Standards for Privacy of Individually Identifiable Health Information. Final Privacy Rule Preamble.. A. Relationship of this Analysis to Analyses in Other HIPAA Regulations

12/28/2000

Congress has recognized that privacy standards, implementation specifications and requirements must accompany the electronic data interchange standards, implementation specifications and requirements because the increased ease of transmitting and sharing individually identifiable health information will result in an increase in concern regarding privacy and confidentiality of such information. The bulk of the first Administrative Simplification section that was debated on the floor of the Senate in 1994 (as part of the Health Security Act) was made up of privacy provisions. The requirement for the issuance of concomitant privacy measures remained a part of the HIPAA bill passed by the House of Representatives in 1996, but the requirement for privacy measures was removed in conference. Instead, Congress added section 264 to Title II of HIPAA, which directs the Secretary to develop and submit to Congress recommendations addressing at least the following:

(1) The rights that an individual who is a subject of individually identifiable health information should have.

(2) The procedures that should be established for the exercise of such rights.

(3) The uses and disclosures of such information that should be authorized or required. The Secretary's Recommendations were submitted to Congress on September 11, 1997, and are summarized below. Section 264(c)(1) of HIPAA provides that:

If legislation governing standards with respect to the privacy of individually identifiable health information transmitted in connection with the transactions described in section 1173(a) of the Social Security Act (as added by section 262) is not enacted by [August 21, 1999], the Secretary of Health and Human Services shall promulgate final regulations containing such standards not later than [February 21, 2000]. Such regulations shall address at least the subjects described in subsection [regarding recommendations].

Because the Congress did not enact legislation governing standards with respect to the privacy of individually identifiable health information prior to August 21, 1999, the Department has, in accordance with this statutory mandate, developed final rules setting forth standards to protect the privacy of such information.

Title II of the Health Insurance Portability and Accountability Act (HIPAA) also provides a statutory framework for the promulgation of other administrative simplification regulations. On August 17, 2000, the Transactions Rule was published. Proposals for health care provider identifier (May 1998), employer identifier (June 1998), and security and electronic signature standards (August 1998) have also been published. These regulations are expected to be made final in the foreseeable future.

HIPAA states that, "any standard adopted under this part shall be consistent with the objective of reducing the administrative costs of providing and paying for health care." (Section 1172 (b)). This provision refers to the administrative simplification regulations in their totality, including this rule regarding privacy standards. The savings and costs generated by the various standards should result in a net savings to the health care system. The Transactions Rule shows a net savings of $29.9 billion over ten years (2002-2011), or a net present value savings of $19 billion. This estimate does not include the growth in "e-health" and "e-commerce" that may be spurred by the adoption of uniform codes and standards.

This final Privacy Rule is estimated to produce net costs of $18.0 billion, with net present value costs of $11.8 billion (2003 dollars) over ten years (2003-2012). This estimate is based on some costs already having been incurred due to the requirements of the Transactions Rule, which included an estimate of a net savings to the health care system of $29.9 billion over ten years (2002 dollars) and a net present value of $19.1 billion. The Department expects that the savings and costs generated by all administrative simplification standards should result in a net savings to the health care system.