[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
 MEDICAL RECORDS CONFIDENTIALITY IN THE MODERN DELIVERY OF HEALTH CARE

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                         HEALTH AND ENVIRONMENT

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 27, 1999

                               __________

                           Serial No. 106-34

                               __________

            Printed for the use of the Committee on Commerce


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 57-441CC                    WASHINGTON : 1999
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                 Subcommittee on Health and Environment

                  MICHAEL BILIRAKIS, Florida, Chairman

FRED UPTON, Michigan                 SHERROD BROWN, Ohio
CLIFF STEARNS, Florida               HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania     FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 PETER DEUTSCH, Florida
RICHARD BURR, North Carolina         BART STUPAK, Michigan
BRIAN P. BILBRAY, California         GENE GREEN, Texas
ED WHITFIELD, Kentucky               TED STRICKLAND, Ohio
GREG GANSKE, Iowa                    DIANA DeGETTE, Colorado
CHARLIE NORWOOD, Georgia             THOMAS M. BARRETT, Wisconsin
TOM A. COBURN, Oklahoma              LOIS CAPPS, California
  Vice Chairman                      RALPH M. HALL, Texas
RICK LAZIO, New York                 EDOLPHUS TOWNS, New York
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN B. SHADEGG, Arizona             JOHN D. DINGELL, Michigan,
CHARLES W. ``CHIP'' PICKERING,         (Ex Officio)
Mississippi
ED BRYANT, Tennessee
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Amdur, Robert, Former Associate Professor of Medicine and 
      Chairperson, Dartmouth Committee for the Protection of 
      Human Subjects, Dartmouth Medical School...................    41
    Gencarelli, Dawn M., Manager, Health Policy, Harvard Pilgrim 
      Health Care................................................    54
    Hamburg, Margaret A., Assistant Secretary for Planning and 
      Evaluation, Department of Health and Human Services; 
      accompanied by Lana Skirboll, Associate Director for 
      Science Policy, National Institutes of Health; and John 
      Eisenberg, Administrator, Agency for Health Care Policy and 
      Research...................................................    10
    Jacobsen, Steven J., Director, Section of Clinical 
      Epidemiology, the Mayo Foundation..........................    37
    Koyanagi, Chris, Director of Legislative Policy, Judge 
      Bazelon Center for Mental Health Law, on behalf of Consumer 
      Coalition for Health Privacy...............................    92
    Krinsky, Daniel L., Director, Patient Services and Pharmacy 
      Practice, Ritzman Pharmacies, Inc..........................    62
    Latanich, Terry S., Senior Vice President, Government 
      Affairs, Merck-Medco.......................................    68
    Meyer, Roberta, Senior Counsel, American Council of Life 
      Insurance..................................................   108
    Meyers, Abbey, President, National Organization of Rare 
      Disorders..................................................    57
    O'Keefe, Mark, Commissioner of Insurance, Department of 
      Insurance, State of Montana................................   100
    Stump, David C., Genentech Fellow............................    44
    Visco, Fran, President, National Breast Cancer Coalition.....    50
    Zubeldia, Kepa, Vice President of Technology, Envoy 
      Corporation................................................    84
Material submitted for the record by:
    Hamburg, Margaret A., Assistant Secretary for Planning and 
      Evaluation, Department of Health and Human Services, letter 
      enclosing response for the record..........................   120

                                 (iii)



