Trump's 2-for-1 Deregulation Plan: Symbol or Solution?

February 24, 2017

Physicians and their medical societies have long asked Congress and the White House to reduce federal regulations — cramping and costly to satisfy, in their view — that govern how they treat patients, use electronic health records, submit Medicare claims, and design their offices.

In President Donald Trump, the medical profession has a champion of deregulation. Trump has claimed that as much as 75% of red tape can be eliminated.

To visualize such a massive reduction, consider that the Code of Federal Regulations was 178,277 pages long in 2015, according to the Office of the Federal Register. Cutting it down by 75% would leave nearly 45,000 pages, close to the code's 43,118 pages in 1966, when Lyndon Johnson was in the White House.

The code has grown during each presidency, Democrat and Republican, over the past 50 years. Trump has acted quickly to reverse the direction. On his first day in office, he signed an executive order temporarily freezing all new federal regulations. Ten days later, he inked another order requiring that for every new regulation put on the books in fiscal 2017, two existing ones must go. It's an approach tried by other countries, with mixed results.

Experts on government regulation and healthcare policy say this 2-for-1 plan ranks as a Trump promise that might be hard to keep, at least literally. Like Trump's executive order on immigration, it already faces a federal court challenge. It nevertheless indicates that the new administration is serious about regulatory relief, and that's what organized medicine likes to hear.

"One can read it in a legalese way, but I tend to look at it in a philosophical way," said Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association (MGMA), in an interview with Medscape Medical News. "There's some symbolism in the executive order — we're going to reduce the regulatory burden across the board.

"The MGMA is absolutely in favor of deregulating healthcare."

Trump the deregulator is doing nothing new, said Michael Livermore, an expert on federal regulations and associate law professor at the University of Virginia. Presidents of both parties going back at least to Ronald Reagan have tried to cull out-of-date, overly burdensome rules, Livermore told Medscape Medical News. "Obama called it 'regulatory lookback.' "

The difference with Trump is that he has come up with a catchier name for a subject that normally puts people to sleep, he said. "You're talking about the most boring, technical undertaking you can imagine."

Usurping Congressional Authority?

The executive order, signed on January 30, does more than require erasing two existing regulations for every new one promulgated. It also calls for offsetting any incremental cost of a new regulation by eliminating the current costs of at least two prior regulations.

Excluded from the executive order are regulations related to the military, national security, foreign affairs, the internal operations of federal agencies, and any other category of regulation exempted by the director of the Office of Management and Budget (OMB). An OMB guidance memo on February 2 expanded the exceptions, saying the order could be waived for an emergency "or some other compelling reason." The memo also said that the order applied only to "significant regulatory action," defined as action affecting the economy to the tune of $100 million or more, or otherwise hurting it in a material way.

On February 24, Trump ordered each federal agency to create a task force to ferret out rules that should be eliminated or modified. "We're going to put the regulation industry out of work and out of business," he told the Conservative Political Action Conference that same day.

The 2-for-1 order drew applause from groups ranging from the US Chamber of Commerce to the American Hospital Association, which said that "reducing the administrative complexity of healthcare would allow providers to spend more time with patients, not paperwork." However, it was lambasted as capricious and unconstitutional in a lawsuit filed by the consumer watchdog group Public Citizen, the Natural Resources Defense Council, and the Communications Workers of America.

The plaintiffs argue that the executive order and the OMB memo don't account for the benefits of regulation in their treatment of cost. For example, a regulation that requires appliance manufacturers to make their products more energy efficient may impose a cost on them, but consumers might save far more on their utility bills as a result. However, those savings can't be used to offset the cost to manufacturers under the executive order.

At a more fundamental level, the plaintiffs say, the executive order allows the Trump administration to usurp the authority of Congress to pass laws by removing or amending regulations that implement those laws. Likewise, the order violates the president's constitutional obligation to "take care that the laws be faithfully executed." At stake, say the plaintiffs, are laws spanning environmental protection, public health, and labor rights.

