There has been a lot of hand-wringing lately over a new regulation from the Department of Health and Human Services known as the sunset rule.
This regulation, which was finalized in the waning days of the Trump administration, is meant to motivate HHS to periodically review its regulations to reduce their burdens on small businesses. It does so by attaching expiration dates — known as sunset provisions — to most rules under HHS authority. Examples include restrictions on technologies available for use in telemedicine, regulations concerning the practice of medicine across state lines, and rules related to topics as wide ranging as food safety and child care. If not reviewed during a specified time period, regulations could expire.
Whether the goal is boosting growth, reducing risks to health and safety, or generally promoting societal well-being, the rule will likely be a force for good. Those concerned about beneficial rules expiring en masse should look to the experiences of U.S. states and other countries, where sunset laws are useful and commonplace, and where accidental expiration of rules occurs only rarely, if ever.
Here’s how it will work: HHS will have to assess the rules on its books to determine if they affect small businesses, and, if so, do a more in-depth review that considers factors like whether rules are overly complex or should be updated to reflect evolving technology or circumstances. If this sounds fairly mundane, it should. HHS, like other federal regulators, is already required to conduct reviews of this kind under an obscure law known as the Regulatory Flexibility Act of 1980 (RFA), bipartisan legislation aimed at reducing the burden of federal regulations on small businesses.
The problem is that agencies don’t comply with the law. Specifically, they don’t comply with section 610 of the RFA, one of the only federal statutes on the books creating a government-wide mandate that agencies review their existing rules. Why don’t they comply? Mainly because there’s no penalty for noncompliance.
In fact, an HHS review found only three regulations it had finalized in the past decade as the result of any 610 review. These three regulations amended about 130 sections of regulatory code, out of roughly 18,000 sections under the department’s purview — less than 1% of them. This can hardly be what President Jimmy Carter intended when he signed the RFA into law, or what Congress intended when it unanimously passed the law.
Why is this a big deal? Well-designed regulations can protect us, but regulations also have costs. My research conservatively estimates that HHS regulations cost about $230 billion annually. This affects our pocketbooks, for sure, but it also has implications for health and safety. The compliance costs from these regulations reduce business profitability, and these losses get passed on to workers in the form of lower wages and to customers in the form of higher prices. By extension, families have less to spend on doctor’s visits, safer vehicles, or living in more-secure or less-polluted neighborhoods. Wealthier families may not feel the pinch, but across society, some risks inevitably rise.
When regulatory costs rise enough, one can even expect deaths to occur as an assortment of rules pushes some hard-working Americans who are on the margins into poverty. Research that I and others have done estimates that for each $100 million or so in regulatory costs, there will be one expected death due to an impoverishment effect.
Using that metric, the cost of HHS regulations could indirectly result in more than 2,000 deaths each year. Keep in mind that this doesn’t account for how HHS regulations might directly affect mortality by interfering with the health care system. Consider, for example, that HHS regulations barred certain academic and state public health officials from conducting Covid-19 testing in the critical early days of the pandemic. It also doesn’t account for regulatory benefits, which may also be considerable.
We’ll never know which regulations are saving lives — or which are prematurely ending them — without reviewing the complicated patchwork of rules on the books. If the pandemic has taught us anything, it’s that a systematic review of all health care regulations is long overdue.
My economic analysis suggests that the new sunset rule could easily generate billions of dollars in annual benefits. This swamps the estimated annual cost for HHS to review the regulations (which it says are in the millions of dollars). In fact, the co-benefits alone for this rule — the indirect benefits to health and safety from raising American incomes — are likely large enough to offset the modest direct costs from the agency having to review its own rules.
HHS’s method for encouraging review via sunset provision has invoked criticism. But the critics lack an understanding of how the process will actually work. A sunset rule critique in STAT noted that HHS would need to assess 680 rulemakings per year in the first five years after the rule goes into effect, and compared that with the 111 evaluations performed under a separate Trump reform in 2018. But these 680 “assessments” merely entail determining which rules affect small businesses. More in-depth reviews apply only to those with significant impacts, which HHS estimates at about 11% of its regulations. Moreover, those 111 evaluations could relate to anything from rules with major economic impacts to minor actions that don’t even qualify as regulations — so it’s not a fair comparison.
The sunset expiration date simply serves as an incentive to conduct reviews every so often so rules stay up to date. Without that provision, rules probably won’t be reviewed, as HHS’s record updating rules in response to section 610 reviews makes abundantly clear. Sunset provisions are nothing out of the ordinary. The Organization for Economic Cooperation and Development notes that just under half of its member countries have some form of sunsetting arrangement in place.
Entire regulatory agencies — including the Food and Drug Administration, which is part of HHS — often go through a kind of sunset review process when they are periodically reauthorized by Congress. States as diverse as New Jersey and North Carolina have sunset provisions for regulations, too.
In other words, these laws are a normal part of policymaking at the state, federal, and international levels. Those experiences of various governments demonstrate that sunset review processes tend to be orderly — even dull — affairs whereby policies are reviewed, some are updated, a few are rescinded, and the majority simply continue with little or no change.
Ignore the hype surrounding HHS’s new sunset rule. It should be uncontroversial, despite all the fanfare. Special interests may not like having to revisit rulemakings crafted to shield them from competition from small businesses, but those of us who want a dynamic economy and a regulatory system that works to promote public health rather than undermine it should be celebrating this rule.
James Broughel is a senior research fellow with the Mercatus Center at George Mason University. His research helped inform the Department of Health and Human Services’ regulatory impact analysis for the sunset rule.
