Foundations of the Regulatory State
Spring 2005, Section 3Comments on memo assignment #4
(Posted 5/10/2005)
For your reference, here is a link to the original assignment.
Because of the short time remaining before the exam I will confine myself to identifying three sorts of flaws that casued people to underperform on the memo assignment, and that if repeated on the final exam, will result in an unnecessarily low score.
- Too much time and space spent restating the underlying fact situation. I always stress this strategic mistake in my exam preparation comments, but unfortunately a number of students continue to make it year after year. Don't let it happen to you. Specifically, an exam answer should not be organized like a legal brief, with an initial fact statement. In an exam, an initial fact statement gets your essay off to a slow start and leaves you less time and space for analysis. Instead, you should integrate your discussion of the facts into your substantive analysis.
- Failing to make use of RegState concepts and materials. Presumably most of you had some knowledge about current events and public policy coming into the semester, but if you find that much or even a significant chunk of your essay consists of analysis you could have provided before or without taking this course, that is a bad sign. A strong answer will apply RegState concepts to the underlying factual situation, just as a strong answer in a more conventional law school class will apply doctrinal concepts to the underlying factual situation.
- Answering the wrong question. Be sure to read the question carefully, consider the perspective it requests you to take, and answer it as posed. For instance, on the memo assignments, a number of students were too ready to take an advocacy position when that was not the role that was requested. Similarly, while there is some room for creativity in bringing in material from outside class or from your own prior research or experience, it is a mistake to rely too heavily in your answer on such material, at the expense of the assigned readings and class discussion.
Here for your reference is a sampling of the student essays that I thought were among the most effective we received.
[1]
The Education and the Workforce Committee should encourage the House to take action on the proposed Genetic Information Nondiscrimination Act (S. 306). By prohibiting health insurers and employers from discriminating against persons with a genetic predisposition to disease, the bill arguably brings about a more equitable distribution of health benefits. However, while those genetically predisposed to disease benefit under the bill, others are disadvantaged. The premiums of “healthy” insureds will inevitably be raised to subsidize the extension of equal insurance to those covered under the bill. This loss is further exacerbated by the problems of moral hazard and adverse selection. For instance, if those with a genetic predisposition to disease enjoy insurance coverage on the same level as healthy insureds, they have less incentive to take preventative action to ward off disease. This moral hazard results in an efficiency loss initially covered by the insurer, but eventually passed on to the insured in the form of higher premiums. Adverse selection, which holds that those who know they are genetically predisposed to disease will be disproportionately likely to self-select into insurance plans under the bill, will likewise lead to higher premiums for the healthy insureds in the same pool.
However, the “loss” to healthy insureds must be balanced against the universal gain of better information and consequently better healthcare promised by the bill. With genetic discrimination no longer a threat, people will be more willing to undergo genetic testing, which in turn will add both to general knowledge about the human genome and specific knowledge about the test-taker's own health-care needs. Slightly higher premiums seem a reasonable price to pay for arguably increased distributional equity of health benefits, as well as better knowledge, on both a societal and an individual level, in the crucial area of genetics.
Although the insurance industry no longer opposes the bill, business interests question the bill on the grounds that it imposes new, unnecessary liabilities on employers. Specifically , they maintain that there is no need for the bill, as existing state law addresses genetic discrimination. They also object that the bill's allowance for jury trials and punitive damages will result in excessive liability costs.
There is efficiency value in promoting legal uniformity and consistency nationwide through federal legislation, as well as in allowing for a reasonable level of damages to ensure that employers will follow the mandate. However, inflexible initial legislation seems unwise, especially as it touches upon such a complex area of science. This committee should encourage House debate on possible flexible regulatory schemes, such as a “rolling rule” regime, in which contentious variables like damages provisions could be reevaluated at various levels of government as implementation of the bill provides results and reveals problem areas. Alternatively, employers who fear frivolous or excessive litigation might be permitted to negotiate enforcement mechanisms or penalties they deem more appropriate. Such flexible proposals may allow Congress to protect the interests of those genetically predisposed to disease by enacting a version of the bill, while still assuaging litigation fears in the business sector.