 MEDICAL RECORDS CONFIDENTIALITY IN THE MODERN DELIVERY OF HEALTH CARE

                              ----------                              


                         THURSDAY, MAY 27, 1999

                  House of Representatives,
                             Committee on Commerce,
                    Subcommittee on Health and Environment,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2322, Rayburn House Office Building, Hon. Michael 
Bilirakis (chairman) presiding.
    Members present: Representatives Bilirakis, Deal, Burr, 
Whitfield, Bryant, Brown, Waxman, Towns, and Eshoo.
    Also present: Representative Markey.
    Staff present: Marc Wheat, majority counsel; John Manthei, 
majority counsel; Patrick Morrisey, majority counsel; Karen 
Folk, minority professional staff; and Amy Droskoski, minority 
professional staff.
    Mr. Bilirakis. The hearing will come to order. Good 
morning. I would like to thank all of you, particularly our 
witnesses, for gathering today to begin this subcommittee's 
examination of medical record confidentiality.
    The purpose of today's hearing is to have an open 
discussion, without focusing on any specific legislative 
proposal, about several contentious issues raised in this 
debate. I was proud to work on the Health Insurance Portability 
and Accountability Act of 1996 which allowed portability and 
removed preexisting restrictions on insurance. Under the act, 
Congress is mandated to pass legislation addressing the 
confidentiality of identifiable health information by August 
21, 1999. Failure to do so would trigger a requirement that the 
Secretary of Health and Human Services promulgate regulations 
by February 1, 2000, to address the confidentiality of 
administrative data stored and transmitted electronically.
    It is significant to note that the Secretary's regulatory 
authority is more narrow than the broader debate on patient 
confidentiality. The Secretary's regulations may encompass 
standards relating to patient health information that is 
transmitted and stored electronically. However, while the 
modern health care delivery system is increasingly 
electronically based, most patient health information remains 
paper-based.
    Medical records contain some of our most sensitive and 
personal information. There is little argument that patient 
confidentiality of this information must be safeguarded. 
Additionally, abuse of this information cannot be tolerated, 
and everyone must be held accountable for protecting the 
privacy of this information.
    Yet, we must realize the unintended consequences that such 
legislation may bring about. If legislation goes too far, the 
quality of health care in this country may be seriously 
jeopardized. The modern delivery of health care in this country 
is an integrated system that in many instances no longer 
involves just patients and their doctors. The system, as we 
know, has innumerable benefits: disease management programs, 
protection against adverse drug reactions, and controlling the 
rising costs of health to ensure that more Americans have 
access to care.
    Additionally, we must make sure that in addressing this 
problem, we do not unnecessarily compromise ongoing research 
relating to drugs, medical devices and treatment regimens of 
approved products. We cannot leave large gaps in our knowledge 
about products already on the market and prevent new and 
innovative products from ever being developed. As the 
subcommittee moves forward, it is my hope that Congress will 
develop responsible legislation to establish safeguards 
protecting confidential medical information, encourage strict 
accountability in how this information may be used, and require 
tough penalties for misuse of this information.
    I would like to welcome our witnesses this morning. I look 
forward to--and I would like to thank all of you. I look 
forward to, of course, hearing your testimony. But first I 
would recognize Mr. Brown for an opening statement.
    Mr. Brown. Thank you, Mr. Chairman.
    I would also like to thank the witnesses. In particular, I 
would like to recognize Dan Krinsky from Ritzman Pharmacies in 
Wadsworth, Ohio, in my district.
    Thank all of you for joining us, Dr. Hamburg, and all of 
you for joining us today. I am impressed by the scope and the 
diversity of today's panels. I know that it is sometimes 
difficult to arrange for a fully representative and balanced 
list of witnesses, but the value of these subcommittee hearings 
can hinge on achieving such a balance. I hope that we can 
continue to work toward that balance for future hearings.
    Why is it important to pass a medical records privacy bill? 
I was struck by a recent piece in The Washington Post about an 
incident in Alexandria, Virginia. Apparently after a car was 
stolen near a methadone clinic, the police determined that it 
would be useful to see the clinical records of all of the 
patients using the clinic on the premise that this information 
would somehow help them identify future car thieves.
    Without the consent of the patients, they demanded and 
copied hundreds of private medical records. That doesn't sound 
like something that should happen in this country, but it 
happened not too far from the United States capital.
    We need to pass a medical records privacy bill. In 1997, 
Congress assigned itself the responsibility of establishing 
such protections before August 1999. Several members of this 
committee, including Mr. Markey and Mr. Waxman, Mr. Towns and 
Mr. Greenwood have played key roles in enabling Congress to 
fulfill that commitment. They have done most of the leg work 
for us.
    In light of the complexity of this issue, we owe them a 
tremendous debt of gratitude for doing that. Now it is our turn 
to take a real look at these issues. There is general consensus 
around the goals, the things that we do and do not want to do. 
We want to make sure that individuals can gain access to 
personal medical information; we want to make sure that 
individuals have the first and last say over personally 
identifiable medical information, who can see it, who use it, 
for what purposes.
    We also want to encourage participation in medical research 
by ensuring the confidentiality of any personal information 
used in that research. What we do not want to do is 
inappropriately hinder proper and beneficial uses of medical 
information. The goals may be simple, unfortunately surely 
striking the right balance between them is not. I am a 
cosponsor of the Health Information Privacy Act, legislation 
introduced by Mr. Waxman and Mr. Condit that I believe 
reconciles these priorities in a way that makes sense and 
serves the best interests of individuals and the public. But I 
also think that it is important to keep an open mind as our 
panelists share their perspectives on two of the most 
controversial issues addressed in this bill, preemption of 
State laws and authorization requirements for medical research.
    I would also hope in this or a future hearing we could 
discuss a relevant issue identified by Mr. Towns and addressed 
in his bill, H.R. 307. That issue involves the fate of medical 
records when a health care provider or carrier goes out of 
business. This situation obviously raises access and privacy 
issues.
    The steps this Congress takes in regard to medical records 
privacy are important to every individual in the United States. 
Our committee will play a critical role in ensuring a strong 
effective bill. I look forward, Mr. Chairman, to our future 
efforts toward that end.
    Mr. Bilirakis. I thank the gentleman.
    Mr. Bryant for an opening statement.
    Mr. Bryant. Thank you, Mr. Chairman.
    I will be brief this morning as I know that we have a long 
list of distinguished witnesses waiting to testify, and I am 
eager to hear what you have to say.
    I will have to excuse myself briefly for a short mark up 
after my statement, but I do want to return and hear from you 
so I will be back shortly. When we talk about trying to ensure 
the confidentiality of the patient identifiable health 
information in this day and age, the era of technology and 
Internet and so much information stored electronically, we are 
talking about no small feat. We can all agree that patient 
identifiable information should be readily available for 
patient treatment and securing payment for that treatment.
    But there are ongoing discussions about the appropriate 
uses of information for other purposes including quality 
improvement, health research, public health, health oversight 
and the list goes on. We in Congress are now charged with 
putting together responsible legislation that sets the 
parameters of how and when and under what circumstances the 
patient's information can be used and what the penalties would 
be for violations.
    If Congress doesn't pass legislation prior to August 21 of 
this year, by law, the Secretary of Health and Human Services 
could put forth regulations regarding electronic medical data. 
I know a representative from HHS is here today this morning to 
outline what their proposal is, but I also know that it is very 
important to many of my constituents that Congress take the 
lead in this area. My constituents feel that Congress could do 
a better job, and they don't want the HHS regulations.
    This meeting is the first step in the right direction and I 
want to thank the chairman and the ranking member for holding 
this hearing.
    I look forward to your testimony, as I said earlier. And I 
am grateful to the witnesses for taking time out of their busy 
schedules to be here today, and I would yield back my time.
    Mr. Bilirakis. I thank the gentleman.
    Ms. Eshoo for an opening statement.
    Ms. Eshoo. Thank you, Mr. Chairman, for holding this very 
important hearing today.
    First, I want to salute my colleagues, Mr. Markey and Mr. 
Waxman and the ranking member of the full committee, Mr. 
Dingell, for the work that they have done in introducing 
legislation on the issue of medical records privacy.
    I think that it is absolutely incumbent upon this Congress 
to enact a uniform Federal standard of protection for medical 
records privacy. Currently there isn't any Federal standard. 
There is an existing patchwork of State laws that provide 
erratic protection at best. There was a time when our health 
care privacy was protected by our family doctors who kept 
handwritten records and those handwritten records were kept in 
a big file cabinet. I can close my eyes and picture my doctor's 
office and the pediatrician who took care of my children. Any 
time that I had a question and I was in the office with him, he 
would go to that big file cabinet and pull out a bulging file 
and say they were healthy from the start and here is what we 
did for them.
    With the advent of managed care, increasing numbers of 
people are involved in health care treatment, payment, and 
oversight and given access to our very sensitive material. So 
today we have to place our trust in entire networks of insurers 
and health care providers. We can no longer expect that 
information supplied to our doctors will remain confidential.
    The American people expect and are entitled to 
confidential, fair, and respectful treatment of their private 
health information. But there is another bookend to this issue, 
and that is research. Research cannot be hampered. It should 
not be hampered. And I don't think that the American people 
want it to be hampered. They understand full well what comes 
from the research because they are the beneficiaries of it.
    So we have to be sure that any legislation that is enacted 
does not erect unnecessary barriers that would slow or impede 
medical research. I have--and I have bragged about this because 
I am very proud of it. I have the largest number of biotech 
companies in my Congressional District more so than any other 
place in California or our country or the world.
