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Friends, Cronies, Countrymen: Lend me your ears

051617 Sauer Blog Post
Cronyism is kind of like a celebrity endorsement, except this one comes at the expense of users, clients, taxpayers and legitimate competitors. (AP Photo/Steven Senne)

Cronyism isn't always vanilla-flavored, business-on-business crime — sometimes it's chocolate, strawberry, or even rocky-road flavored. The flavor of cronyism that I detest the most – even more than praline ice cream — is when a business or industry decides that they need the government to step in to give them legitimacy when the market hasn't. It is kind of like a celebrity endorsement, except this one comes at the expense of users, clients, taxpayers and legitimate competitors.

If it's for something healthcare-related, it can come at the expense of patients. For instance, right now a group of manufacturers is attempting to expand their market share at the "small price" of government intervention.

In this case, the makers of over-the-counter personal sound amplification products (PSAPs) want the FDA to create a new regulatory category recognizing PSAPs as hearing aids. The upside for these companies is that it puts their products on the same level as traditional doctor-prescribed hearing aids, and allows them to market to individuals with serious hearing issues.

The downside is that exposes the same companies to more regulation, it provides even more reasons for insurance to not cover hearing aids, it might end high-end customized hearing aids for veterans if they follow Medicare Part D's lead regarding over-the-counter drugs, and it would pre-empt current state laws. Worst, it doesn't reduce government involvement in healthcare — it expands it.

But wait, there's more! Just like the people who like praline ice cream always seem to be similar people, Sen. Elizabeth Warren, D-Mass., always seems to be behind any move to increase the scope of government, and in this case it isn't any different. Warren, along with a few colleagues, introduced the Over the Counter Hearing Aid Act of 2017 in late March.

Leave it to Warren to regulate the dreams of my youth away.

The problem here is broader than just Warren — the political Left truly believe they can spur innovation through broader regulation. They believe that the pressure of an oppressive government is the way to create the next gemstone. They believe that the market works because they tell it to — not that it actually works on its own. And yet almost more troubling, the government is already so big and convoluted that an industry can think that their best chance of increasing market share isn't through research and development, advertising, marketing, or even a better supply chain.

No, the PSAP manufacturers think their best chance of success is to lash themselves to the government.

You don't need a medical professional to get a PSAP. They're most often used recreationally by hunters, bird watchers, theater-goers, and so forth. They're not intended to treat a medical condition, and choosing one as a substitute for a hearing aid can actually damage your hearing, according to the FDA. Let's let PSAPs be PSAPs and let hearing aids be hearing aids.

True innovation happens without government. In fact, permission-less innovation has dominated major innovations of the last 20 years, with digital innovation advancing so quickly the government couldn't stop it even if they wanted to — you have that to thank for your ability to read this article anywhere in the world from a handheld device. And, where we see the most innovation in healthcare pricing are areas where the government has less control, not more.

Doctors are selling memberships like gyms, surgeons are listing prices, and competition is happening in an open, competitive forum just like on eBay. Self-insured companies are sharing the savings with employees who shop for healthcare, and in the competitive healthcare market you can even get a diagnosis over Twitter. In healthcare, innovation is everywhere that government isn't.

If Warren and PSAP manufacturers want more competition, they should be looking to deregulate the hearing-aid market instead of regulating themselves.

These PSAP cronies are going in the wrong direction, but fortunately they haven't been very shy about their intentions. If Warren is going to keep serving up this interesting flavor of cronyism she'd better figure out how to put more toppings on it to cover the bad flavor — really, why would anyone eat praline ice cream?

Charles Sauer (@CharlesSauer) is a contributer to the Washington Examiner's Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor and for an academic think tank.

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