Deep Dive Episode 98 – Regulatory Reforms and the COVID Pandemic
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Governments at all levels are figuring out how to make sure sick people are treated and that coronavirus doesn’t spread. Some experts are now drawing attention to possible regulatory reforms, as early reports suggested that federal agencies may have prevented private testing for COVID-19 before slowly issuing approval.
Others are calling for state-level reforms, such as changes to occupational licensing requirements. Existing occupational licensing laws arguably restrict medical professionals, including nurses and pharmacists, from practicing to the full scope of their training by limiting what duties they can take on and making nurses practice under doctor supervision. Licenses rarely transfer across state lines. This means that qualified doctors in one state cannot practice in other states, severely restricting their ability to provide telehealth services to potential patients. Advocates posit that these doctors should be allowed to prioritize the most pressing cases on telehealth. Many states have implemented emergency reforms regarding these issues to help prevent physician burnout and make sure medical professionals can focus their energies where needed.
Municipal-level reforms are also being discussed as vital to avoid penalizing residents for acting responsibly. In many localities, working from home requires the worker to overcome regulatory requirements. Some view this as generally unwise but are now drawing even greater attention to the topic because Americans are being urged to stay inside.
Further, while some regulations like parking limits make perfect sense in normal times, is suspending such rules worth considering in the current environment? This episode will discuss these issues and more.
Nate Kaczmarek: Good morning and welcome to The Federalist Society’s Fourth Branch Podcast for the Regulatory Transparency Project. My name is Nate Kaczmarek. I’m the Director of RTP. As always, please note that all expressions of opinion are those of the guest speakers on today’s call. Today, we’re pleased to bring you an interesting and timely discussion on Regulatory Reforms and the COVID Pandemic featuring three of our RTP working group members.
We have joining us Dr. Roger Klein, who is a lawyer and physician on RTP’s FDA and Health working group. He is a faculty fellow at the Center for Law, Science, and Innovation at the Sandra Day O’Connor College of Law at Arizona State University; also, Shoshana Weissmann, who is on our State and Local working group. She is a senior manager for digital media and communication and a fellow at R Street Institute; and also Dr. David Hyman, who is a lawyer, physician, and a co-chairman of RTP’s FDA and Health Working Group. He is the Scott K. Ginsburg Professor of Law & Policy at Georgetown Law.
If our audience would like to learn more about our speakers and their important work, you can visit regproject.org — that’s R-E-G project.org — where we have their full bios listed. In a moment, I will turn it over to Roger to get us started. After opening remarks and discussion, we will go to audience Q&A, so please be thinking of all the difficult questions you’d like to ask our speakers. Thank you all for joining us. Roger, the floor is yours.
Roger D. Klein: Thank you, Nate. So today I want to talk about a really important story that needs to be told, and that involves the clinical laboratory testing that has taken place during the current COVID-19 outbreak. So basically, just as a predicate, clinical laboratory tests are those tests that you use to diagnose or measure what are called the analytes. And in this case, we’re talking about tests that are used to diagnose the COVID-19 disease or the virus called SARS CO-2.
So these clinical laboratory tests are performed in a wide range of labs. And these include hospitals, which — where most laboratory tests are performed, commercial laboratories both large and small and including private labs that are owned by, for example, pathology groups. So since 1988 with the enactment of the clinical laboratory improvement amendments to the Public Health Services Act, clinical laboratories, after issuance of regulations in 1992, have been regulated under the Public Health Services Act, under the auspices of the Center for Medicare and Medicaid, services through its, quote, “CLIA” program, or Clinical Laboratory Improvement Amendments program. There’s an extensive — there has been an extensive system of oversight that involves state regulation, as well as accreditation agencies.
And that’s for the laboratory testing itself, anything that goes on in the clinical lab. Diagnostic test kits, which are produced by manufacturers and distributed—these include instruments and reagents—those have, since 1976, been regulated by the medical device amendments to the Food, Drug, and Cosmetics Act. So professionals in laboratories have always set up and validated tests within their laboratories. And they view them as medical services or, in the case of pathologists like me—I’m a pathologist by training—we view that as part of our medical practice.
So in 1992, 16 years after enactment of the medical device amendments, FDA first asserted jurisdiction to regulate these tests that are designed, developed, validated, and performed in laboratories but then mostly claimed to exercise enforcement discretion towards them, taking small moves to assert jurisdiction but basically keeping a hands-off approach for many years. During the Obama administration, which was encouraging of regulation generally, FDA took significant steps towards regulating laboratory developed tests, or what we call laboratory developed procedures, as medical devices under the medical device amendments. The administration went as far as issuing guidance documents that proposed a framework for regulation in 2014. That draft was withdrawn after the November 2016 election.
Laboratory service providers have long resisted FDA oversight. Most molecular tests, for example, have historically been laboratory developed procedures. I myself have directed a number of labs. Almost everything we did was a laboratory developed procedure. And we’ve argued that regulation would impair patient access, slow advancement in innovation, and leave us insufficiently nimble to address changes in technology, medical knowledge or emergencies, like disease outbreaks.
