Christopher J. Conover has attempted to estimate the total cost imposed by legal and regulatory distortions of health care, by synthesizing previous studies of individual issues. The analysis

suggests that the total cost of health services regulation exceeds $339.2 billion. This figure takes into account regulation of health facilities, health professionals, health insurance, drugs and medical devices, and the medical tort system, including the costs of defensive medicine. Moreover, this approach allows for a calculation of some important tangible benefits of regulation. Yet even after subtracting $170.1 billion in benefits, considerable, amounting to $169.1 billion annually. In other words, the costs of health services regulation outweigh benefits by two-to-one and cost the average household over $1,500 per year.

More specific papers are linked to here. Looking at those papers, my guess is that the authors have under-estimated the cost of regulation. For example, I do not think that the work on professional accreditation and licensure captures the rigidities in the system imposed by regulation (prohibiting substitution), or the cost of rent-seeking as professional associations lobby for special favors.

Above all, I can see what a Herculean task it would be to try to estimate the costs of health care regulation. But the study suggests to me that there is some real potential for savings by considering some of the “reputation system” ideas that I discussed here.

Thanks to the Heritage Policy Blog for the pointer.

For Discussion. The authors point out that because every state imposes professional regulations for physicians, there are no “natural experiments” to facilitate estimating costs. Are there “natural experiments” in allied health professions?