Chapter 9.A.2: Facility Licensure and Accreditation

we first observe that existing healthcare regulation focuses almost exclusively on regulating individual components of the medical and healthcare industry, while lacking a capacity to address how those components work together as a system--a system that pandemics can destabilize. Indeed, one factor that contributed to COVID-19's spread was the inability of U.S. healthcare regulation to operate on a societal level, to protect certain components from the deficiencies of others. We contend that healthcare regulation must also include what we call “macromedical” regulation: regulation that focuses on protecting the stability of the healthcare sector as a system of interconnected parts. We find some useful analogies in the Dodd-Frank Act and other post-crisis financial regulation, particularly in macroprudential regulation designed to protect the financial system as a system.

Whatever else regulation does, it almost always begets more regulation. Part I of this article explains why and how the regulatory ratchet works. It focuses on the incentives to regulate and the suppression of information about its impact. Part II illustrates the explanatory power of the regulatory ratchet model by tracing five major turns in the market for health care. The health care market provides graphic illustrations of the regulatory ratchet at work, graphic because the consequences caused or exacerbated by each turning include physical suffering and, on occasion, death. The final part of this article, Part III (1) argues that the likelihood that regulation will beget more regulation ought to figure in any cost benefit analysis of a proposed regulation and (2) suggests how the regulatory ratchet model might be refined to facilitate its use.

To illustrate the growth of the market bureaucracy, this Article traces the origin and development of several market-based theories that have been central to the modern era of health policy and law. The first, called managed competition, looks to consumerism in insurance markets and contends that people will choose wisely among health plan options, and their choices will drive higher value health care. The second, sometimes called consumer-driven health care, relies on consumerism when using medical care. The notion is that when people are subject to a share of the costs, they will more selectively choose when and where to use medical care and will avoid low-value products or services. The final example considers the application of antitrust to health care mergers, ostensibly to create a competitive field on which consumerism can flourish.

This Article shows that, in application, these ideas have not, nor will ever, deliver as imagined in a world that deviates irreconcilably from theory. Nonetheless, these ideas continue to spawn a vast web of health law and regulation in their support. The cost of this market bureaucracy includes the scaffolding to hold up an ineffective market-based structure and, more importantly, the opportunity cost of foregone alternatives to solve important health care system challenges.

Health care's market bureaucracy endures in light of repeated failure in part, as others have discussed, due to politics and political economy. Yet, this Article suggests that it persists equally because of its role in the sanctification of values of individualism and choice. Choice seems especially appealing when it comes to decisions about our health. We want to believe we are in control. Yet, choice as translated into market-based policies has proven empty. Understanding that markets do not actually enhance meaningful choice-- and are as bureaucratic as any other approach--can clear the way to ask how to design better health law and policy. ….

The growing body of evidence discussed in this Article shows that market-based approaches have largely failed health law and suggests we can do better. It is time to let go of the false hope that market-based solutions will solve U.S. health care woes. …. Trying to gauge shared priorities in a deeper way will of course be contentious and divisive, particularly if it reveals that what some people want is discriminatory or rights threatening. One possibility is that ineffective, bureaucratic market-based policies may be the price we pay to keep the peace.