During the 2009 to 2010 H1N1 outbreak, laboratories in hospitals and commercial settings rapidly set up tests that helped to meet the exploding clinical demands for testing. This all changed. This paradigm changed in March of 2016 when, during the Zika virus outbreak, FDA sent warning letters to Texas Children’s Hospital and another laboratory telling them that they needed to apply for an emergency use authorization.
So during the administration — the Obama administration, FDA kind of creeped through some various moves into trying to regulate laboratory developed tests. And that culminated in that outbreak, the Zika outbreak, where they sent warning letters to some hospital laboratories, academic laboratories, others making them apply for — telling them they need to apply for emergency use authorizations, which are authorized in a public health emergency as a way to expedite medical device use. And FDA allows them on the market under those circumstances. So basically, FDA started regulating laboratory-developed tests in an emergency.
So fast forward to COVID-19 and FDA pursued this same policy and threw in emergency use authorization on February 5th, the day after a public health emergency was announced or declared by Secretary Azar. The FDA placed CDC in charge of testing and put it in the role of diagnostics manufacturer, essentially, for the nation. It was the only source of testing. And the testing was to be performed through public health laboratories, which are basically epidemiology labs.
So we had a government — we had government lab testing and government lab test manufacturer as our source of testing in the United States. Because of faulty design, CDC’s kits appear to have experienced contamination. Laboratories were unable to — the public health labs were unable to validate them. In addition, there were tight testing criteria. So as of late February, we only had done 472 tests in the United States.
But contrast this with the private lab. University of Washington had a test ready to go. Seattle, the epicenter of the initial outbreak, at least that we knew of, wanted to go live with the test, but FDA wouldn’t let them. There were other labs that could have performed testing in New York and maybe would have signaled to us what was going on early. As a result, you ended up having in Seattle initially early on an outbreak in a nursing home that infected, I don’t know, 50 to 100 people and killed over 30. So potentially, we could have caught that had University of Washington, which is now performing 3,000 tests a day, been able to go live with its test.
On February 29th, FDA issued a guidance document that essentially engrained the policy allowing them to regulate laboratories, telling them in that guidance that they needed to obtain emergency use authorization. So while presented as an expansion or lessening of the — what was going on — they had labs could start testing and then had 14 days to file — or 15 days to file a UA — it was, in fact, a formalization of FDA regulation of laboratory developed tests. I described this in a March 2nd article in City Journal.
So by March 16th, the dearth of testing and the problems that we were having — FDA updated this guidance to allow states to take responsibility for testing. But I think many labs took this as a signal that few warning letters would go out towards them. Then, on March 18th, Senator Rand Paul, who himself has been found positive for the coronavirus — Senator Paul introduced the Verified Innovative Testing in American Laboratories Act of 2020.
This act clarifies that clinical laboratories and the tests they develop within them and validate within them are to be regulated under the Public Health Services Act and even in the cases of emergencies. Not only did we have a problem with laboratories being able to quickly set up tests for their patients and manage patients quickly and triage them so they would know who’s positive and who isn’t so that we could allocate resources properly, FDA also hadn’t approved any emergency use authorizations for diagnostic kit manufacturers. So test manufacturers were selling tests in Europe. They were selling these kits in Europe, including some in the United States, didn’t have the right to sell them here.
So we were hamstrung and had no test on the market. Dr. David Hyman and I wrote what seems to be perhaps potentially a prevenient op ed in Investor’s Business Daily in 2017 in which we urged a lessening of the regulatory approach towards manufactured diagnostic tests that are shipped and distributed while at the same time discouraging FDA from trying to regulate laboratory developed procedures. We see the results of this. The President came in, President Trump, and he put together a public-private partnership. FDA relaxed their rules.
We have many laboratories that have jumped in, including LabCorp, Quest, BioReference, and others, and many, many hospitals. LabCorp has publicly announced they’re doing 20,000 tests a day. My understanding is that, from published data and conversations, is at a minimum we did, I think, 67,000 tests yesterday.
So we’ve gone from performing basically no tests to dwarfing any other country in the world, including countries like Germany and South Korea, which are doing a lot of tests. We were rapidly — by mobilizing the private sector, the private laboratories, we’re rapidly, rapidly able to begin testing many, many patients. And we are, because of it, getting a handle on this outbreak, understanding it, and are much better able to manage it. So with that, I’ll close the introductory remarks. But thank you.
Nate Kaczmarek: Thank you, Roger. Shoshana?
Shoshana Weissmann: Hi, everyone. I really appreciate the opportunity to talk about this today. I’ve been kind of surprised about the extent at which there have been regulatory reforms in response. Roger gave a fantastic overview as it applies to the FDA. But there are even more that I’ve worked on in the past and, to some extent, that I had expected would pop up. One of the biggest ones is allowing medical professionals to work across state lines.
There are already certain compacts for a few medical professionals, especially the nurses. That’s a pretty widespread compact. But in most cases, professionals of any kind can’t easily work across state lines. Last year, Governor Ducey became — he enacted the first law that allowed professionals to easily transfer in their occupational licenses. And while that’s a great idea just for the licensing side of things—that enabled more mobility—it’s really vital now that they have a process that can be expedited.
