The [Only] Problem with Government Involvement

Let’s say that you offer a fee-for-service professional service. A large number of people, not everyone, want this service, so you cater to those who seek it out as they desire. Those who want this service care about its cost, as well as their continued access to it and the cost of that access. You go on providing the service for a number of years. The service works well for some, but for others it doesn’t. For some people your service doesn’t help their underlying situation, but for others it helps them live a longer, fuller life. After several years, the government looks at your service and realizes its benefits. As such, the government enacts regulations to ensure that the private service you make available to your customers will, to a certain extent, always be accessible to your customers–and possibly others–by encouraging you, through indirect incentives, to provide your professional service in situations where your involvement may not be financially beneficial to your bottom line. So, you practice in concert with the regulation for few years and things go well–which we should assume because, technically, things improve when the government involves itself in any situation. After a period of time, though, the government desires to make another adjustment because for some reason or another the regulation it passed several years earlier doesn’t do as much as the government believes it should–not enough people can realize the benefits of your service. At that point, the government identifies a class of people–a class that it feels can’t access your service readily–and decides to pay you for providing your service to that class. This goes on for a few years and things go well–which we should assume because, technically, things improve when the government involves itself any situation. This back-and-forth process continues well into the future. You provide your service; the government tweaks the regulations that affect your service to better serve their incentives. After enough time passes, this back-and-forth activity becomes common practice in your service’s industry, and because change and repeal in governmental law is hard to come by, the way that you practice your service and the manner in which the government desires that you practice your service eventually becomes one in the same. The success of your service is inherently dependent on the government, and vice versa. It’s at this point that the government begins to appreciate the public costs associated with its regulatory ventures. Some officials question whether the costs are too large; none question whether they’re too small. Accordingly, the government looks to you–the only non-altruistic party involved–and reviews your professional service, as well as the professional judgment necessary to provide your service, in attempt recover monies that it feels it wrongfully paid you for your service. The reviews take place using hindsight, and the decisions are, more or less, final. How would you respond to mitigate the losses that you may face resulting from the from this retrospective analysis? Welcome to the world of Medicare and RAC audits.

See: http://www.modernhealthcare.com/article/20120512/MAGAZINE/305129944/1135

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