    So I see firsthand the advances in medical treatments and 
therapies that they have produced. Access to health data is 
vital to the ability to conduct research. I think that we have 
to keep that on the front burner just as we seek to protect the 
confidentiality of the materials. Research has used health 
records to develop treatments for childhood leukemia and 
uncovered the link between DES and reproductive cancers. Access 
to health data plays a critical role in protecting and 
advancing public health as well.
    Our local public health agencies use health records to 
identify and prevent outbreaks of infectious disease like the 
recent E.coli infections. Information is the life blood of 
research. Without access to health data, patients would be, I 
think, the real losers.
    So while I believe that we must establish a uniform Federal 
standard to protect the American people against the 
unauthorized use of private identifiable information, I think 
that we also have to be mindful of what the effects of the laws 
will be on medical research and the lives that are saved as the 
outcome of the research.
    So thank you, Mr. Chairman, for holding this hearing. It is 
a very important one. I thank all of the witnesses that are 
part of today's hearing, and I am also delighted to see that 
our hearing room is standing room only.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. I thank the gentlelady.
    Mr. Whitfield.
    Mr. Whitfield. Mr. Chairman, thank you very much.
    It is quite odd that we have this kind of crowd considering 
financial modernization is right down on the first floor and I 
know that it is packed down there.
    Mr. Chairman, this is quite an important subject matter 
that we are going to discuss this morning as we try to balance 
the need for patient histories for research and adequate 
medical care versus the privacy of patients. I have in my hand 
right here a 23 page questionnaire that is now given to home 
health care agencies when they submit medical assistance to 
home bound patients.
    This is referred to as the ``OASIS document'' which I 
understand now is on hold. But during the question and answer 
series, I would like to ask a couple of questions about this 
because it makes you wonder if it is necessary to fill out 23 
pages of questionnaires about patients.
    So this entire subject is quite appropriate at this time. I 
look forward to the hearing and yield back the balance of my 
time.
    Mr. Bilirakis. I thank the gentleman.
    Mr. Waxman for an opening statement.
    Mr. Waxman. I am very pleased that the subcommittee is 
focusing today on the important issue of medical records 
privacy. The testimony will be helpful as we work to address 
the pressing need for legislation that would protect the 
privacy of health information.
    Currently, there is no comprehensive Federal law that 
protects the privacy of medical records. Instead there is a 
patchwork of State laws many of which provide minimal 
protections. Unfortunately, there have been many incidents of 
inappropriate use and disclosure of such information. Concern 
about such privacy invasions has led some individuals to avoid 
medical testing and to withhold information from their 
physicians.
    Congress should enact legislation that protects the privacy 
of health information and ensures that individuals have 
appropriate control over their medical records. At the same 
time, we must allow appropriate access to health information 
for important public health purposes such as health research 
and respect the work that States are doing to address 
confidentiality issues.
    This week I join with Mr. Condit, Mr. Markey, Mr. Dingell, 
and Mr. Brown and many of my other colleagues to introduce 
legislation, the Health Information Privacy Act, that I believe 
strikes the proper balance regarding these issues. We dealt 
with many of the thorny issues that we will be discussing at 
this hearing today, and I think that we have a balanced 
compromise.
    The bill is based on three fundamental principles. First, 
health information should not be used or disclosed without the 
authorization or knowledge of the individual except in narrow 
circumstances where there is an overriding public interest.
    Second, individuals should have fundamental rights 
regarding their health records such as the right to access, 
copy, and amend their records and the opportunity to seek 
protection for especially sensitive information.
    Third, Federal legislation should provide a floor, not a 
ceiling, so that States and the Secretary of Health and Human 
Services can establish additional protections as appropriate. 
This common sense bill reflects consensus among a number of my 
colleagues who have long been leaders in the area of health 
care and privacy. And I believe that colleagues with a wide 
variety of perspectives can support it.
    I look forward to hearing from the witnesses today on the 
complex issues relating to medical records privacy and to 
working to advance meaningful legislation on this issue.
    I thank you, Mr. Chairman, for holding this hearing.
    Mr. Bilirakis. I thank the gentleman.
    Mr. Deal.
    Mr. Deal. Thank you, Mr. Chairman, I would like to thank 
you, also, and the panelists for being here today.
    Like most Members of the last Congress, I received many 
communications from my constituents with regard to the 
numbering system that was being proposed. I think that began an 
awareness on the part of many people on this issue of privacy, 
and it is certainly one that I think is a delicate balancing 
act.
    Mr. Whitfield alluded to the information form that was 
being asked to be filled out by home health care agencies. I 
had occasion recently with my 92-year-old mother who was 
receiving home health care to overhear the conversation with 
the home health care nurse who was asking the questions, and as 
my mother is hard of hearing, it was not difficult to hear the 
questioning process.
    Quite frankly, the questions were so personal and so 
intensive in nature that I was surprised my mother did not tell 
him it was none of their business when they asked a few of 
those questions. So it is something that I think all of us are 
concerned with, and I thank all of you for being here.
    Thank you, Mr. Chairman, for the hearing.
    Mr. Bilirakis. Thank you. Mr. Towns.
    Mr. Towns. Thank you, Mr. Chairman, for holding this 
hearing. I want to commend you for doing this.
    As other committee members have indicated, the issue of the 
privacy of medical records is one that cannot be ignored. 
Through the rapid growth of modern technology, health records 
are now readily available for commercial use, disclosure to 
employers, and restrictions on eligibility for health 
insurance. That is why I am pleased to join my colleagues in 
cosponsoring the Health Information Privacy Act.
    I am very pleased that a provision was included in this 
legislation which would require the Secretary of HHS to 
promulgate regulations for the maintenance of health records 
once a facility closes. Currently, there is no uniform method 
for disposition of a health record if a facility or health 
benefit plan ceases to exist. You may ask what does happen to 
that patient's records? Well, it could be destroyed or it could 
wind up in the street. We really do not know.
    Speaking from personal experience of having my own patient 
records found in the street after hospital closure, I can tell 
you that it is a problem that will only worsen with the 
consolidation and merger of various facilities. In fact, we 
have just seen a number of health plans that are no longer 
operating Medicare HMO. Can we, in fact, account for all of 
those patients' records? I do not think so.
    Similar provisions which are offered in a larger bill, H.R. 
307, have been pointed out by this committee as well at the 
Government Reform Committee during the last 5 years. Let us 
know recognize that there is some serious problems in this. The 
British example is of health record maintenance where the 
health records of some British royal family members were 
recently found in the street by a man walking his dog.
    It is my hope that any legislation dealing with medical 
records privacy would contain a means of handling health 
records once a health facility shuts down or health benefit 
plan ceases to do business. If we are concerned about 
continuity of care, we must find a uniform way of dealing with 
records. Let me also add that a solo practitioner, that when 
they would expire, the part of the office and all of that would 
become part of the estate and the family would sell it. But the 
way that we are delivering medical care today, nobody is going 
into those offices.
    The question is what happens to those records. These are 
the things, Mr. Chairman, that we really ought to get to the 
root of if we are really serious about health care and the 
continuity of it.
    Thank you so much.
    Mr. Bilirakis. I thank the gentleman. You have brought 
those points up before. They are horror stories. No question 
about it.
    The opening statements of all members of the subcommittee 
are made a part of the record without objection.
    [Additional statements submitted for the record follow:]
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida
    Thank you, Chairman Bilirakis, for holding this important hearing 
today. The focus of today's hearing is confidentiality of medical 
records.
    As we all know, H.R. 3103, the Health Insurance Portability and 
Accountability Act of 1996 (HIPPA) directed that within three and one 
half years after being signed into law that federal laws or federal 
regulations must be in place to ensure the confidentiality of medical 
records and other health information. The deadline imposed is close at 
hand.
    With the advances being made in biomedical research, especially 
genetic research, legislation to protect the confidentiality of health 
information becomes even more necessary.
    Advances in computer technology and the need for administrative 
efficiencies have created serious issues concerning the confidentiality 
of patients' medical records.
    We must look at the issues related to our changing health care 
system on a bipartisan basis, maximizing input from patients, academia, 
researchers, industry, professional groups, and government experts.
    As we proceed with how best to craft legislation to create a 
federal health privacy law, there are several key areas we should look 
at. For instance, what are the risks to the ability of scientists to do 
the cutting edge research needed to cure disease, both from failure to 
address the potential misuse of information by employers and health 
insurers, as well as from overly restrictive confidentiality 
regulations?
    What legislative and administrative steps can be reasonably taken 
to maximize the potential for the success of future research?
    Can we create an environment that protects the confidentiality 
rights of the patient and prohibits overt discrimination without 
infringing on the critical need for scientific progress against deadly 
and disfiguring diseases?
    As we all know, certain white-collar jobs are becoming globally 
mobile, as employers use low-cost satellite and fiber-optic 
communications to link U.S. headquarters to companies offering services 
continents away.
    Privacy advocates fear that insurers, employers, and pharmaceutical 
companies could gain access overseas to peoples medical records. This 
concerns me and needs to be addressed by Congress.
    We should also look at the rights of patients. One question we need 
to consider is should patients be allowed to access their own medical 
records.
    In conclusion, after passage of legislation to ensure 
confidentiality and privacy of medical records, we should then move 
toward the issue of genetic discrimination.
                                 ______
                                 
 Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
    Thank you, Chairman Bilirakis for holding this hearing today on the 
topic of medical records confidentiality.
    Every American wants to know that their medical records remain 
confidential, and that sensitive information that is identifiable to 
them is not bought and sold and posted on the Internet. No one deserves 
to have that happen to them.
    Many advocates believe that information management systems, 
statutory protections at the state level, and common law tort theories 
do not adequately protect medical records data. Some have proposed that 
a Federal medical records confidentiality ``floor'' be enacted, on 
which states could build higher levels of protection.
    Others, who believe that present protections are insufficient, 
favor a Federal law. This approach may allow for a freer flow of 
critical information, perhaps for research. A federal approach may even 
cut regulatory compliance costs for enterprises operating interstate.
    On Tuesday of this week the National Breast Cancer Coalition 
recognized the legislative work of this Committee in the area of breast 
cancer research and early identification. This is an area that is 
greatly important to me and my family, and I am very pleased that the 
Coalition's president, Fran Visco, is here today to testify. What 
causes me concern as I review some of the legislation introduced in the 
House, is that research to find the cures for diseases like breast 
cancer will become much more difficult. As someone whose own family has 
faced breast cancer, I do not want to see legislation going forward 
that would impede research.
    Many bills are being introduced to address challenges in the area 
of medical records confidentiality. All well-intentioned. Some that are 
very sound, others I view as mis-guided. Today this hearing affords 
Members an opportunity to explore issues that directly impact Americans 
and the interests we all have in privacy, and the confidentiality of 
our personal information. I urge all the Subcommittee Members to study 
these issues with great care. It is here in the Congress, and 
specifically on this Committee, beginning with this panel chaired by 
Mr. Bilirakis, that these matters will be considered and acted upon. 
So, Mike, I commend you for holding this hearing, and I yield back my 
time.
    Thank you, Mr. Chairman, and I look forward to the testimony this 
morning.
                                 ______
                                 
    Prepared Statement of Hon. John D. Dingell, a Representative in 
                  Congress from the State of Michigan
    Today the Health and Environment Subcommittee will address the most 
personal of health care issues, the right of an individual to have 
control over his or her medical records. I would like to thank my good 
friend Chairman Mike Bilirakis, for holding a hearing on this important 
topic, and I look forward to more hearings on the subject in weeks to 
come.
    I am proud to be a cosponsor of the Health Information Privacy Act 
with Mr. Waxman, Mr. Condit, Mr. Markey, Mr. Brown of Ohio, Mr. Towns, 
and Mr. Turner. This bill recognizes the fundamental right of an 
individual to inspect, copy, and amend his or her medical records. It 
ensures that these records will not be used or disclosed without an 
individual's knowledge or consent. The bill establishes a federal floor 
of privacy protections, leaving States the freedom to enact stronger 
laws patient protections.
    Today's hearing covers but two facets of the medical records 
confidentiality debate--research and preemption. Everyone agrees that 
medical research is the foundation of twentieth-century medicine, and 
everyone also acknowledges that protections for patients who are the 
subject of research are essential. These two interests are not mutually 
exclusive. Many research studies involve patients with highly sensitive 
medical records, such as women with breast cancer or people with 
genetic disorders. We need to enact strong safeguards to protect the 
very groups who are. most likely to benefit from such research. All 
research, whether federally-funded or private, should be subject to a 
check by an institutional review board or a similar entity. The 
potential harm from a lack of oversight is too great.
    A comprehensive federal privacy law would provide many new 
protections for personal medical records. However, in passing federal 
legislation we must not preempt the protections that States have 
already enacted. For example, some States have implemented laws that 
guard the privacy of certain types of medical information, such as 
mental health records. State and local laws that are more protective of 
an individual's privacy rights must be allowed to stand.
    There is another, equally important reason for a federal law not to 
preempt stronger State and local laws. Congress has been considering 
federal privacy legislation for two decades. If we pass a law this 
year, it is unlikely that we will revisit the subject any time in the 
near future. We must not tie the States' hands by preventing them from 
responding to privacy issues that arise in years ahead.
    While there are many facets to the debate over medical records 
confidentiality, and these issues are often complex, the need for 
federal legislation is clear. In an age where unauthorized parties may 
obtain very personal information about ourselves with the click of a 
computer mouse, we need to assure the public--and ourselves--that our 
medical information is kept private and secure.
                                 ______
                                 
   Prepared Statement of Hon. Edward J. Markey, a Representative in 
                Congress from the State of Massachusetts
    Thank you, Mr. Chairman for holding this hearing on this critical 
issue, and thank you for permitting me to take part as I am not a 
member of this Subcommittee.
    As you know, I introduced the first medical privacy bill in the 
House in early March, H.R. 1057, The Medical Information Privacy and 
Security Act, and this week I joined with my colleagues Mr. Waxman, Mr. 
Brown, Mr. Dingell and Mr. Condit in introducing a consensus bill.
    The August 21 deadline imposed by the Health Insurance Portability 
and Accountability Act for Congress to pass medical privacy legislation 
is looming before us. And now is the time for us to move forward on 
this issue that is of great concern to so many Americans.
    Without question, the rapid advance of the Information Age is 
revolutionizing the American economy and forcing the evolution of new 
relationships both good and bad. There is no area of its development 
that causes more anxiety for ordinary people than the area of privacy. 
And there is no area of privacy that causes more anxiety for Americans 
than the privacy of their most personal health information.
    Today, we are experiencing the erosion of our medical privacy. With 
the stroke of a few keys on a computer, or the swipe of the 
prescription drug card, our most intimate and closely held personal 
health information is being accumulated and tracked.
    This erosion of our privacy threatens the very heart of quality 
health care--doctor/patient confidentiality. By undermining this sacred 
relationship, we destroy the trust that patients rely on for peace of 
mind, and doctors depend on for sound judgment.
    In an HMO today, anywhere from 80-100 employees may have access to 
a patient's medical record [according to the Privacy Rights 
Clearinghouse in San Diego California.] With such unrestricted access 
to one's personal health information, it's impossible to separate the 
health privacy keepers from the ``just curious'' peepers.
    Not to mention what I believe is the greatest threat to your 
medical privacy--the information reapers.
    The evolution of technology has provided the ability to compile, 
store and cross reference personal health information, and the dawning 
of the Information Age has made your intimate health history a valuable 
commodity.
    Last March, the Wall Street Journal wrote about the ultimate 
information reaper--a company that is ``seeking the mother lode in 
health `data mining' ''. This company is in the process of acquiring 
medical data on millions of Americans to sell to any buyer.
    Currently there is no federal medical privacy law to constrain the 
information reapers as they delve into large data bases filled with the 
secrets of millions of individuals. These data bases represent a 
treasure chest to privacy pirates and every facet of your medical 
information represents a precious jewel to be mined for commercial 
gain.
    With this unfettered access, patient confidentiality has become a 
virtual myth, and the sale of your secrets a virtual reality.
    Because of the rapid evolution of technology, we have fallen behind 
in assuring a right that we have come to expect--the fundamental right 
to keep our personal health information private.
    The time is ripe for Congress to take action on this issue. Now is 
the time to pass a strong medical privacy law that will provide 
patients the right they deserve, the right to medical privacy.
    Mr. Chairman, I thank you again for convening this morning's 
hearing. I look forward to working with you and our colleagues on both 
sides to meet the August 21 deadline and I look forward to hearing the 
testimony of our witnesses presented here this morning.