Pennsylvania followed suite soon after Arizona enacted that, with a similar kind of model, not quite as good but still pretty good. So it’s nice that those two states have models to be expedited. It’s just too bad that while a quarter of the country was moving already to enact similar laws that they hadn’t gotten there, just because it would have benefited them to have that kind of model in place.
So instead, you see a lot of states waving laws that stop medical professionals in other states from working in their states. Governor Polis in Colorado did this, Governor Charlie Baker in Massachusetts as well. A bunch of the governors have started this. It just would have been helpful if they had a process to be expedited rather than having to do this on the fly.
And this also plays into telehealth because you have to be licensed in the state you’re practicing in. And this applies to telehealth, too, even if you’re just looking at a screen. So I think that telehealth is one of these other issues that a lot of libertarians have been interested in.
And it’s interesting, too, because you’ll get a lot of criticism from people saying that what if the medical standards are different, if the staff standards of practice are different in different states. But they’re really not all that different enough to make a difference. And most of these laws take into account good standing anyway. So if people had poor marks on their record or if their license was in jeopardy for some other reason, that would factor into whether or not they could become licensed in a new state.
And with telehealth, too, there’s a lot of tools that people haven’t been able to take advantage of. Among them is the store and forward system, which is essentially letting doctors look through people who have logged into the system and asked for medical health. And it allows doctors to prioritize cases. And that’s especially helpful now as with coronavirus we want to make sure that the most important cases can be prioritized.
And part of the other reason that all this matters, too, is because, whether in person or over an internet system, allowing doctors to practice across state lines means allowing them to go where they’re needed most. One other factor that plays into this is scope of practice. All that is is just letting medical professionals practice everything they know. In a lot of states, nurses can’t practice anything unless they’re under the supervision of a doctor. They’re not allowed to work to the full extent of their knowledge.
Well, states have started to change that law. And actually, Ron DeSantis in Florida, the governor there, had recently signed legislation that expanded nurse scope of practice. And that was just serendipitous. But hopefully that will help expand access to care, especially letting nurses take care of cases, maybe taking some of the load off of doctors’ backs so doctors can handle the more advanced cases. All that’s really important.
And all of this, honestly, has been very important before as there’s doctor shortages. But the supply of nonphysician providers has been increasing. All of this was already important, but, especially in the time of coronavirus and medical shortages, this is even more important.
A part of this, too, includes not just people who you see in the doctor’s office but pharmacists, allowing them to renew ongoing prescriptions, allowing them to provide over-the-counter birth control, really anything fairly simple like that that allows them to take some of the load off of doctors and reduce doctor burnout is really, really important. Alabama expanded that ability for pharmacists recently in one of many executive orders that states have been putting out recently.
And aside from medical things, there’s also other regulations that you might not have considered would play a role here, especially with food shortages. And you see all these posts about grocery stores being run out of food. Texas Governor Greg Abbott announced that Texas would waive laws that prohibit alcohol delivery trucks from delivering groceries. So now they can help out. And not only are they able to help out with something very important—and that’s food—but hopefully that helps employment as we see a lot of people out of work at this time.
Another type of regulation is just restrictions on feeding the hungry. Over the years, there have been so many examples of — it’s more so local, rather than state officials prohibiting people from feeding the homeless and the hungry. You’ll hear all different excuses for it, including making sure that they have proper nutrition. But any nutrition is better than none.
Last year, there’s a really famous case where MUST Ministries in Georgia was prevented by the local health department from feeding sandwiches to hungry kids, as they had been doing for quite a long time. So now they’ve all these extra restrictions on them. And they’ve been making it work to the best of their abilities. They feed literally thousands of children. But thankfully, the local school department has partnered with MUST Ministries to keep that going to kids who are out of school and might not have as easy access to food.
There’s also regulations that prohibit people from working from home. I’m not even kidding. It applies to people uploading YouTube videos from their apartment, at times, people working from home just sitting at their desks. And a lot of times you need to jump through ridiculous regulations in order to be approved to simply work from home. And while we’re asking people to stay inside and we want people to be employed, those regulations really need to be suspended or lifted.
And you’re not really seeing that happen much. Although, I suspect that there’s going to be a big lack of enforcement. But oddly enough, there’s not a lack of enforcement in everything you would expect. Thankfully, some localities and states have suspended parking hour limits, overnight parking rules, things like that because there’s not much traffic to begin with. And again, we want people to stay inside. Although, I found out yesterday that Albany has been still enforcing these laws, which isn’t helpful to anyone.
And it’s just more tickets and fines that don’t help in the time of coronavirus, which is unfortunate. And my colleague, Nick Zaiac, has been working on especially any regulations that apply to transportation. So he’s more the expert on that. But he had come up with some of these ideas, just making sure that people don’t have to move their car or really simple things like that.
That also plays into DMV restrictions. A lot of those have been lifted, including in Virginia and Colorado, letting people renew their licenses online, closing DMVs and extending the period that licenses are valid for. All those are really good ideas to make sure that people don’t have to go outside, go to crowded areas, especially at the DMV when you often find yourself waiting for quite a while.
And in addition to these, there’s just a lot of long-term solutions. Like I said with licensing reciprocity, it would have been helpful if more states had enacted that earlier so they would have a process to expedite. And hopefully going forward they not only enact reciprocity but also create mechanisms for pandemics for exactly how they’re going to expedite it in times like these.
