HHS shows how to sunset red tape on small business

Amidst the post-election chaos and a worsening pandemic, you’d be forgiven for missing one of the most consequential deregulatory actions of the entire Trump administration: On Nov. 4, the Department of Health and Human Services proposed a “sunset regulation,” which, if finalized, would build expiration dates into thousands of existing HHS regulations as well as new rules going forward. While the fate of this regulation remains uncertain, the principle behind it has support from both sides of the aisle, and it could serve as a template for future regulatory reforms. 

Under the proposal, HHS rules that have been in effect more than eight years will expire in two years. More recent regulations — as well as rules going forward — will sunset 10 years after enactment. To push back the sunset date, HHS will have to review rules to determine if they have a significant economic impact on small businesses. When the answer is yes, a more in-depth review will follow. And if HHS fails to conduct these assessments (with only a few exceptions), the rule goes up in smoke.

This regulation is a response to an array of executive orders and other presidential directives that require “retrospective review” — bureaucratic jargon for a lookback at existing regulations. HHS, like most agencies, also has to comply with the Regulatory Flexibility Act, which is meant to reduce burdens on small businesses and has requirements for retrospective review. But those requirements largely lack teeth.

HHS would like to remedy that problem, and for good reason. Review of existing regulations remains a relatively rare phenomenon. Some new regulations are subject to review, including cost-benefit analysis, but existing regulations are seldom scrutinized with any serious rigor, let alone updated. About 68 percent of federal regulations have never been updated. HHS estimates 85 percent of its rules created before 1990 have never been edited.

That regulations should be periodically reviewed is common sense, and it’s bipartisan.

Cass Sunstein, President Obama’s regulatory chief, has suggested that testing whether regulations are achieving their expected outcomes is “one of the most important steps imaginable.” Michael Greenstone, who served as chief economist on Obama’s Council of Economic Advisers, has proposed sunset provisions as a means to force retrospective review.

The benefit of a sunset provision is that enforcement happens automatically.

Like children pretending to do their homework, regulators often go through the motions of a review without accomplishing much of substance. That’s because no one is seriously looking over their shoulder. With a sunset trigger, the reviewing agency must take the process seriously or it loses its beloved regulation.

Sunset requirements are relatively commonplace in the states. New Jersey, Indiana and North Carolina have sunset requirements for regulations. Colorado, Texas and California have sunset processes for entire boards and agencies. In 2019, Idaho even allowed its entire regulatory code to sunset (replacing it with a more streamlined version). That process went remarkably well, despite some cries from special interests that the sky was falling.

The timing of the HHS rule may seem odd given that a pandemic is underway, as well as a presidential transition. In reality, the timing couldn’t be better. Bureaucracy and red tape have hindered the response to the pandemic at just about every turn, which is why agencies like the FDA have been frantically waiving regulations under temporary emergency powers. The Biden administration would be wise to conduct an audit of what went wrong, and the new HHS regulation would help achieve that end by requiring a deep dive into 18,000 HHS regulations — of which roughly 12,400 are more than 10 years old.

The new regulation is expected to cost somewhere between $10 and $26 million over a decade. That’s a very small drop in the bucket compared to the more than $1 trillion HHS spends each and every year (not to mention the 18 percent of GDP Americans as a whole spend on healthcare annually). A few small improvements to some big rules and the regulation will pay for itself many dozens of times over.

Given the presidential transition now taking place and a potentially hostile Biden administration, the HHS’s self-binding rule will face an uphill battle. Nevertheless, the proposed rule constitutes a bold last hurrah from the Trump administration.

Even if ultimately repealed, it creates a roadmap for regulatory reformers in the future.

Ronald Reagan once suggested that a government bureau is the closest thing to eternal life that we’ll ever see on this earth. Close behind is a rule in the Code of Federal Regulations. HHS’s new sunset rule won’t change that state of affairs dramatically, but it may cause a few outdated regulations to find their way to the scrapheap. Now wouldn’t that be something?

James Broughel is a senior research fellow with the Mercatus Center at George Mason University. Follow him on Twitter @JamesBroughel.