[2]
Recommendation: The House Education and Workforce Committee should embrace the normative goal of Genetic Information Non-Discrimination Act (GINDA) , specifically the right to non-discrimination based on genetics, and to encourage political compromise on details through a negotiated regulation strategy to draft changes to the bill.
Benefits:
Benefits of GINDA bill are significant and overriding.
- The initial first version of GINDA passed the Senate 98-0
- This was largely due to fact that discrimination based on genetics violates principles of pluralistic equality
- Allowing genetic discrimination also provides perverse incentives for individuals not to learn about genetic predisposition to disease for fear of reprisals
- Individuals and public interest benefit greatly from knowledge of disposition to certain diseases as early prevention measures can lower overall health care expenditures
- Saving lives whenever possible has inherent moral value, and also increases overall worker productivity
Objections:
Using genetic information to screen patients can reduce health care costs.
- By preventing insurance companies to exclude high risk patients, they will be able to offer lower costs and premiums to healthier patients
- While possibly Kaldor-Hicks efficient, permitting this is morally problematic from a rights perspective as it could leave high risk patients either with much higher premiums or uninsurable altogether
- Health care organizations must simply be denied opportunity to decrease costs at the expense of this fundamental right
Business interests object that this bill is unnecessary and overbroad.
- They assert that there is no need to create a Federal Law as 30 states already have provisions against genetic information discrimination
- Currently there is no evidence of genetic discrimination nor indications that it will begin in the near future
- This bill might open floodgates to litigation against businesses as it includes provisions for punitive damages and for pain and suffering that greatly increase incentives to sue and potential cost to employers
Strategy to Break Political Deadlock:
The Committee should advocate a negotiated regulation to get through the current political stalemate.
- House should mandate a stakeholder negotiation between civil rights groups, labor unions, business interests, to come up with a rule acceptable to all
- Could be difficult to include all stakeholders as main beneficiaries are all employees, most of who are non-union and therefore do not have clear representatives
- However it should be possible to create compromise that addresses main concern - use of genetic information to deny insurance or employment - while assuring businesses that they will not be unduly burdened by new regulation
Other innovative regulatory strategies are not suited to resolving the GINDA problem
- This bill involves a fundamental right- non discrimination for genetic traits- for which the optimal “rate” is zero
- Therefore it would be impossible to allow for businesses to trade for compliance credits, like they would with pollution emissions, or allow for flexible mandates which allow for periodic renegotiation
- Further it is not well suited for regulation by local or state agencies, as it involves nondiscrimination standards between national employers and insurance companies, therefore Federal level legislation like Title VII is preferable
[3]
I. Regulatory Design: Flexibility
- As designed, the program maintains a certain degree of flexibility: the federal regulatory scheme does not preempt those states whose current policies are more stringent.
- Alternative #1 : Congress could, however, strengthen its political coalition by using negotiated rulemaking , and incorporating the Chamber of Commerce's demand for a single preemption standard.
- Pro: A single standard would enable employers to know exactly what they had to comply with. Additionally, uniformity would prevent “race to the bottom” behavior [see below].
- Additionally, including the regulated entities serves procedural justice goals.
- Con: It seems unwise to take away incentives for states to develop more stringent standards. By doing so, Congress might alienate other groups with political capital (e.g. scientific groups, people with disorders).
- Alternative #2 : Congress could explore the option of using markets in compliance duties (i.e. permits).
- Pro: A scheme where companies that exceeded compliance could sell permits—or perhaps liability credits—would provide a market incentive for all businesses to institute effective gene testing policies.
- It would be efficient to require low-cost actors instead of high-cost ones to meet the regulations.
- Con: The ability to trade permits concerning compliance with genetic testing is ethically dubious. Congress would appear to be putting a price on compliance (and by extension on the potential for saving human lives through scientific advancement), thus diminishing the moral message.
II. Program Design : Centralization
- As designed, the regulatory proposal requires considerable centralization of decision making and monitoring.