There’s also certificate of need laws that — I think it was Timothy Sandefur has described as a competitors veto. It really stopped access to medical care. It’s frustrating, and a lot of these certificate of need laws are being lifted to make sure that there can be enough hospital beds. It’s odd that this wasn’t lifted before, although people have explained that this is related to certain Medicaid reimbursement laws. There’s even now federal legislation to make sure that states won’t be penalized for that.
So all this is to say there’s no shortage of regulations that need to be scraped or at least paused in certain cases, like with transportation regulations, to make sure that people are acting safely, they don’t go outside, and they have reasonable access to medical care. Thank you.
Nate Kaczmarek: Thanks, Shoshana. Very interesting. David?
David Hyman: So Roger’s given you a nice case study of the FDA regulation of clinical labs, and Shoshana’s given you a whole bunch of specific concrete examples of regulatory reforms that people are doing or thinking about. I want to do something a little bit different. I’m going to give you a framework for thinking about the various categories of regulatory reform that you’ve heard about already, as well as some other things that appear to be on the menu.
I teach a course at Georgetown law titled “How to Regulate,” and I’ve written a lot about the regulation of the healthcare system. And so there’s a little bit of déjà vu all over again for me in talking about this. But let me just give you the framework, sketch it out briefly, because I think it will help organize the way in which people think about the various reform proposals they’re hearing.
So the first category, which in lots of ways is the easiest, are things that the proponents want to do because there’s a crisis. And they plan for those reforms to go away, and everything will go back to the way it was after the crisis is over. So we’ve seen social distancing, closing of non-essential businesses, orders to shelter in place.
Nobody’s planning to continue those after the pandemic has run its course. We’re not going to see selective closing of specific businesses by government order after the shelter-in-place requirements are lifted. Shoshana talked about parking restrictions, and she mentioned that many states are closing their DMV or motor vehicle administration. Here in Maryland they closed public libraries. And again, those are sort of short-term responses tailored to the kinds of conditions that are likely to reduce the spread of COVID. And so that makes perfect sense. They’re not particularly controversial.
The second and third categories are more controversial or certainly should be. And both of them sort of flow from Rahm Emanuel’s famous quote about not letting a serious crisis go to waste. So the second category is made up of things that proponents thought were a good idea before the pandemic happened, and they can now push them through because the case for doing so during a pandemic is stronger. And they want to have it sticky. That is they want it to stay that way after the crisis has run its course because they think it’s better policy.
So if you’re interested in enhancing healthcare system capacity, the list of reforms would include a bunch of the things that Shoshana’s already mentioned: occupational licensing reform, broader use of telemedicine, elimination of certificate of need. And these are — although she mentioned that libertarians like it, there’s actually bipartisan support for some of these things. So the Obama administration in 2015 and 2016 issued a series of reports where they basically said, “We think occupational licensing reform is really important. It’s a barrier to entry for lots of people. It makes life much more difficult for people who’ve had encounters with the criminal justice system. And we ought to be making reforms.” The reports actually quote Milton Friedman and Adam Smith. So that particular form had some bipartisan appeal.
Issues about how the FDA and the CDC ought to handle approvals and inspections might be specific to the infections that we’re facing. But they could also prompt broader revisiting of the balances that are struck by those agencies. There’ve been news reports of things that are being held up from getting to the market because the FDA and NIOSH, which is part of the CDC, haven’t been able to cut through the regulatory red tape. So those are the sorts of things that I think are different than the first category and how sticky in terms of their long-term duration remains to be seen.
Now, the last category in some ways is the most troubling one. These are things that the proponents thought were a good idea before that they can now push through, even though the case for doing so hasn’t changed because of the pandemic. They just think it’s a good idea, and they want to push it through. And they want it to stay that way thereafter. And we can call this the pure opportunism category. And if you don’t like Rahm Emanuel’s formulation, Representative James Clyburn was quoted last week as saying, quote, “The coronavirus bill is a tremendous opportunity to restructure things to fit our vision.”
So if you take a look at the bill that’s been proposed by the House of Representatives, there’s a bunch of stuff, some of which is in the first category, some of which is in the second category. But there are also things about initiatives to encourage board diversity and restrictions on stock buy backs, requiring airlines to buy carbon offsets and the like. That’s just a wish list. They had that wish list before the pandemic, and they’re basically viewing this as the only train that’s leaving town. And they’d like their bill provisions to be included.
It’s a bipartisan phenomenon. We’ve seen pushback on AB5 in California, the bill that basically limits independent contractor status in ways that sweep quite broadly. And concern about it predated the coronavirus epidemic, but it’s sort of been amped up. The opponents are saying this is not just regular level job killing but, even worse, job killing in the context of a pandemic.
And it isn’t just at the federal level. In San Jose, the mayor has decided that gun shops are non-essential businesses, so they have to close. And in Ohio, the attorney general has reportedly ordered abortion clinics to stop performing surgical abortions because they’re non-essential surgical procedures. And the equipment that’s being used there could be used for essential surgical procedures. Now, there’s certainly politically neutral arguments for both of those policies, but does anybody really believe that those arguments were the actual reasons for those policies? If the political valence in each of those locations was flipped, I think we’d see the opposite pattern.