    Mr. Bilirakis. I do want to apologize to the witnesses and 
to the audience for the late start. Obviously you must know 
that we had a general vote, one of those very tough votes that 
we sometimes have here, and that delayed the start.
    But I would like to now welcome the first panel consisting 
of Dr. Peggy Hamburg, Assistant Secretary for Planning and 
Evaluation, Department of Health and Human Services.
    Dr. Hamburg, we appreciate your attendance, appreciate your 
patience, and obviously your written statement is a part of the 
record. We appreciate it.
    I will give you 10 minutes so you can complement your 
statement in any way that you wish. You might want to introduce 
your accompanying persons.

  STATEMENTS OF MARGARET A. HAMBURG, ASSISTANT SECRETARY FOR 
    PLANNING AND EVALUATION, DEPARTMENT OF HEALTH AND HUMAN 
SERVICES; ACCOMPANIED BY LANA SKIRBOLL, ASSOCIATE DIRECTOR FOR 
    SCIENCE POLICY, NATIONAL INSTITUTES OF HEALTH; AND JOHN 
  EISENBERG, ADMINISTRATOR, AGENCY FOR HEALTH CARE POLICY AND 
                            RESEARCH

    Ms. Hamburg. Thank you, Mr. Chairman, Congressman Brown, 
distinguished members of the committee. We appreciate the 
opportunity to appear before you today to discuss the need for 
Federal legislation to safeguard the privacy of health 
information.
    With me today are Dr. Lana Skirboll from the Office of 
Science Policy, National Institutes of Health, and Dr. John 
Eisenberg, who is the administrator of the Agency for Health 
Care Policy and Research or what we fondly call AHCPR.
    I would like to commend the members of this committee, in 
particular Representative Waxman, Representative Markey, 
Representative Dingell, Representative Towns, and 
Representative Brown for their hard work in developing medical 
privacy legislation. The most recent bill was just introduced 
on Tuesday, and we have not had the opportunity to review it in 
detail. We have noted, however, that the authors chose to take 
a new approach to the issue and in doing so have helped provide 
momentum that will be needed to enact legislation this year.
    We are here today to emphasize our support for passage of 
bipartisan legislation providing comprehensive privacy 
protection for people's health care information. Stories abound 
that raise concern that our sensitive medical information can 
enter the wrong hands and/or be misused. For example, at one 
HMO, every clinical employee could tap into patients' computer 
records and see notes from psychotherapy sessions. In another 
example, the director of a work-site health clinic testified 
before the National Committee on Vital and Health Statistics 
that he was frequently pressed to disclose his patients' health 
information to their supervisors.
    These kinds of problems and others you have already spoken 
to this morning, underline the legitimate fear that Americans 
have about the security of their health care information. 
Almost 75 percent of our citizens say that they are at least 
somewhat concerned that computerized medical records would have 
a negative effect on their privacy. If we don't act now, public 
distrust could deepen--and ultimately stop citizens from 
disclosing important information to their doctors, or getting 
needed treatment, especially for sensitive concerns like mental 
illness or seeking genetic testing.
    The problem is not theoretical. Numerous analyses over 
several years by government, industry, and professional groups 
have identified serious gaps in protections for health 
information and have recommended Federal legislation to close 
them.
    In September 1997, Secretary Shalala presented her 
recommendations for protecting ``Confidentiality of 
Individually-Identifiable Health Information.'' In that report, 
the Secretary concluded that Federal legislation establishing a 
basic national floor of confidentiality is necessary to provide 
rights for patients and define responsibilities of record 
keepers. She recommended that Federal legislation focus on 
health care payers and providers and the information they 
create and receive in providing and paying for health care.
    The Secretary recommended legislation to implement five key 
principles.
    First, information about a consumer that is obtained for 
delivering and paying for health care should, with very few 
exceptions, be used and disclosed for health purposes and for 
health purposes only.
    Second, those who legally receive health information should 
be required to take reasonable steps to safeguard it. They 
should ensure that the information is available only to those 
who should have access to it, and only for purposes authorized 
by the patient or authorized by law.
    Third, consumers should have access to their health records 
and should know how their health information is being used and 
who has looked at it. The consumer should be given clear 
explanation of these rights.
    Fourth, people who violate the confidentiality of our 
personal health information should be held accountable. Those 
who use this information improperly should be punished.
    These first four principles must be balanced against the 
fifth principle, public responsibility. Just like our free 
speech rights, privacy rights cannot be absolute. We must 
balance our protections of privacy with our public 
responsibility to support other critical national goals--public 
health, research, quality care and our fight against health 
care fraud and abuse.
    As a major payor for health care, our Department is aware 
of the need to use personal health information for each of 
these national priorities. For example, our researchers have 
used health records to help us fight childhood leukemia, or to 
conduct the research to learn that beta blocker therapy 
resulted in fewer rehospitalizations and improved survival 
among elderly survivors of acute myocardial infarction. Public 
health agencies use health records to warn us of outbreaks of 
emerging infectious diseases. Our efforts to improve quality in 
our health care system depends critically on our ability to 
review health information.
    HIPAA also requires that if Congress fails to enact 
comprehensive privacy legislation by August of this year, HHS 
must implement final regulations by February of 2000, as the 
chairman noted.
    We have assembled a team from all of the relevant Federal 
agencies to work on these regulations, and it is our intent to 
have these regulations prepared in time for the statutory 
deadline.
    While we are moving ahead to have the regulation ready, the 
President and Secretary Shalala have made it clear that their 
first priority is to see Congress enact a comprehensive bill. 
Our staff has been working closely with many of your staff, and 
staff in the Senate, to assist you in achieving that goal. 
Again, let me reiterate that we want to see legislation and we 
want to work closely with you to make that happen.
    Mr. Chairman, the principles embodied in my recommendation 
should guide a comprehensive law that will create substantive 
Federal standards and provide our citizens with real peace of 
mind and protection. The principles represent a practical, 
comprehensive and balanced strategy to protect health care 
information that is collected, shared, and used in an 
increasingly complex world.
    Thank you again for giving us this opportunity to testify, 
and we are eager to answer any questions that you may have.
    [The prepared statement of Margaret A. Hamburg follows:]
  Prepared Statement of Margaret A. Hamburg, Assistant Secretary for 
    Planning and Evaluation, Department of Health and Human Services
    Mr. Chairman, Congressman Brown, distinguished members of the 
Committee: I appreciate the opportunity to appear before you to discuss 
the Administration's recommendations for federal legislation to protect 
the privacy of health information. With me today are, Dr. Lana 
Skirboll, Associate Director for Science Policy, National Institutes of 
Health, and Dr. John Eisenberg, Administrator of the Agency for Health 
Care Policy and Research.
    I would like commend the members of this Committee, in particular, 
Rep. Waxman, Rep. Markey, Rep. Dingell, and Rep. Brown for their hard 
work in developing medical privacy legislation. The most recent bill 
was just introduced on Tuesday, and we have not had the opportunity to 
review it in detail. We have noted however, that the authors chose to 
take a new approach to the issue and in doing so have helped provide 
momentum that will be needed to enact legislation this year.
    As you may remember, Secretary Shalala first presented her 
recommendations, required by the Congress under Section 264 of the 
Heath Insurance Portability and Accountability Act (HIPAA), in 
September 1997.1 I think it is fair to say that the 
recommendations were well received and have been used to assist others 
in crafting their own legislative proposals.
---------------------------------------------------------------------------
    \1\ ``Confidentiality of Individually-Identifiable Health 
Information, Recommendations of the Secretary of Health and Human 
Services, pursuant to section 264 of the Health Insurance Portability 
and Accountability Act of 1996'' can be found on the HHS web site at: 
.
---------------------------------------------------------------------------
    HIPAA also requires that if Congress fails to enact comprehensive 
privacy legislation by August of this year, HHS must implement final 
regulations by February 2000. We have assembled an interagency team to 
work on the regulations including representatives from the Departments 
of Labor, Defense, Commerce, the Social Security Administration, the 
Veterans Administration and the Office of Management and Budget. It is 
our intent to have the regulations prepared in time to meet the 
statutory deadline.
    While we are moving ahead to have the regulation ready, the 
President and Secretary Shalala have made it very clear that their 
first priority is to see Congress enact a comprehensive health 
information privacy bill. Our staff have been working closely with many 
of your staff, and staff in the Senate, to assist you in achieving that 
goal. Again, let me reiterate, we want to see legislation, and we want 
to work with you to make that happen.
    The issue of health information privacy is quite complex--in order 
to resolve it legislatively, some difficult choices will have to be 
made. We believe that our recommendations strike the appropriate 
balance between the privacy needs of our citizens and the critical 
needs of our health care system and our nation. This is an issue that 
touches every single American, and to reach resolution we will need a 
bipartisan effort.
                        the need for legislation
    It has been 25 years since former HEW Secretary Elliot Richardson 
set forth principles that led to the landmark Federal Privacy Act. 
Those 25 years have brought vast changes in our health care 
system.Revolutions in our health care delivery system mean that we must 
place our trust in entire networks of insurers and health care 
professionals--both public and private. The computer and 
telecommunications revolutions mean that information no longer exists 
in one place--it can travel in real time to many hospitals, physicians, 
insurers, and across state lines.
    In addition, revolutions in biology mean that a whole new world of 
genetic tests have the potential to either help prevent disease or 
reveal the most personal health information of a family. Without 
safeguards to assure citizens that getting tested will not endanger 
their families' privacy or health insurance, we could endanger one of 
the most promising areas of research our nation has ever seen.
    Health care privacy can be safeguarded. It must be done with 
national legislation, national education, and an on-going national 
conversation.
    Currently, when we give a physician or health insurance company 
precious health information, the level of protection will vary widely 
from state to state. We have no comprehensive federal health 
information privacy standards. Because the practice of health care is 
increasingly becoming interstate through mergers, complex contractual 
relationships and enhanced telecommunications, we can no longer rely on 
the existing patchwork of state laws. The patchwork does not provide 
Americans the privacy protections they need or expect. The Congress 
should seize upon this opportunity to create strong federal standards 
and reassure the public that they can trust their providers and 
insurers to keep their health information secure.
    In developing our recommendations for federal legislation, we 
learned a great deal through consultations with a variety of outside 
groups and from six days of public hearings conducted by the National 
Committee on Vital and Health Statistics, our statutory federal 
advisory committee for health data and privacy policy. The hearings 
involved over 40 witnesses from across the health community, including 
health care professionals, plans, insurance companies, the privacy 
community, and the public health and research communities.
    We believe our recommendations provide a balanced framework for 
legislation that can protect the privacy of medical records, guarantee 
consumers the right to inspect their records, and punish unauthorized 
disclosures of personal health data by hospitals, insurers, health 
plans, drug companies or others.
                             the principles
    The Secretary's recommendations for legislation are grounded in 
five key principles: Boundaries, Security, Consumer Control, 
Accountability, and Public Responsibility.
Boundaries
    The first is the principle of Boundaries: With very few exceptions, 
personally identifiable health care information should be disclosed for 
health purposes and health purposes only. It should be easy to use it 
for those purposes, and very difficult to use it for other purposes.For 
example, employers should be able to use the information furnished by 
their employers to provide on-site care or to administer a health plan 
in the best interests of those employees. But those same employers 
should not be able to use information obtained for health care purposes 
to discriminate against individuals when making employment decisions--
such as hiring, firing, placements and promotions. To enforce these 
boundaries, we recommend strong penalties for the inappropriate use or 
disclosure of medical records.
    We recommend that the legislation apply specifically to providers 
and payers, and to anyone who receives health information from a 
provider or payer, either with the authorization of the patient or as 
authorized explicitly by legislation.
    However, our recommendations acknowledge that these providers and 
payers do not act alone. In order for a provider or payer to operate 
efficiently, it may need to enlist a service organization to perform an 
administrative or operational function. For example, a hospital may 
