To Regulate or Not To Regulate, That is the Question

Hearing Health & Technology Matters
October 9, 2012

Characteristics of Free Market Economies

The last post on Government regulation introduced gluts and shortages, both undesirable, inefficient and unsustainable–theoretically– in a free market. “Theoretically” because the free market of classical economics is modeled on a world of “complete information, interchangeable goods and services, and lack of market power” — a world that exists only in theory.

 Laissez-faire{{1}}[[1]]tr:  Leave [us] alone.[[1]]  gets closer to free market reality by imagining wholly private economies free of government regulation beyond that required to protect private property.  That model, too, is only theoretical but it’s a closer approximation of reality in some economies such as the US. Figure 1 is an example of one economist’s view of an ideal “free” market. It is difficult to separate economics from politics when discussing government intervention/control of markets, but Economics and Politics are different and Hearing Economics sticks with economics.{{2}}[[2]]Feel free to apply the economics to your own flavor of politics.[[2]] I’ll start with examples of and finish by focusing on our profession/industry.

Samples of Government Economic Regulation


  • China has a big inventory glut stemming from efforts for a number of years by the Chinese government to prop up Supply by devaluing the Renminbi (RNB, aka yuan) and gain a trade advantage. But even Costco can’t buy enough product to keep up with Chinese production. The RNB is still going down against the Dollar, making everybody outside China mad, punishing Chinese workers with lower real wages, punishing consumers (they can’t afford to purchase imported goods), but attracting higher skilled industries such as telecommunications.  All of which means more hearing aid component production in China, if China has anything to say about it.  Note: China has a Command Economy, meaning that it’s not only OK for the Government to intervene, but it’s their job to shape and grow the economy.  There’s a case where Economics IS Politics.  
  • Free Bart!

        If you think China’s torn, consider the US Postal Service’s glut of 700 MILLION 44c Bart Simpson stamps it can’t unload and certainly can’t export.  Now that’s a glut!  If ever there was a time for Government intervention, this is it.  They should have a fire sale — — a Bart Simpson Forever Stamps campaign–where we can buy Bart for 44c and use him on 45c mail.   That’s $308 million in revenue for the Post Office which won’t put a dent in their $10 billion deficit this month, but it’s the thought that counts.  It also probably requires an act of Congress.  

  • If your heart goes out to China and the US Postal System, wait till you hear about the US catfish and lobster gluts. Wholesale lobster prices are the lowest in 40 years, thanks to advanced technology and good weather, though consumers aren’t seeing a drop.  Lobstermen staged a work stoppage. It didn’t work so they met with State Government to try to regulate the number of days allowed for fishing, among other things. Meanwhile, Catfish farmers suffered rising Cost, lowered Price, competition (imports) and substitutes (Tilapia). They left the industry in droves — a classic case of not Willing to Sell (W2S)–which resulted in shortages, rising Price, influx of Sellers, and … a huge glut this year.  Time for US Government to the rescue.  It bought $10mil worth of catfish on top of its normal catfish order.  Like the US Postal Service, though, that amount won’t put a dent in the catfish industry’s death march.  
  • Drilling down to State Government, hearts go out to the blogger in North Carolina who wrote about his  “cave man diet” to control diabetes, thinking (naively) that his experience might be helpful to others.  Silly cave man —  he didn’t realize that his blog was “assessing and counseling” without a license, nor that such blogging was a criminal act. He found out when the director of the State Nutrition Board called and followed up with documentation highlighting his crimes– including the unlawfulness of writing “I do suggest that your friend eat as I do and exercise the best they can” without a license in nutrition. Cave man is resisting, claiming violation of his First Amendment rights.  (Editor’s note:  I do not have a license to blog in Arizona or any other state, either as an Audiologist or as a Economist-in-Training.  If you reside in North Carolina, please stop reading my posts, for both of our sake).    

 Government Regulation of Hearing Health Care


Readers may have gotten my drift from the above examples and wonder where this is headed when it comes to our own carefully tended turf.  It’s a fact that every regulation, regardless of its source, brings Costs — administrative oversight, updating rules, burgeoning paperwork, policing.  Consider those as sunk costs.  The Big Question for us and those we serve is whether regulations of  Audiology and/or hearing aid dispensing are more for the benefit of consumers or providers.  This has always the issue, in one form or another, as the current series of posts by Wayne Staab makes abundantly clear.  Hearing Economics will periodically use the Big Question in future posts to consider Supply and Demand in different markets.  

At present, the big elephant in the room is a politically incorrect Corollary Question: In the long run, does professional licensure hurt providers more than it helps them? One answer is that it’s a matter of individual experience and preference, but that just sidesteps the issue.  We lack sufficient data to answer or predict  future answer, but just because a question doesn’t have an answer doesn’t mean it’s not a valid question.  I’ll end this post with an example that begs the corollary question. 

Example of Government Regulation of Audiologists


Once you are licensed as an Audiologist in your state, did you know that you are required by law to participate in Medicare?  This is not about whether you elect for Participation or Non-Participation Medicare status.  This is about the lesser-discussed “opting out” and the fact that:

Audiologists are not included on the list of providers who are allowed to opt out of Medicare. This will therefore require the audiologist to enroll in the Medicare program and obtain a Provider Transaction Access Number (PTAN). A non-enrolled Medicare provider could provide a service at no charge as long as no other patients were charged for the same service.”{{3}}[[3]]This is from an ASHA publication on Medicare FAQs.[[3]]

The challenges raised by this regulatory recognition/restriction are varied.  One the one hand, the very fact that Medicare recognizes Audiologists as an entity that is in some way “essential” (watch out for that word in future regulation and enforcement) means we’re special.  On the other hand, being special through licensing makes us prisoners of our own device. As the Eagles point out, we can check out anytime we want, but we can never leave.  How’s that for autonomy? Two scenarios (out of many) quickly spring to mind:  

  1. You open a Concierge Audiology practice that is geared toward a small group of affluent consumers who wish to purchase services and product from you on a private, contractual basis.  Why should the Government get involved in such an arrangement?  Once you enroll, are you allowed to deny entry into your practice to anyone who wishes you to submit charges to Medicare?  
  2. You read and re-read the last sentence of the above quote and finally decide to become a “non-enrolled Medicare provider.”  That loophole enables you to skip the HIPAA/Medicare billing quagmire so long as you do not charge any of your patients for diagnostic procedures.  Instead, you simply increase your Price for hearing aids and offer “free” hearing exams.  The Government is not involved anymore. How are you distinguishable from a hearing aid dispenser?  What purpose does your license serve?  Would you be better off without it?
Definitely an uncomfortable topic.  We’ll visit it again when Hearing Economics returns to Government Regulation.



Photo courtesy of Gerard Lameiro, BBC News

  1. A third scenario: as a member of AAA and/or ASHA, one finds a colleague who has “opted out” in that he/she charges for services and does not accept Medicare.
    Principle 8, Rule 8c requires members to report unethical behavior (I cannot something illegal being ethical.)
    Should we expect lots of folks being “ratted out”?

    1. mjaudseo

      Well, Mike, that scenario belongs in a post on membership organizations and the economic benefits and cost of membership. That post will come but for now let’s stick with the economics of government regulation on Audiologists who, as you know, need not align with a membership organization in order to ply their trade within a state. From the free market economic view — that’s a good thing and I’ll pursue that thought when we get to membership organizations, along with good old Principle 8, Rule 8c. By the way, what did you mean to say in your parentheses — I think there’s an important word missing?

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