Now, there are a lot of hard cases that fall in between categories. So the House bill that I’ve already said some mean things about also provides for voting by mail, which will make a lot of sense if, come November, we’re facing a resurgence of the epidemic. But it also includes same-day registration and routine mailing of absentee ballots. And those had been on the wish list for a while.
Now, we’ve been here before. In the midst of the AIDS epidemic, the FDA drew a hard line, and then it beat a tactical retreat after activists occupied the FDA headquarters and press coverage in Congress turned against the agency. But the same can’t be said of how the FDA handled laetrile, where it again drew a hard line, which it took to the Supreme Court and won a unanimous judgement vindicating its outright ban.
So let me sum up. Our regulatory status quo is the result of imperfect and often anecdotal information about the problem, mixed intentions, both good and bad, half-dependence, politics, and a long series of attempts to play regulatory whack-a-mole against a backdrop of policies and procedures that are deliberately intended to limit administrative discretion. Now, when you combine that with just enough petty bureaucracy and turf protection to make things interesting, you’ve got a recipe for the kinds of problems we’re now facing, including the ones that Roger highlighted at the outset. But the stakes now suddenly seem much higher.
So in thinking about the problem of regulatory reform in the midst of pandemic, I think it’s useful to remember Chesterton’s fence and only tear down regulatory constraints or construct them differently if we’ve got a good theory as to why somebody else thought the regulation was necessary in the first place and a better theory and some evidence on why we should replace it with something else. For lots of things, like those in my first category, that will be an easy lift. For the second category and the third category especially, a much harder lift.
So we should be asking our usual hard questions about the nature of the market failure, government failure, the decision costs and error costs of a regulatory fix, the public choice aspects of intervention, and the rest of the usual suspects that need to be rounded up. To sum up, don’t make things worse. Make them better. Thank you.
Nate Kaczmarek: Thank you very much, David. I wanted to go back to Roger to see if he has any additional comments. One thing I had a question about in listening to your presentation was to ask about the FDA’s rationale for not opening up testing as you and David had advocated for in 2017. Just sort of give the FDA’s perspective and then your further thoughts.
Roger D. Klein: Yeah. Thanks, Nate. So David — in our op ed, what we argued for was a more — what I think was a more rational, at least as I would put it, approach, a more evidence-based approach to regulation based on need, which I think could be extrapolated here. FDA is well-intentioned I think in the main. And they’re trying to improve public health. 20/20 hindsight is brilliant.
Prospectively, we didn’t know we had all these cases. And FDA is saying, well, we want to make sure things work. I think — and then we’ve had the subsequent explosion of cases which we would have picked up, certainly, if people had been testing. But we didn’t know they were there. FDA didn’t know they were there at the time.
But again, that argues against FDA’s policy. But they would be saying, well, we need to have tests that work. And people would argue that, well, you’ve got lots of really good smart people who are doing testing every day without FDA oversights. And those tests work fine, and we don’t have any significant problems with laboratory tests in the United States. And we’ve got lots of kit manufacturers and they’re selling kits all in Europe. And they sell them for years there before they can sell them here and they seem to work fine.
So it’s, again, the balance of protection that the agency would argue versus sort of the practical realities, I think, of the day-to-day world.
David Hyman: Yeah. I’d just add that I think this is the same debate that one always has about what’s the right role of the FDA, and is it being too cautious or not cautious enough? A former commissioner of the FDA said, “Most people seem to think we only have two speeds: too fast and too slow. There’s never a just right, Goldilocks outcome.” And that’s a challenge. We don’t want bad tests out there. But on the other hand, we don’t want to tighten down the valves so much that there are no tests. And as I said in my own remarks, the context of an epidemic focuses the mind and raises the stakes.
Roger D. Klein: Can I add? I just want to say the other thing is, first of all, FDA’s granted the UEA to the CDC, but it’s tests didn’t work. So the labs couldn’t validate it because it wasn’t — it had problems of its own. And it was very low throughput. You just couldn’t do enough. And it just — again, in retrospect, it’s very easy. But a system of government-run testing, which isn’t what we do anywhere — all of our testing is private. It seems to have faltered the same way some would predict.
Nate Kaczmarek: Very good. Shoshana, any additional points you’d like to make, or I was curious if there were any of the regulations that won’t be — that are being relaxed at this point and not enforced during this time, if you have any predictions about which of them that will remain the case beyond this current pandemic, relaxation of regulations that will just go by the wayside? Any predictions in that regard?
Shoshana Weissmann: That’s a great question, especially because it’s always so hard to tell especially with the patchwork of state regulations we have and different political and regulatory environments. I’d love to say that a lot of the licensing reforms and a lot of the certificate of need law reforms will stay. I do think you’ll see some of them stay, probably codified through the legislature first, as they should be.
But I think one of the big highlights we’re really seeing now is there was already some recognition of licensing reform and the role it plays in helping people climb up the economic ladder by giving them more opportunity but especially by expanding access to care. Over the past couple of years that’s one side of the issue I’ve become really interested in because so many licensing regulations do stop people from getting care without other benefits. It’s not about safety. It’s about where the doctor’s located, things like that, or even not letting nurses do everything they’re qualified to do and maybe taking some pressure off of doctors and lowering costs.