The Trump administration has not yet filed a reply to the lawsuit, which asks a federal district court in Washington, DC, to block the executive order. However, Trump has said he's not going to sacrifice the public good on the altar of deregulation.

"Now we're going to have regulation, and it's going to be just as strong and just as good and just as protective of the people as the regulation we have now," he told a group of business leaders last month. "We're going to take care of the environment, we're going to take care of safety and all the other things we have to take care of."

Serious Cost Savings in the United Kingdom

Trump's deregulation plan didn't come out of the blue. The Republican-controlled House passed a bill in January 2016 that would thin out the Code of Federal Regulations in a similar fashion. It has a ponderous name but a snappy acronym — the Searching for and Cutting Regulations That Are Unnecessarily Burdensome Act (SCRUB).

The measure would establish a commission to review existing rules that ought be scrubbed because they are ineffective, obsolete, duplicative, harmful to innovation or wage growth, or else because their costs outweigh their benefits. Under SCRUB, federal agencies that issue new regulations must offset their cost by repealing regulations that the commission has recommended for the scrap heap. SCRUB didn't get anywhere in the Senate last year, but the bill's sponsor, Rep. Jason Smith (R-Mo), reintroduced it earlier this month for another go-around.

There are precedents for the Trump 2-for-1 plan in other countries. Canada, for example, instituted a 1-for-1 framework for regulatory pruning in 2012. The government credits it with eliminating a net 20 regulations and $24 million worth of administrative hassle for Canadian citizens and businesses so far.

To Livermore, the regulatory expert at the University of Virginia, the Canadian experiment doesn't boast much of a payoff. "Compared to the budget or GDP of a major developed country," Livermore said, "[$24 million] is a rounding error at best."

In contrast, the United Kingdom has put some serious numbers on the board with a regulatory relief program that began in 2005 as 1-in, 1-out and evolved to an ambitious 1-in, 3-out. The program now is saving UK businesses the equivalent of $10 billion a year, according to Jitinder Kohli, a managing director at Deloitte Consulting, in a recent Forbes article. Kohli, who headed the UK initiative in its first 4 years, based that figure on government estimates.

Trump's version of the UK program "may sound simplistic," Kohli wrote. "But in the UK, it became crystal clear that having a target can be an enormously powerful driving force for change."

Others have their doubts about what 2-for-1 can accomplish here. Peter Van Doren, a senior fellow at the libertarian Cato Institute and editor of the journal Regulation, questions the accuracy of self-reported government cost savings. "Agency estimates of their own effectiveness should be viewed with skepticism," Van Doren told Medscape Medical News.

Van Doren cautions that eliminating existing regulations is an arduous, lengthy process, given the need for the government to draft the proposed changes and then collect public comment. "It's more difficult than Trump lets on," he said.

"As best as I can tell, he's engaged in what I call signaling. He's basically telling his supporters, 'I'm going to try to put a halt to this crazy stuff.' "

Likewise, Livermore called the Trump plan "kind of gimmicky and not a sophisticated way...of improving regulatory quality." He faults the president's executive order for seeming to "focus exclusively on regulatory costs without accounting for the benefits," a complaint also made by the plaintiffs in the federal lawsuit.

Some policy experts have wondered if Trump's executive order could backfire on the new administration. Any new laws that a Republican-controlled Congress passes will need regulations down the road to implement them. If the government can't jettison old regulations to make room for new ones, new laws would be on hold. Republicans also could face this potential problem with recently enacted legislation to their liking, such as the 21st Century Cures Act, said Diana Zuckerman, PhD, president of the National Center for Health Research, in an interview with Medscape Medical News.

Like others, the MGMA's Anders Gilberg sees a lot of question marks in Trump's 2-for-1 plan. He's fairly sure, however, that Trump will not be able to reduce federal red tape by 75%.

"You have to be cautious approaching what you cut and what you don't," Gilberg said. "Regulations are necessary at some level."

That said, Gilberg is hoping the Trump administration will somehow make life simpler for physicians. "Healthcare," he said, "is extremely overregulated."

Follow Robert Lowes on Twitter @LowesRobert

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