- An advantage of centralization is that it prevents “race to the bottom”: a situation where states would decrease protection of genetic disorders to attract businesses/insurers seeking lower liability.
- Additionally, centralized regulation sends a forceful moral message against discrimination.
- Alternative #1 : Congress could use devolution of regulatory authority to state and local government.
- Pro: State/local officials may be able to regulate more efficiently because they are familiar with local conditions (including, perhaps, businesses who already meet genetic testing requirements).
- Con: This program would require greater oversight, and thus increased costs.
- Alternative #2 : Congress could use a rolling-rule regime based on central commands built on local experience.
- Pro: A rolling-rule regime promotes innovation by constantly monitoring implementation—and technological innovations—and altering regulatory schemes accordingly.
- Con: This scheme seems inapposite for binary regulation like testing (i.e. firms either test or don't), and also introduces complexity that would likely frustrate the Chamber of Commerce.
III. Recommendation
- As designed, the program's advantages outweigh its disadvantages. And, though businesses and insurers are critical of the bill, only a limited degree of flexibility is possible given the need to:
- Send a moral message that discrimination will not be tolerated;
- Create an environment where people are willing to get tested, thus benefiting scientific advances.
- Congress should, however, explore the option of negotiated rulemaking , and particularly the request for a single preemption standard.
- The benefits of a single preemption scheme—namely, political support, procedural justice, and discouraging race to the bottom—appear to outweigh the potential drawbacks.
[4]
Advantages of the Current Senate Bill
- Bars employers from using genetic information in making decisions on hiring, firing, and promotions.
- Bars insurers from using such information as a reason for denying coverage or increasing premiums.
- Expands portions of HIPAA.
- Encourages individuals to get life-saving genetic testing that they may not get otherwise for fear of discrimination. (even if there is little evidence of actual genetic discrimination)
Disadvantages of the Current Senate Bill
- It would create confusion at both the federal level and in the 30+ states that already provide protection against genetic discrimination.
- Legislation provides for jury trials and punitive and compensatory damages that may lead to an increase in law suits.
Alternative Regulatory Methods
- Flexible Mandates
- This allows fixed regulation that doesn't apply universally to all industries
- Pros: Various industries have different responses to the problem. This allows regulation to be tailored to specific kinds of industry.
- Cons: since genetic discrimination is generally wrong, all industries should be required to abide by the same rules.
- Rolling Rule Regimes
- Instead of permanent fixed regulations, it would allow a commission to evaluate the interaction of genetic information with various industries and alter the rules accordingly over time.
- Pros: genetic testing is such a new science that it is difficult to anticipate all of the effects it will have on industry. There should be a commission that is providing constant oversight so that regulation is kept out of the courts.
- Cons: industries would feel insecure without being able anticipate rules in the future.
- Devolution of Authority
- This policy would allow individual states to create regulations for genetic discrimination on their own.
- Pros: States could create policies tailored to the particular industries in their states.
- Cons: The system of regulation is inconsistent. Discrimination is wrong everywhere and should be treated similarly across the country.
- There is already a piece-meal system of regulation where states have made their own laws. This bill is meant to unify the response to genetic discrimination.
- Regulatory Negotiation
- This would allow certain industries to bargain for the right to discriminate on the basis of genetic information in exchange for compliance with another policy.
- In this case, there is no positive benefit.
- If the purpose of the legislation is to ban genetic discrimination because it is morally wrong, then it does not make sense to allow industry to negotiate their way out of complete compliance.
- Markets in Compliance Duties
- In this case, each industry would be granted a certain number of allowances that they could buy and sell on the open market.
- Like negotiation, this particular regulatory scheme does not make sense for discrimination.
Conclusion
- A rolling rule regime appears to be the best solution to the political logjam in congress.
- It provides both a uniform set of rules for industry and allows those rules to evolve as the technology changes.
[5]
Dispute: S. 306 expands the safeguards against genetic discrimination established in HIPAA, providing secretarial and equitable enforcement mechanisms.
- Higher protection necessary to encourage citizens to undergo voluntary genetic testing.