So I think this will provide a good case study that might help going forward. In particular, though, I think certificate of need laws have become a real center of attention in a way they haven’t been before. They’re scholars and people like me nerding over this issue. But it’s become really widespread where people are noticing why were these laws in place in the first place? Why were we limiting access to care? What was the purpose? And if we’re lifting it in times like this, maybe we don’t need them to begin with.
So I think that you’re going to see some of these stay. I don’t know exactly how many. And by stay, I mean either the executive order kind of stays or the legislature codifies it formally. And I hope that there’s going to be more moves going forward to prepare for future pandemics. Of course, no one wants that. But as this situation shows, it’s a reality.
As with parking regulations and other temporary suspensions, I don’t think you’ll see those stay. But you might see some localities putting plans into place or maybe even think tanks putting out papers on “Here’s how you do it when it comes time for — and this stuff happens. Here’s which ones you suspend. Here’s which ones you should consider getting rid of to start with,” or other laws that might be helpful. So I’m hoping that this helps people plan for the future. And I do think you’ll see some of these stay, but just how many is going to determine on how all of this ends up if the regulatory reforms prove helpful. And I think they will.
David Hyman: Let me just add I think, as Shoshana and her colleagues have written, the occupational licensing problems and scope of practice issues stretch well beyond the healthcare system. They’re examples involving licensing of interior designers and overly restrictive requirements involving hair braiders and barbers and cosmeticians and so on. And none of those are obviously in play in the context of the pandemic, at least not as a first order consideration.
So I would not expect changes that are the result of the pandemic for the healthcare scope of practice and licensing issues, telemedicine and the like, to spread more broadly. It’s possible they can create a factual case as to why we should be revisiting those things, but they’re not going to be teed up initially. So I’m less confident that those changes, even though I think they’d be quite desirable, are likely to result.
I think, like Shoshana, the parking restrictions are going to go back in place. There are reasons for having them in that it’s a major source of revenue for lots of places. So eventually, you’re going to start paying your parking meters again.
Shoshana Weissmann: I would agree with all of that, and one other point I’d like to add, too, is the low-hanging fruit, like Louisiana having an occupational license for florists, interior designers, hair braiders, stuff like that. States have already begun reforming those. It’s actually kind of — I think states have lagged in some of the more advanced cases, the cases where it deals with medicine and people are a little nervous to deregulate at all for fear of either being called — basically being called out and saying that they’re being driven by ideology rather than facts. But facts do support deregulation, at least in my opinion, and the facts I’m seeing of these professions.
And it’s interesting because this will really — this will add to the licensing reform movement, the common sense one driven by facts, in a way that I think it’s been lacking before. You’ve had bipartisan support, especially for the low-hanging fruit before and even for the middle level in some of the medical things. But I think that this is really going to add to that in a way that will be beneficial not just to licensing reformers generally but hopefully to the people affected by these regulations.
David Hyman: Yeah. I agree with that. I just point out nobody’s calling for deregulation of the legal profession, which would be valuable to ordinary consumers in terms of getting them access to all sorts of benefits, including low-cost wills to the extent people are concerned about that in the context of a pandemic.
Nate Kaczmarek: Roger, are there some additional thoughts you’d like to offer at this point?
Roger D. Klein: Well, you know, I could talk about this all day because I think it’s such a critical issue. Testing is so important to resolving medical issues. You can’t fight what you can’t see, and testing is really our eyes. So we’re kind of swinging blindly in the dark. And you can’t help but wonder if, in New York or certainly in Washington where I know for sure they were ready to go — if they had started testing in early February, perhaps we wouldn’t be where we are today.
So I think that we need to look at regulation. And David has put forth a really great discussion of the balances that you try to strike. But I think what becomes problematic or troublesome is it’s very difficult to quantify what you prevent. I think the laboratory issue right now is a rare example where the harms of over-regulation, at least in my view, are quite visible. And I think that’s something that often is missed from the discussion.
Regulation is a very, very heavy tool in many instances. And there’s certainly a need for it, and it’s important. But it needs to be tailored and done right. And I think often — and Shoshana can chime in on this and David, too, but I think often what happens is there’s an inherent bias towards risk adverseness because it’s very hard to see the problems that you cause, what wouldn’t have come on the market, what wouldn’t have happened, versus arguments about what you’ve prevented.
David Hyman: Yeah. I — sorry. Shoshana, go ahead.
Shoshana Weissmann: Oh, no. You’re fine. You can go.
David Hyman: So I was just going to say anybody who’s done any work with the FDA has seen these basic dynamics, which are — in the sort of inside buzz you would call these error costs, false positives and false negatives, taking action when you shouldn’t have and failing to take action when you should have. Now, in the long history of the FDA, there are multiple instances of the commissioner being called before congressional oversight committees and just hammered for having a drug approved that turns out to have cause tremendous harms. And we can debate whether they had good enough information or not.
But there are almost no examples of them being called to action in nearly the same way or nearly the same frequency for their failure to approve drugs that they should have approved more quickly. There are certainly occasional instances where they’re asked questions, “Why has this drug been approved elsewhere? Why isn’t it available to Americans?” But the default mode, if you have any sense of self-preservation or you’re trying to avoid criticism, is to be careful because you get criticized much more harshly for false positives, that is approving a drug that you should have, than for false negatives, not approving a drug that, in retrospect, you should have.