hire an organization to encode and process bills, or a managed care 
organization may contract with a pharmaceutical benefit management 
company to provide information to pharmacists about what medications 
are covered and appropriate for their customers.
    The numbers and types of service organizations are increasing every 
day. While most do not have direct relationships with the patients, 
they do have access to their personal health care information. 
Therefore, we recommend that they should be bound by the same 
standards. For example, a health plan's contractor should be allowed to 
have access to patient lists in order to do mailings to remind patients 
to schedule appointments for preventive care. But it should not be able 
to sell the patient lists to a pharmaceutical company for a direct 
mailing announcing a new product.
    Because we recommend a minimum floor of protection for all records, 
our report does not distinguish among types of health care information 
based on sensitivity. For example, our recommendations do not include 
specific provisions related to genetic information in health records. 
Genetic information should be covered by the same rules. However, we 
recognize that the public is especially concerned about the unique 
properties of genetic information--its predictive nature, and its link 
to personal identity and kinship and its ability to reveal our family 
secrets.
    Therefore while you are developing privacy legislation, you should 
also consider how to limit the collection and disclosure of genetic 
information and prohibit health insurers and employers from 
discriminating against individuals on the basis of their genetic 
information. Because of the speedy development of genetic technologies 
and its potential for abuse, we recommend that legislation concerning 
discrimination in underwriting by insurers or other improper use of 
such information be considered expeditiously. We look forward to 
continuing our work with you on this issue.
Security
    The second principle is Security. Americans need to feel secure 
that when they give out personal health care information, they are 
leaving it in good hands. Information should not be used or given out 
unless either the patient authorizes it or there is a clear legal basis 
for doing so.
    There are many different ways that private information like your 
blood tests could become public. People who are allowed to see it--such 
as lab technicians--can misuse it either carelessly or intentionally. 
And people who should not be seeing it--such as marketers--can find a 
way to access it, either because the organization holding the 
information doesn't have proper safeguards or the marketers can find an 
easy way around the safeguards. To give Americans the security they 
expect and deserve, Congress should develop legislation that requires 
those who legally receive health information to take reasonable steps 
to safeguard it and face consequences for failure to do so.
    What do we mean by reasonable steps? The organizations should adopt 
protective administrative and management techniques, educate their 
employees, and impose disciplinary sanctions against employees who use 
information improperly.
    We are addressing some of these steps in our Security Standards 
regulation, implementing the Administrative Simplification mandate 
under HIPAA. Our NPRM laid out a range of approaches for safeguarding 
the information to which the HIPAA mandate applies. However, that 
regulation will only cover the security of specific electronically 
maintained records. We need comprehensive privacy legislation to cover 
all health information that needs this kind of protection.
    We don't believe a law can specify the details of these protections 
because each organization must keep pace with the new threats to our 
privacy and the technology that can either abate or exacerbate them. 
But a federal law can require everyone who holds health information to 
have these types of safeguards in place and specify the appropriate 
sanctions if the information is improperly disclosed.
Consumer Control
    The third principle is Consumer Control. The principles of fair 
information practice (formulated in 1973 by a committee appointed by 
Secretary Richardson) included as a basic right: ``There must be a way 
for an individual to find out what information about him is in a record 
and how it is used.''
    With very narrow exceptions, consumers should have the right to 
find out what is contained in their records, find out who has looked at 
them, and to inspect, copy and, if necessary, correct them. Consumers 
should be given a clear explanation of these rights and they should 
understand how organizations will use their information. Let me give 
you an example of why this is important. According to the Privacy 
Rights Clearinghouse, a California physician in private practice was 
having trouble getting health, disability, and life insurance. She 
ordered a copy of her report from the Medical Information Bureau--an 
information service used by many insurance companies. It included 
information showing that she had a heart condition and Alzheimer's 
disease. There was only one problem. None of it was true. 
Unfortunately, under the current system these types of errors occur all 
too often. Consumers often do not have access to their own health 
records and even those who do are not always able to correct some of 
the most egregious errors.
    With that in mind, our recommendations set forth a set of practices 
and procedures that would require that insurers and health care 
providers provide consumers with a written explanation detailing who 
has access to their information and how that information will be used, 
how they can restrict or limit access to it, and what their rights are 
if their information is disclosed improperly.
    We also recommend procedures for patients to inspect and copy their 
information, and set out the very limited circumstances under which 
patient inspection should be properly denied.
    Finally, we recommend a process for patients to seek corrections or 
amendments to their health information to resolve situations in which 
innocent coding errors cause patients to be charged for procedures they 
never received, or to be on record as having conditions or medical 
histories that are inaccurate.
Accountability
    The fourth principle is Accountability. If you are using 
information improperly, you should be punished. This flows directly 
from the second principle of security--the requirement to safeguard 
information must be followed by real and severe penalties for 
violations. Congress should send the message that protecting the 
confidentiality of health information is vitally important, and that 
people who violate that confidence will be held accountable.
    We recommend that offenders should be subject to criminal felony 
penalties if they knowingly obtain or use health care information in 
violation of the standards outlined in our report. The penalties 
mandated in privacy legislation should be higher when violations are 
for monetary gain, similar to those Congress mandated in the 
administrative simplification provisions of HIPAA. In addition, when 
there is a demonstrated pattern or practice of unauthorized disclosure, 
those committing it should be subject to civil monetary penalties.
    In addition to punishing the perpetrators, we must give redress to 
the victims. We believe that any individual whose privacy rights have 
been violated--whether those rights were violated negligently or 
knowingly--should be permitted to bring a legal action for actual 
damages and equitable relief. When the violation is done knowingly, 
attorney's fees and punitive damages should be available.
    These first four principles--Boundaries, Security, Consumer Control 
and Accountability--must be carefully weighed against the fifth 
principle, Public Responsibility.
Public Responsibility
    Just like our free speech rights, privacy rights can never be 
absolute. We have other critical--yet often competing--interests and 
goals. We must balance our protections of privacy with our public 
responsibility to support national priorities--public health and 
safety, research, quality care, and our fight against health care fraud 
and abuse and other unlawful activities.
    Our Department is acutely aware of the need to use personal health 
information for each of these national priorities. For example, HHS 
auditors use health records to uncover kickbacks, overpayments and 
other fraudulent activity. Researchers have used health records to help 
us fight childhood leukemia and uncover the link between DES and 
reproductive cancers. Public health agencies use health records to warn 
us of outbreaks of emerging infectious diseases. In addition, our 
efforts to improve quality in our health care system depend on our 
ability to review health information to determine how well health 
institutions and health professionals are caring for patients.
    For public health and safety, research, quality evaluations, fraud 
investigations, and legitimate law enforcement purposes, it's not 
always possible, or desirable, to ask for each patient's permission for 
access to the necessary health information. And, in many cases, doing 
so could create major obstacles in our efforts. While we must be able 
to use identifiable information when necessary for these purposes, we 
should use information that is not identifiable as much as possible.
    To demonstrate how access must be balanced against public 
responsibility, let me outline a few of the areas in which we recommend 
that disclosure of health information should be permitted without 
patient authorization.
Public Health
    Under certain circumstances, we recommend permitting health care 
professionals, payers, and those receiving information from them to 
disclose health information without patient authorization to public 
health authorities for disease reporting, adverse event reporting, 
public health investigation, or intervention. This is currently how the 
public health system operates under existing State and federal laws.
    For example, consider the outbreak of E. coli in hamburger that 
resulted in the largest recall of meat products in history. Public 
health authorities, working with other officials, used personally 
identifiable information to identify quickly the source of the outbreak 
and thereby prevent thousands of other Americans from being exposed to 
a contaminated product.
Research
    An important mission for the Department of Health and Human 
Services is to fund and conduct health research. We understand that 
research is vitally important to our health care and to progress in 
medical care. Legislation should not impede this activity.
    Today the Federal Policy for Protection of Human Subjects and FDA's 
Human Subject Regulations protect participants in most research studies 
that are funded or regulated by the federal government. These rules 
have worked well to protect the privacy of individuals while not 
impeding the conduct of research. We recommend that similar privacy 
protections should be extended to all research in which individually 
identifiable health information is disclosed, and not just federally 
funded or regulated research.
    All researchers must determine whether their research requires the 
retention of personal identifiers. There are research studies that can 
only be conducted if identifiers are retained; for example, outcomes 
studies for heart attack victims or the recent study which identified a 
correlation between the incidence of Sudden Infant Death Syndrome and 
the infant's sleep position. If, and when, personal identifiers are no 
longer needed, the researcher should be required to remove them and 
provide assurances that the information will be protected from improper 
use and unauthorized additional disclosures.
    Under the Common Rule, if personal identifiers are necessary, an 
IRB must review the research proposal and determine whether informed 
consent is required or may be waived. In order for informed consent to 
be waived, an IRB must determine that the research involves no more 
than minimal risk to participants, that the absence of informed consent 
will not adversely affect the rights or welfare of participants, and 
that conducting the research would be impracticable if consent were 
required. This or a similar mechanism of review should be applicable 
for all research using individually identifiable health information 
without informed consent regardless of funding source.
    This recommendation is consistent with the Federal Policy for the 
Protection of Human Subjects as well as the Privacy Act--policies that 
have protected federal research participants and research records for a 
quarter of a century and that have saved lives and fostered countless 
improvements in medical treatment.
                               preemption
    Our recommendations call for national standards. But, we do not 
recommend outright or overall federal preemption of existing State laws 
that are more protective of health information.
    Some protections that we recommend may be stronger than some 
existing State laws. Therefore, we recommend that Federal legislation 
replace State law only when the State law is less protective than the 
Federal law. Thus, the confidentiality protections provided would be 
cumulative and the Federal legislation would provide every American 
with a basic set of rights with respect to health information.
                               conclusion
    Mr. Chairman, the five principles embodied in our recommendations--
Boundaries, Security, Consumer Control, Accountability, and Public 
Responsibility--should guide a comprehensive law that will create 
substantive federal standards and provide our citizens with real peace 
of mind.
    The principles represent a practical, comprehensive and balanced 
strategy to protect health care information that is collected, shared, 
and used in an increasingly complex world.
    In addition to creating new federal standards, we must ensure that 
every single person who comes in contact with health care information 
understands why it is important to keep the information safe, how it 
can be kept safe, and what will be the consequences for failing to keep 
it safe. Most of all, we must help consumers understand not just their 
privacy rights, but also their responsibilities to ask questions and 
demand answers--to become active participants in their health care.
    We cannot expect to solve these problems all at once. With changes 
in medical practices and technology occurring every day, we need to be 
flexible, to change course if our strategy isn't working and meet new 
challenges as they arise.
    Mr. Chairman, we in the Department and the Administration are eager 
to work with you to enact strong national medical privacy legislation.
    Thank you again, for giving me this opportunity to testify. My 
colleagues and I look forward to answering any questions that you may 
have.

