Cost of Obamacare Regulations Underestimated by Billions of Dollars

The Obama Administration underestimated the costs of Obamacare regulations by billions of dollars says the non-partisan Mercatus Center at George Mason University in a working paper it issued on Monday.[1] The study examines eight Obamacare regulations issued in 2010 that became law before public comment was allowed because of the brief timeline Obamacare gave for their implementation.

Mercatus carefully studied the required cost/benefit analysis used by the Administration. And it found that the Administration’s cost estimates tended to be underestimated while its benefit estimates tended to overestimate. The result is that the cost of implementing these eight regulations may be billions of dollars more than the Obama Administration is willing to admit.

For example, Mercatus says that:

For the “Early Retiree Reinsurance Program” rule, costs were underestimated by $9-$10 billion over four years. More accurately calculated benefits might have been about one-third as high as estimated.[2]

This comes as no surprise to us at Americans for Limited Government. We’ve caught the Obama administration artificially inflating Obamacare’s benefits before.

For instance, on September 7, 2010 we submitted a public comment that criticized the Obama Administration for “describ[ing] [the preventive services regulation] as having a cost-savings benefit while supplying insufficient evidence to back such a claim and ignoring evidence to the contrary.”[3]

The Mercatus study confirms our criticism:

The selective review of the literature provided in the RIA gives the uninformed reader a false impression of the extent to which preventive health services are cost-saving. Literature reviews consistently have concluded that most clinical preventive services typically are not cost-saving.[4]

While the Mercatus Center’s working paper does not scrutinize the paperwork burden analysis of these regulations (we hope they will consider doing so in the future), we’ve found that the Administration also underestimates how much it will cost Americans to comply with the paperwork these regulations generate.

Of the eight regulations examined by the Mercatus study, we commented on six of them, and in three of those six we flagged errors in the Obama Administration’s paperwork burden cost calculations.

One such error is the Administration’s estimate of what it costs per hour for legal services. The Administration estimates that it costs $119 per hour to hire an attorney.[5] Using the Laffey Matrix we estimate that the average billing rate for a Washington, DC attorney is more like $427 per hour.[6] In just one regulation this mistake could amount to tens of millions of dollars. But even the billing rate for paralegals of $155 per hour is well above the Administration’s estimate for attorneys.[7]

By underestimating the costs of Obamacare’s paperwork burden, the Obama Administration is also underestimating Obamacare’s implementation costs which will have to be borne by the American public.

Before Obamacare’s passage Nancy Pelosi prophesied, “[W]e have to pass the bill so that you can find out what is in it….”[8]

The Obama Administration can continue to paint rosy pictures of Obamacare, but the more we find out what’s in it, the more we see it for what it really is.

2. Mercatus Center, Haste Made Waste: The Health Care Law’s Rushed Regulations (Jan. 9, 2012), 2 available at http://mercatus.org/sites/default/files/publication/ACA-Study-Summary.pdf.

3. William Wilson, President of Americans for Limited Government, Comments of Americans for Limited Government on RIN 0938-AQ07 Interim Final Rules for Group Health Plans and Health Insurance Coverage Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act (Sep. 7, 2010), 1 available at http://obamacarewatcher.org/sites/default/files/regcomments/alg_comment_0938-AQ07.pdf.

4. Supra note 1 at 12-13 (emphasis in the original).

5. William Wilson, President of Americans for Limited Government, Comments of Americans for Limited Government on RIN 1210-AB41Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 Under Patient Protection and Affordable Care Act (July 9, 2010), 8 available at http://obamacarewatcher.org/sites/default/files/regcomments/alg_comment_0991-AB41.pdf.

6. Id.

7. Id.

8. Nancy Pelosi, Pelosi Remarks at the 2010 Legislative Conference for National Association of Counties (Mar. 9, 2010), available at http://www.democraticleader.gov/news/speeches?id=0249.