And as Roger pointed out, the retro-scope is always 20/20 or even 20/10. Right? After the fact, we all look much smarter than we did at the time.
Shoshana Weissmann: I totally agree with all that. And you see that same regulatory dynamic on the state level, no matter the state. It’s very much the same thing, especially with licensing regulations and also certificate of need laws, really any of these regulations. You don’t get to see the fallout as clearly of what didn’t happen because X thing wasn’t allowed. For example, with Louisiana florists’ licenses, you don’t get to see all the florists that aren’t allowed to be florists and they’re doing something else or not doing anything because of it.
You have certain anecdotes, and there are ways of quantifying. But they’re imperfect because you’re trying to model what happened or what would have happened. And particularly with certificate of need laws, part of the reason I was saying that these laws should have been reformed a long time ago is because there’s economic and medical activity that isn’t happening because of these laws. There are things you can’t see. You can compare state to state. And in certain cases, you’ll really be able to get a good picture that way.
But for example, one of the Institute for Justice’s clients — I don’t want to get it wrong, but I want to say that he wanted to open an MRI clinic and provide essentially discount MRIs. And he wasn’t allowed to do so, due to certificate of need laws. So we don’t get to see that happening, let alone the people who weren’t Institute for Justice’s clients, the people who we don’t hear about. I have so many anecdotes, as this applies to all kinds of professions.
But anecdotes aren’t data. And while there are efforts to quantify that data to paint a fuller picture, they’re always going to be imperfect and partially because of that uncertainty and partially because of the very scholarly nature of the work. Your ordinary person isn’t going to see that. But if a licensing law is removed or something of that nature and harm is caused, everyone’s going to see that. It’s going to be a big story, and there’s going to be the proverbial guy in the movie yelling “There ought to be a law.”
Nate Kaczmarek: Very good. We have our first audience question of the day. Let’s go to that question now. When we get to your request, you’ll hear a prompt. Please state your name and affiliation and ask your question. If you’d like to join the queue for questions, please enter star, then the pound sign.
Tom Hayhurst (sp): My name is Tom Hayhurst. I’m out in Ft. Collins, Colorado. And I’m an independent consultant with the biotech industry. And I have a question. I’m curious as to why we’re not hearing a greater differentiation in the demographics of the people that are infected by this virus. In the beginning, we heard an awful lot about in excessive of 60, 65 years old. And then there was some talk about lung problems and immune-suppressed patients.
Why are we not getting a greater demographics of the people that are most vulnerable so that we can tailor our activities more towards the most vulnerable rather than the entire population? That’s all I have to ask.
Nate Kaczmarek: Roger, you want to take a crack at that?
Roger D. Klein: Yeah. Sure. So I think we are — Tom, thank you very much for your question. I think it’s clear — first of all, anybody can get infected with this. It’s obvious that anybody can get infected. And quite frankly, anybody can get seriously sick. But it is most lethal and certainly most toxic to elderly and immunocompromised individuals.
I don’t think there’s any — that’s entirely clear. What you’ve heard recently are some statements actually based on pretty scant data — but describing impacts on younger people. And there’s no question younger people can be seriously affected. I think what that was was more a response to the imagery of youth partying on Florida beaches during spring break and not engaging in social distancing and the fear that young people are going to ignore these warnings because they think that they’re not at risk and they’re going to spread the virus to older people. So I think that’s why you heard some of that blurring.
The other thing I want to make clear is our data are very limited. Our testing has been done on sick people. It’s prioritized to people who are the sickest and then tiered down from there. So what we have is what’s called the ascertainment bias. We are looking at the sickest people. We’re probably not capturing many, many infections.
For example, in New York they say they have 23,000 cases. They may have 100,000 or more infections easily. And I look at that based on their laboratory positivity rates. But what that does say is that, for most people, this is probably a benign disease that is infrequently serious and rarely fatal. We don’t have those numbers yet. We will learn them as more serology tests come online and we get a better epidemiologic perspective of this disease rather than a bias medical perspective based on testing of hospital patients and others who are heavily symptomatic.
David Hyman: So I agree completely with that. The only thing I’d add, harkening everybody back to grade school math, is it’s useful to think about this in terms of the numerator and the denominator. The denominator is the number of people that have the disease. But we’ve got at best an imperfect measure of that because we haven’t done enough testing. And lots of people that appear to be asymptomatic may in fact have the disease.
So that’s going to complicate matters. The numerator, if we’re focusing on hospitalized patients, are going to give us a somewhat deceptive view of the mortality risks.
Roger D. Klein: David’s right. We’ll capture the data. Then we’ll capture the more serious cases. But what we aren’t capturing fully are the nonserious cases. And that’s going on anywhere in the world. There isn’t a single country where you have close to one percent of the people infected, included — or reported as infected, including in China. But what we’re seeing in New York, for example, is that may be very — at least certainly in high population density areas, that may not at all be the case, and there may be many, many times the number of asymptomatic infections.
