Over-Regulation

The healthcare industry is one of the most heavily-regulated in America. Medicare alone has more pages of regulation than the tax code, rendering compliance increasingly difficult and complicated. For all their complexity and cost, many healthcare regulations fail at their essential purposes. The HIPAA privacy law largely fails to adequately protect patient privacy; instead, it stifles medical research by locking away valuable data. The requirements for electronic health records are widely seen as decreasing efficiency and reliability of record-keeping. Medicare’s fee-for-service healthcare reimbursements, designed to prevent fraud, instead incentivize unnecessary care, to the tune of $150 billion to $250 billion in waste annually.

Some sectors of the healthcare industry have it especially bad: Nursing homes, for instance, are subject to over 700 pages of federal regulations, and hundreds more pages of state rules. Many states regulate every detail of a nursing home’s operation with crushing specificity. This specificity breeds rigid, sometimes cruel compliance, as when sleeping residents are wheeled in to activities so that homes could count them as having “participated.” In Illinois, nursing aides tear pictures out of magazines and tape them to walls just before inspection time in order to satisfy state rules mandating a certain number of pictures in the facility.

In the 1980s, Australia experimented with a principles-based approach to nursing home regulation, replacing a thousand rules with 31 general principles requiring, for instance, that nursing homes provide a “home-like setting.” Within a short period, quality improved dramatically, as healthcare professionals were freed to do what’s right rather than what’s dictated by rules. Imagine that: healthcare experts, using their expert judgment and common sense instead of spending all day with their noses in the rulebook. Doesn’t that seem like a better way to run a healthcare system?

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