    Mr. Bilirakis. Thank you, Doctor.
    I would say virtually all of the opening statements from 
members here on both sides of the aisle emphasized, obviously, 
the sensitive balancing act that is involved here and certainly 
emphasized the need to not come up with something that would 
basically hurt research and new ideas.
    Having said that, I understand that the report submitted by 
the Biotechnology and Industrial Organization dated May 27, 
1999, fresh off the press, entitled Confidentiality of Patient 
Medical Records--this, by the way, I would ask unanimous 
consent to be made part of the record at this point--has 
reported and I quote them, referring to two bills, H.R. 1057 
and H.R. 1941, ``contain provisions that will significantly 
impede medical research by requiring that all research be 
monitored by an external entity.''
    [The information referred to follows:]
       Statement of the Biotechnology Industry Organization (BIO)
               Confidentiality of Patient Medical Records
                           executive summary
    The Biotechnology Industry Organization (BIO) is encouraged that 
the Subcommittee on Health and the Environment of the House Commerce 
Committee is holding this hearing and working to develop legislation to 
protect the confidentiality of patient medical records. Although it is 
critical to protect patients' confidentiality rights, this legislation 
must be carefully written to allow the continuation of vital medical 
research. Specifically, federal legislation must recognize that medical 
researchers use--and sometimes share information and should not impose 
undue burdens on these efforts. Federal legislation should create 
national, uniform confidentiality protections, rather than leaving 
researchers subject to a patchwork of state laws. Further, legislation 
should not interfere with existing FDA rules governing adverse event 
reporting. While it is critical to protect patients, imposing too many 
restrictions on access to important data will slow research efforts. 
Federal legislation must facilitate the positive uses of medical 
information to help ensure that the biotechnology industry will 
continue to make breakthrough scientific achievements into the next 
century.
                               statement
    The Biotechnology Industry Organization (BIO) represents 832 
companies, academic institutions and state biotechnology centers 
engaged in biotechnology research on medicines, diagnostics, 
agriculture, pollution control and industrial applications. BIO would 
like to take this opportunity to provide input into the continuing 
congressional debate on legislation to protect the confidentiality of 
patient medical records.
    BIO is pleased that the Congress is developing federal medical 
confidentiality legislation. As you know, under existing law, if 
Congress does not act by August of this year responsibility 
automatically shifts to the Secretary of the Department of Health and 
Human Services to prepare regulations regarding the use and disclosure 
of patient information in electronic transactions. Thus, if Congress 
does not enact legislation, the rules governing patient confidentiality 
will be a patchwork comprised of these regulations and a myriad of 
state laws. This environment could slow important research efforts.
    BIO has been a supporter of national legislation to protect the 
confidentiality of medical information. BIO strongly supports enactment 
of a law that protects patients' confidentiality, just as we supported 
barring discrimination on the part of group health plans based on 
``genetic information''. We view it as a moral duty--and good public 
policy--to reassure the public that the great promise of biotechnology 
research will not be tarnished by abuses of this technology.
    However, the legislation must be carefully written to allow the 
continuation of vital medical research. This research is essential if 
we are to realize the promise of developing new treatments and cures 
for many diseases. Legislation that unreasonably restricts researchers' 
access to and use of medical information will slow, and could halt, 
research efforts, thereby creating a barrier to the development of new 
drugs and biologics.
    Thus, Congress must craft legislation that balances protecting 
patients' confidentiality while encouraging research. We are optimistic 
that this can be accomplished and want to work with you to develop 
legislation that achieves this balance.
The legislation must carefully define protected health information.
    The public has an interest in protecting the confidentiality of 
identifiable medical information. Information that can be used to 
identify an individual raises privacy concerns. Therefore, legislation 
should define ``protected health information'' to include individually 
identifiable information to ensure that patients' confidentiality 
rights are not breached.
    Information that is coded, encrypted, or otherwise made anonymous, 
however, is not as threatening. Use of this data does not raise privacy 
concerns and therefore should not be subject to the same strict 
regulations as identifiable information. In addition, this information 
is critical for health research. For example, it is often used for 
outcomes research or in disease management programs. This data can 
provide valuable assistance to researchers as they monitor patient 
outcomes or try to determine the appropriate dosages for certain drugs. 
Therefore, legislative language should include information that is 
coded, encrypted, or made anonymous in its definition of 
``nonidentifiable health information.''
    While most of the pending bills contain such a definition, we are 
concerned that HR 1941, the Health Information Privacy Act, sponsored 
by Mr. Condit, Mr. Waxman, and others, does not. Legislation that 
doesn't precisely define nonidentifiable information is likely to have 
a chilling effect on research because researchers will fear that by 
sharing certain information they are violating federal law and will be 
subject to prosecution.
The legislation should not create new external review boards.
    Under current law, patients who participate in clinical trials are 
protected by FDA regulations and the ``common rule''. This includes 
safeguards such as oversight by Institutional Review Boards (IRBs), 
informed consent requirements, and other protections. In certain 
situations, the common rule provides for expedited review to ensure a 
timely response to a research request.
    Some medical research, however, falls outside the common rule. 
Examples include medical record review and certain ``preclinical'' 
research. Federal confidentiality legislation should not impose 
excessive restrictions or layers of bureaucracy on this research. 
Specifically, new legislation should not create an external review 
process that will impose overly burdensome requirements. Requiring that 
all research not governed by the common rule be approved by an external 
review board or satisfy other external monitoring processes will impede 
research.
    Unfortunately, the two bills pending before this subcommittee, HR 
1057, the Medical Information Privacy and Security Act, sponsored by 
Representative Markey, and HR 1941 contain provisions that will 
significantly impede medical research by requiring that all research be 
monitored by an external entity. HR 1057 would require all medical 
research, including research that is privately funded or does not 
involve human subjects, to be reviewed by an IRB.
    HR 1941 goes even farther. It requires that all research be 
reviewed by an entity certified by the Secretary. It should be noted 
that this entity is required under the bill to determine that ``the 
importance of the health research outweighs the intrusion into the 
privacy of the protected individuals who are the subjects of the 
protected information'' before it approves the use of protected 
information. This standard is more restrictive than that used by IRBs.
    Rather than creating additional layers of oversight, legislation 
should protect patients by establishing clear rules governing the use 
of information and penalties for violations of these rules.
Federal legislation should create national, uniform protections.
    Federal legislation should create national, uniform confidentiality 
protections. Clinical trials are multi-state ventures. National 
standards allow researchers to create informed consent and other 
procedures that will be legal in all states. If federal legislation 
allows individual states to impose restrictions on top of these 
standards, research will be slowed.
    Strong national standards will also give the public peace of mind 
because they will know that their medical information is subject to 
appropriate protections. This, in turn, will make them more willing to 
share information with medical researchers.
    Unfortunately, neither HR 1057 nor HR 1941 provide such standards. 
By allowing state laws to remain in force, these bills will foster a 
patchwork of standards and rules that inhibit research.
    We urge Congress to enact preemption language that will supersede 
all state laws that would inhibit access to information important to 
research. If broad preemption language is not adopted for the 
provisions of the entire bill, we urge that preemption language 
governing medical research be adopted.
The legislation should not interfere with existing FDA rules governing 
        adverse event reporting.
    The safety of drugs is monitored by existing FDA rules that require 
physicians and other providers to report to drug manufacturers 
instances of adverse events for safety and efficacy surveillance. These 
programs, which are already regulated by the FDA, are an important 
source of information about the use and efficacy of certain drugs. It 
is critical that new confidentiality legislation not contain provisions 
that will discourage reporting and thereby interfere with these 
programs.
    In our view, once again, HR 1057 and HR 1941 fall short since they 
do not contain these provisions.
The Secretary's Study.
    During this debate, some have argued that the Secretary of the 
Department of Health and Human Services should evaluate the common 
rule, with an eye toward protecting the confidentiality of patients' 
medical information. We would urge you to be cautious about 
legislatively authorizing such a study.
    The Secretary already has the authority to study these issues since 
the common rule requires IRBs to consider patient confidentiality as 
one of the risks to be evaluated when considering a research request. 
If federal confidentiality legislation directs her to review the common 
rule, it should make clear that she should do so in a manner that 
weighs all the benefits and risks to the subject of the research 
including short and long term safety and discomfort, and not just focus 
on confidentiality. Confidentiality concerns should not outweigh other 
factors. Moreover, the legislation should make clear that the product 
of any study be a report to Congress, rather than new regulations. 
Given the controversial nature of this matter, the issues should 
receive a full debate prior to the promulgation of new regulations.
Conclusion
    As the Congress debates confidentiality legislation, we urge you to 
remember that the public has a strong interest in the medical 
achievements of biotechnology. The biotechnology industry is on the 
cusp of developing promising new drugs and treatments for people with 
serious diseases.
    While it is critical to protect patients' confidentiality rights, 
imposing too many restrictions on access to important data will slow 
research efforts. Congress must facilitate the positive uses of medical 
information to continue the breakthrough scientific achievements into 
the next century.
    BIO encourages you to develop this critical legislation. We 
appreciate the opportunity to submit this statement for the record and 
look forward to working with you in this endeavor.