That increases the denominator, as David says, and makes the death rate plummet. And we may not be any different than — this might be another H1N1, for example. We don’t know that yet. But as we see more people tested — again, what we’re doing now is medical testing. We need surveillance testing now to — we have enough data and we know there are enough cases. We need to do surveillance testing, which means testing of unselected populations. We can use serology, which are blood draws, for that and get a much better handle on how pervasive this infection really is.
Nate Kaczmarek: Roger, this is Nate. Do you have an idea for how long that’s going to take for us to have a better grasp of how this compares to prior — for instance, H1N1 or other epidemics?
Roger D. Klein: Yeah. That’s a great question. So I think sooner rather than later. That’s what the miracle and the greatness of the United States private sector, especially in laboratory testing. So we have—it just crossed my screen—an EOA for a serology test passed in front of my eyes. And I’m told that large commercial labs, which can really do—they can do amazing numbers of high throughput testing—will be online with serology tests, again, which don’t require stick a swab deep into somebody’s nasal pharynx and a PCR test to find whether somebody’s infected but rather look at exposure, whether somebody has developed antibodies, which are defense molecules — whether they’ve been exposed. And I think we can get these numbers.
If this is done properly, we should be able to get these numbers pretty readily. We can then get a much better handle on the epidemic, the regions, where do we have to worry. Washington State, for example, is behaving very differently than New York, probably because the population density. And they’re not seeing anything like the explosive numbers.
And they’ve been testing — University of Washington, smaller state, University of Washington was one of the early testing sites once they were allowed to test. They’re up to, I believe, 3,000 a day. There’ll be more soon. But we’re not seeing what we’re seeing in New York in Washington. So we need to really do these types of studies.
Nate Kaczmarek: We have one more question. Let’s see if we can get it in.
Jeff Wood: Good afternoon. This is Jeff Wood from Washington, D.C. I was just curious how HIPAA as a regulation fits into this in terms of the constraints on sharing relevant epidemiological information. I’m old enough to remember an era in which health information was not as protected as it is today. And I’m interested in the speakers’ thoughts on that.
David Hyman: So I’m not a fan of HIPAA for any number of reasons. I’ve written about it. But to the extent the information that’s being obtained is obtained in the context of a public health initiative, a different set of rules apply than if it’s provided in the context of a treatment relationship. And so I think there’s reportable reporting for infectious diseases that effectively trumps the HIPAA requirements that would otherwise require confidentiality. So there’s any number of reasons why you should have questions about HIPAA and the way it’s been implemented. But I don’t think this is probably near the top of the list of reasons to be concerned or critical about HIPAA. Roger, what do you think?
Roger D. Klein: Yeah. I agree with David. But I would say that, on a practical level, especially in managing individual patients, families, and trying to isolate people who are infected and quarantine people who are exposed, I think there could be some issues. And I also think — not so much — less legal than practical. We’re so conditioned to be ultra-cautious with any sort of sharing of information.
And people don’t — doctors aren’t lawyers, and they’re not studying HIPAA. Everybody gets HIPAA training. But most of that urges extreme caution. And I think there’s always a wariness of can you do this, can you do that? And I think at the margins there’s probably some potential concerns. But as David suggests, I don’t think that’s at the center of what we’re dealing with right now.
David Hyman: My experience, for what it’s worth, is that healthcare providers mention HIPAA when they don’t want to do something for any number of reasons. And it’s just more convenient to mention HIPAA. And some of that, I think, has to do with the sort of risk aversion that HIPAA training encourages. So there are reasons for changing HIPAA this isn’t near the top of the list.
Nate Kaczmarek: Very good. Shoshana, would you like to offer the audience any concluding remarks before we hang up?
Shoshana Weissmann: Sure. No, I really appreciate the opportunity to do this. And I know that at my organization, the R Street Institute, we’re always looking for more ways to help, especially if it comes to coronavirus. But as dire as a time this is, I think we’re going to see a lot of opportunity to reform government in ways that can help people, especially as it comes to medical care.
So while this isn’t a great time, I am excited to see how things open up going forward. And maybe there’s more opportunities that I haven’t come across to open up access to medical care and make sure that people with coronavirus are prioritized and other people are able to access care.
Nate Kaczmarek: Excellent. David, Roger, any further thoughts you’d like to give our audience?
David Hyman: Regulation is a policy perennial. We’ll be back.
Roger D. Klein: Yeah. Yes. I second that. Look. At the Regulatory Transparency Project, this is what we’re trying to do. We’re looking at regulations. We’re saying what makes sense, what doesn’t, trying to start a discussion of how to best protect society, protect people while encouraging and fostering innovation. And I think that’s — it’s an ongoing discussion. It’s not going to stop.
Nate Kaczmarek: I think that’s absolutely right, and we are grateful to Roger, Shoshana, and David for your great insights today. We, of course, welcome listener feedback by email at firstname.lastname@example.org. Thank you all for joining us.
Operator: On behalf of The Federalist Society’s Regulatory Transparency Project, thanks for tuning in to the Fourth Branch podcast. To catch every new episode when it’s released, you can subscribe on Apple Podcasts, Google Play, and Spreaker. For the latest from RTP, please visit our website at regproject.org. That’s R-E-G project.org.
This has been a FedSoc audio production.