- Earlier diagnosis can increase the number of lives saved.
- Currently many people avoid genetic testing, because fear being discriminated against. This prevents the detection of genetic problems at earlier stages, when they are sometimes easier and cheaper to treat.
- Employers and insurers are concerned about the bill's allowance of jury trials and punitive damages.
- Trial costs would be passed on to insureds through increased rates.
- This could lead to adverse selection where the “healthy” (non-at-risk) opt out of the insurance pool leaving only high risk people, further increasing the insurance rates.
Potential Solutions:
- Limit Centralized Control: Eliminate federal cause of action for genetic discrimination and punitive damages. Leave only Secretarial Enforcement provisions
Pro: Secretarial fines work similar to a Pigouvian tax, internalizing the externality of covert genetic discrimination identified by agency.
- Pro: Eliminates fears of employers/insurers concerning potential lawsuits.+
- Con: Increased genetic testing creates adverse selection (more “at-risk” people obtain insurance)
- Increases insurance rates.
- “Healthy” drop insurance, which further increases rates.
- Insurance companies might drop treatment of certain conditions to lure healthy back into risk pool, leaving “at-risk” uncovered for genetic risks. (Note: not necessarily discrimination, because insurers would be treating both “healthy” and “at-risk” equally)
- Establish Minimum Standards for Coverage: Solve problem created by eliminating federal cause of action through creation of federal minimum standards requiring insurers to cover certain genetically-linked diseases to prevent insurance companies from dropping coverage.
- Pro: Genetically “at-risk” maintain coverage for treatments that are necessary if risk becomes reality.
- Pro: Insurers' costs should not rise too significantly, because would likely be covering risks similar to those covered by current plans.
- Pro/Con: Insurers and employers can absorb some costs by offering supplemental insurance for treatments of other genetically-linked diseases. The “at-risk” seeking such insurance would face higher premiums.
- Con: Insurers' costs will still rise if increased voluntary genetic testing results in more “at-risk” procuring insurance.
- Con: Difficulty in determining which genetically-linked diseases should be covered.
- Negotiated Rule-Making: Allow insureds and employers/insurers concerns to be jointly represented when determining which genetically-linked diseases should be covered under general coverage plans.
- Pro: Negotiated rule-making is viewed as a method for limiting litigation resulting from unpopular regulations.
- Pro: Both cost concerns and genetic discrimination concerns would be represented in the final compromise.
- Con: Attempts at negotiated rule-making has at times taken as long as usual government processes and has at times failed to decrease litigation over the final rule ( Ex: EPA negotiated rules between 1987 were subject to as many lawsuits as normally formed rules and did not save any time.).
- Conclusion: Applying these suggestions may break the political logjam.
Key to symbols used to mark essays:
On some essays we circled particular words or phrases that seemed found questionable or unclear, and attached these symbols to them.
good point or argument ! excellent point or argument ~ fair point, or incompletely or unclearly expressed – weak point … point needs elaboration " point already made, repetitive ? unclear ?? very unclear, confused, mixing together separate points x mistake of law, misstatement of fact, misuse of term x? point appears mistaken # irrelevant or tangential point #? point's relevance unclear #cl
point irrelevant to interests of client or to your assigned role abs overly abstract c-a fails to discuss obvious counterargument conc conclusory; result of argument stated without reasoning contra
contradiction dir? didn't follow directions exag otherwise good point is overstated or exaggerated ff fighting facts: contradicting stated facts or making assumptions inconsistent with them jg
jargon: using technical language as substitute for analysis lec lecturing: abstract discussion unconnected to or unnecessary for the problem at hand ll laundry list: throwing in relevant and irrelevant arguments alike, without distinction mix mixing together issues that should be discussed separately ns non sequitur: conclusion does not follow rew reword phrasing or diction rf repeats facts unnecessarily sa straw argument: weak or caricatured argument set up merely for sake of rebuttal ss
slow start: too much space spent restating the issue or getting to the point tc throat-clearing; same as slow start ua unsupported assertion vb verbose; too much space devoted to the point or points in question vg discussion is overly vague