Types of Regulatory Tools
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1 Types of Regulatory Tools Provision goods/services Contracting Loans, loan guarantees, grants Command & control standards (social regulation) Economic incentives Information disclosure Economic regulation Subsidies/Vouchers
2 Problem Experience Rating Refusing to enroll high risk individuals Coverage limits Healthy individuals don t enroll Can t afford health insurance Health Reform Provisions 2701 PHSA: Requires community rating, with variation allowed only for individual/family, rating area, age (with limits), and tobacco use 2702 PHSA: Requires plans to accept every individual and employer that applies for coverage 2703 PHSA: Requires plans to renew coverage for every individual and employer wishing to continue coverage in the plan 2705 PHSA: Prohibits plans from establishing rules for eligibility based on certain health status-related factors 2704 PHSA: Prohibits preexisting condition exclusions 2705 PHSA: Prohibits plans from establishing rules for coverage based on certain health status-related factors 2707 PHSA: Requires all plans to offer essential health benefits package 1501: Requires all individuals to enroll in a plan offering minimum essential coverage. Tax penalty if fail to do so. 1401: Establishes premium assistance in the form of tax credits for qualifying individuals 1402: Provides that plans shall reduce cost-sharing for qualifying individuals; HHS to reimburse plan for the value of the reductions
3 5 Criteria For Evaluating Regulatory Tools Effectiveness Efficiency Manageability Equity 1) Fairness 2) Redistribution Political Legitimacy and Feasibility 1) Feasibility 2) Accountability
4 Enforcement Nursing Homes Detecting Non-Compliance: Survey and Certification Primarily administered by state agencies Inspect at least every 15 months Inspect in response to complaints CMS occasional surveys facilities Sanctions Terminate Medicare/Medicaid provider agreement Financial sanctions: CMPs (e.g., fines) Denial of payment No new patients until deficiency cured Corrective action plan Work w/ state and CMS to develop plan to cure deficienciens Sanctions if no cure by specified date In-service training Appointment temporary or permanent new management
5 (c) Notification of facility policy. At admission, the facility must (1) Inform both the incoming resident and, in the case of a minor, the resident s parent(s) or legal guardian(s) of the facility s policy regarding the use of restraint or seclusion ; (2) Communicate its restraint and seclusion policy in a language that the resident, or his or her parent(s) or legal guardian(s) understands ; (3) Obtain an acknowledgment, in writing, from the resident, or in the case of a minor, from the parent(s) or legal guardian(s) that he or she has been informed of the facility s policy on the use of restraint or seclusion. Staff must file this acknowledgment in the resident s record. 42 C.F.R
6 Command and Control Standards Effectiveness Strong nexus between standard and goal Thoroughness Requires strong enforcement Detecting non-compliance Meaningful sanctions Process-based vs. outcome standards Standards become out of date? Efficiency The greater the complexity, the higher the administrative costs Enforcement considerations High government costs? Administratively burdensome to industry? Process-based vs. performance standards Unintended consequences
7 Command and Control Standards (con t) Manageability Impacted by complexity issue Enforcement considerations Updating standards Equity Same standards for everyone Can t tailor to differences
8 Command and Control Standards (con t) Political Legitimacy strong Political Feasibility Viewed as infringing on free choice/market Opposition from regulated industry Support from beneficiaries of regulation Issue getting public attention?
9 Indirect Regulatory Tools Effectiveness Build on others expertise/experience Flexibility across localities/populations Principal-agent concerns Manageability Oversight challenges Efficiency Avoid start-up costs/duplication Monitoring costs
10 Indirect Regulatory Tools (con t) Political Feasibility Giving others a piece of the action State/3P does not want responsibility Political Accountability Blurs accountability
11 Financial Incentives Effectiveness Regulated entities free to ignore standards vs. compliance w/ command and control standards is mandatory How large are the financial incentives? Penalizing undercapitalized providers Enforcement considerations How easily can regulated entities manipulate the data? How hard detect cheaters? Process vs. outcome standards Efficiency Administratively burdensome? High enforcement costs? Regulated entities data gathering costs Wasteful if entities already meeting standards Unintended consequences E.g., creaming
12 Financial Incentives (con t) Manageability How hard to select criteria? Enforcement/data validation Equity Same standards for everyone Adjusting for uneven playing field Political Feasibility Maybe less opposition from regulated industry More opposition from beneficiaries Political Accountability Weaker than command & control regulation
13 Consumer Information Effectiveness Salience Information understandable Consumers use information Consumers have real choice among sellers
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