency (Kagan)

• Decisions made before analysis

– Reduced incentive to do good analysis

– Pressure to support the decision

• OMB review function curbed

Presidential Priorities and Incentives for Good Analysis

Agencies respond to committees (Weingast et. al., Moe)

But there are principal-agent problems

• “Legislative drift” (Epstein & O’Halloran; Gersen & O’Connell)

• Divided government impairs rulemaking (Yackee and Yackee)

• Political salience (Shapiro & Morrall, Carpenter)

• Tight deadlines mitigate these problems

– Ensure agencies write regs while current coalition is in power

– Deliver benefits before 2012 elections

Congressional Politics and Incentives for Good Analysis

• All had to be implemented 3, 6, or 9 months after passage

• 7 of 8 met or exceeded deadlines

• Average OMB review time: 5 days

• Longest review: 13 days

– 2008 average: 56 days

– 2009 average: 27 days

Deadlines and ACA Rules

More than a “Just So” Story