    Mr. Bilirakis. This is so new I am not sure whether you are 
even familiar with it. I apologize to Mr. Waxman and others if 
they haven't had an opportunity to see it. I just think that it 
is significant as we approach it from a generic standpoint.
    Do you have any comments regarding that?
    Ms. Hamburg. Well, I have not seen the document that you 
refer to. But, of course, we appreciate the concerns that many 
have with the academic community and the private sector with 
respect to impediments to ongoing research. We do believe, 
though, that research can be done responsibly and move forward 
in a framework that involves various levels of privacy 
protection, oversight, and monitoring. Certainly the research 
that is supported by the National Institutes of Health goes 
forward under the circumstances and goes forward in a way that 
has supported probably the premier researchers and research 
accomplishments of any place in the world.
    Mr. Bilirakis. Do either of you have anything that you 
would care to add?
    Mr. Eisenberg. Let me add one thing. I think the three 
operative words are all, monitored, and external in what you 
said, all research would be monitored by an external entity.
    We do support the idea that research that is carried out 
with any funds, not just Federal funds, have accountability to 
be sure that the data that is used, the personnel information 
that is used, is maintained in a confidential way.
    Second, the word ``monitored'' implies something that is 
much more aggressive than is usually the process for the 
institutional review boards which review the proposal for the 
research. We are asking that there be accountability in the 
event that the confidentiality promises are breached. But the 
standard IRB is not to monitor in a very odious way the 
research that is carried out by investigators.
    Third, the term ``external'' I think could be 
misunderstood. Institutional review boards are not external 
organizations. In fact, one of the very important 
characteristics is that they are internal, that one member of 
the IRB needs to be someone from outside the organization, but 
they are internal organizations which are watch dogs to 
determine that the research is carried out according to the 
highest principles of research ethics.
    Mr. Bilirakis. Did you have anything that you wanted to 
add?
    Ms. Skirboll. Yes. I would add that Federal research, that 
you are well aware of, much of it is records research, health 
services research, epidemiology now comes under the common 
rule. The common rule requires an outside entity, if you will, 
act separate from the investigator to review research.
    Research is looked at for both privacy issues, for 
confidentiality issues, whether research requires informed 
consent or not. And this is all done in the context of both 
protecting the privacy of patients, particularly protecting the 
privacy of patients that volunteered to participate in 
research, and, at the same time, ensuring that research can 
move forward, important research can move forward.
    Mr. Bilirakis. Well, as I understand it saying in the same 
point here, according to the written testimony of the 
Biotechnology and Industrial Organization, H.R. 1941 would 
expand the Federal Government's role in private research by 
requiring that all research, whether funded with private 
dollars or taxpayer dollars, be reviewed by an entity certified 
by the Secretary using standards that are more restrictive--
''more restrictive,'' their words--than that used by 
institutional review boards.
    Do you agree or disagree that expanding the scope of the 
Secretary's power over private research and imposing higher 
compliance costs will impede scientific research? I know that 
we all are--my time is up, but I know we are all concerned with 
the biotechnology industries inputs in this regard. And I don't 
know to what extent the administration has worked with them in 
working up your proposed regulations, but it is certainly an 
area that we all need to work on. Very quickly, my time is up, 
if you would like to respond.
    Ms. Hamburg. I think that it is very important that these 
issues get aired and discussed. We appreciate this forum and 
others for that purpose.
    I think that ultimately we feel very deeply that the health 
of our research enterprise depends on the trust and confidence 
of those participating in research, that their privacy will be 
protected and confidential data will be handled appropriately. 
And that if you are participateing in a research study, you 
probably are not paying attention to what is the source of that 
funding and distinguishing between what kinds of protections 
you get from one circumstance and another.
    People basically want to have some fundamental sense of 
confidence that their very personal and sensitive health 
information will be handled appropriately. We think there are 
mechanisms to achieve that in the public and private sector.
    Mr. Bilirakis. Thank you. We have a couple more panels who 
will probably continue to explore that.
    Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman. Dr. Hamburg, obviously 
private companies that conduct research have raised questions 
about the impact of various privacy bills on their operations. 
Run through, if you would, how the Secretary's recommendations 
would affect, could affect private sector health research, say 
a clinical trial for example.
    Ms. Hamburg. I think that I might turn to my colleague from 
NIH who has looked at this in more specific detail to give you 
the best possible answer.
    Ms. Skirboll. I think it would be important for us to 
describe how it works for the Federal sector briefly and then 
explain what the Secretary has recommended.
    First of all, it is important to understand that all 
federally supported research that comes under the common rule, 
the 17 agencies that signed on to common rule, are protected 
using both IRBs and informed consent. Walking through that, a 
researcher has a proposal, the proposal comes to the IRB chair, 
the IRB chair determines whether that research requires 
informed consent or does not and whether it requires expedited 
review or not.
    Let me go first to informed consent. Informed consent is a 
determination of risk, what is the risk to the patient. With 
medical records, the risk really has to do with privacy and 
confidentiality. That is weighed and determined whether 
informed consent should be required in this study or not. If 
informed consent is required, the common rule says that you 
must, in the informed consent document, inform the patient the 
extent to which their privacy will be protected.
    If informed consent is waived, then the particular study is 
considered not risky to privacy and confidentiality or to the 
risk of the patient. What do I mean by that? The common rule 
requires that you look at things that we all agree would be 
risky with regard to confidentiality. Would it be damaging to 
our financial status, to our employability? Is it stigmatizing? 
Does it have an affect on reputation.
    It cannot be waived if the research is--a review cannot be 
waived if IRB--it could not be waived if it meets those 
criteria and informed consent cannot be waived. Much research, 
much records research, and I could give you examples of each, 
are waived and no informed consent is required with regard to 
the issues of burden associated with such IRB review.
    The Secretary's recommendations very simply require this. 
The Secretary's recommendations suggest that without--as long 
as you are doing research in which there is no informed 
consent, it does not address informed consent research, where 
there is no informed consent, there should be an IRB-like 
entity, some oversight entity that looks to the extent to which 
confidentiality and privacy are being protected and whether 
informed consent should be obtained or not.
    Mr. Brown. Thank you, Mr. Chairman.
    Thank you.
    Mr. Bilirakis. Mr. Bryant.
    Mr. Bryant. Thank you, Mr. Chairman.
    Let me ask a question. Again, I apologize for missing much 
of the testimony so far. We did have a short mark up, and it 
was short. In terms of law enforcement and investigations that 
might involve health care fraud and abuse, should a privacy 
bill require--would a privacy bill that you would recommend 
allow law enforcement officers to come in and just review 
health care records in a general search for fraud and abuse 
without any specific probable cause, or is it your view that 
they ought to have probable cause and obtain a search warrant 
before they do that? How would you envision any type of 
legislation to make that----
    Ms. Hamburg. This is obviously a complex and difficult 
issue. The Secretary's recommendations recognize that there 
were existing laws at the State and local level with respect to 
access by law enforcement agencies for this information and 
recommended that those be allowed to continue to be enforceable 
and did not really address, in a more comprehensive way, that 
issue.
    Mr. Bryant. In that event, would you envision--in the event 
of some sort of inspection by law enforcement officers, would 
you envision a requirement in any type of privacy bill that the 
patient whose records were reviewed be notified that they were 
inspected and by whom they were inspected?
    Ms. Hamburg. Again, it is a very complex issue. I am not a 
lawyer, and I would hesitate to make specific comment on that 
in that I really am uncertain about the legal framework in 
which that question would have to be answered.
    Obviously we would be happy to work with you on that 
question and bring the right people and resources to bear.
    Mr. Bryant. From a medical standpoint--I am a lawyer, not a 
doctor. From a medical standpoint is there a difference between 
privacy, the word privacy, the term privacy, and 
confidentiality? You nodded your head. You have to speak now.
    Ms. Skirboll. By definition, privacy is the right of an 
individual to limit access and disclosure. Confidentiality is 
really considered the tools by which you do that, you 
accomplish that.
    So privacy is your right to limit access and 
confidentiality is the extent to which it actually is 
disclosed, the tools that you used to keep it confidential. 
That is sort of a dictionary definition of it.
    Mr. Bryant. Unless any of you have any other comments to 
the questions----
    Mr. Eisenberg. I will just tread on dangerous territory, 
too, not being a lawyer. But I do think it is important to 
distinguish whether or not the legal investigation is one that 
involves the patient or one that involves the provider.
    As we look at this issue, we are trying to distinguish the 
different ways in which the legal community would need to 
notify or ask for patient permission when the patient is the 
subject of the investigation versus when it is actually the 
person providing the care, the patient is the subject.
    Most feel that those ought to be distinguished in a 
different way.
    Mr. Bryant. Mr. Chairman, I yield back the balance of my 
time at this point.
    Mr. Bilirakis. I thank the gentleman.
    Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman.
    I want to thank the panelists for an excellent 
presentation. To Peggy, I don't know if all of the members of 
our subcommittee know of the extraordinarily distinguished 
family that you come from. Peggy's father most recently headed 
up the Carnegie Foundation and her family has done 
extraordinary work. So we have very distinguished people that 
have given us very important information.
    Currently all 50 States have some form of medical records 
privacy laws and 34 of the States have comprehensive laws. I 
know that it is not unusual to have hundreds or even thousands 
of people enrolled in a clinical trial from dozens of States.
    What types of burdens can you tell us about that 
researchers would face if they have to comply with many 
different laws; and what affects do you think these burdens 
would have on research?
    Ms. Hamburg. Again, I think that Dr. Skirboll is probably 
in the best position to answer your question with respect to 
what is a difficult issue of the patchwork of laws that govern 
privacy and confidentiality.
    Ms. Eshoo. We are going to have to face this in whatever is 
drawn up.
    Ms. Skirboll. I think I described that there are a number 
of circumstances with regard to records research--Peggy gave 
some examples of it and so did John--where informed consent is 
not required to conduct really important research. It gathers 
important information that improves all of our health and 
improves the Nation's health.
    It is important so that when you look at what States may 
put into place. Minnesota has a law right now that requires for 
informed consent for every study of a record. That is an 
enormous burden to those investigators. We believe that the 
system in which an IRB, a local IRB, looks at the issues of 
risk to the patient, allows research to move forward without 
informed consent, in every situation look at the risks 
carefully, that it should be allowed to proceed.
    States could put into place, in patchwork circumstances, 
different regulations that would affect a single clinical trial 
across many States or that would actually bring a halt to 
research where such informed consent is not practical. So there 
is a risk. But there needs to be--the Federal position is that 
there needs--the administration position is there needs to be a 
floor certainly in which everybody understands there is a 
common set of rules.
    Ms. Eshoo. I am not so sure that I have drawn from what you 
have said the effects on research as a result of what we have 
though.
    Ms. Skirboll. The effects of research today? Well, 
Minnesota is an example where it is one State in which being 
able to conduct records research is significantly hampered 
because of the requirement that one always get----
    Ms. Eshoo. So it is too stringent?
    Ms. Skirboll. Yes.
    Mr. Eisenberg. May I add something to that?
    I think there are three issues that need to be considered 
when we look at the State-to-State variation that might exist. 
One of them is it is understandable why the States might be 
filling the vacuum now in the absence of Federal legislation 
and with the uncertainty about whether strong Federal 
regulation and law will exist.
    It is understandable that a State would respond to the 
concerns of the people in that State for privacy and 
confidentiality legislation. Second, it has only been recently 
that there have been experts in this field who have been 
working with the States to help them to draft this kind of 
legislation.
    For example, there was one set of organizations that issued 
model legislation, but just in February of this year. I think 
that as the States start to look at--look at this kind of 
legislation, they will lean upon national experts. I think we 
will probably start to see more uniformity across the States 
even without Federal legislation because of the commonality 
that does exist among the concerned parties.
    Third, it is true that the experience in Minnesota is one 
that we have learned from, but I want to emphasize that we have 
learned from.
    One of the wonderful things about the States in this 
country is they are, as they say, a cauldron for 
experimentation.
    Ms. Eshoo. Test kitchen.
    Mr. Eisenberg. A test kitchen, yes, exactly.
    And I think the people in Minnesota would be the first to 
say that we have learned from the experience there and that 
there have been modifications made even in Minnesota already in 
that State's rules.
    So as we look at this, I think that the most compelling 
argument as we look at the States is we need some Federal 
legislation that will, at a minimum, give as floor so that the 
States can look at what the Federal Government has done and 
decide whether anything else is needed.
    Ms. Eshoo. Very helpful. Thank you. Thank you, Mr. 
Chairman.
    Mr. Bilirakis. I thank the gentlelady. Mr. Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman. You had mentioned 
the difference in privacy and confidentiality. And privacy, I 
think all of us would view, is this information necessary to 
provide me the best quality of health care that is available.
    I mentioned in my opening statement the outcome and 
assessment information set that is now--was actually--I guess 
it was required and then HIPAA backed off of it or HHS backed 
away. Could you give me an update on precisely where your 
agency is on the OASIS questionnaire?
    Ms. Hamburg. Perhaps the best way to do that is to provide 
you specifically in follow-up to this hearing with that 
information. HICFA is not present, and as you know they have 
the lead responsibility.
    The concerns that you have raised have been addressed. 
There was, in fact, I think a hearing on the Senate side 
earlier this week. Modifications have been made. We are very 
sensitive to the issues, but I think that the specific 
questions you are asking could best be addressed in follow-up 
if that is acceptable to you.
    Mr. Whitfield. Sure. It is my understanding that the 
American Civil Liberties Union also expressed some concern 
about those questions as well; is that correct? Are you aware?
    Ms. Hamburg. I do not know the specific details. I do know 
that this has obviously been the focus of a great deal of 
attention.
    There have been some modifications made in order to focus 
really on what needs to be asked in the context of appropriate 
treatment and assuring quality of care to those receiving home 
care.
    And we would be happy to provide you with detailed 
information about the status of that.
    Mr. Whitfield. I appreciate that. I recognize the 
difficulty in dealing with this whole issue. But as Mr. Deal, 
Nathan Deal, had mentioned as well, when we go back to the 
district, these home health care agencies are more vocal on 
this one issue than almost anything else right now.
    I don't think there is any group more committed to 
providing quality health care to the homebound than they are. 
They have been quite vocal about it. After I had the 
opportunity to review some of the questions which relates to 
finances, plans for conception, laundering, housekeeping, 
shopping, telephone use, it seems that it does go maybe a 
little bit farther than it should.
    While I know that you are not primarily concerned, you are 
involved, I suppose, in some of the policies over there. I just 
wanted to raise that issue because it is vitally important.
    Thank you again for attending today, and we look forward to 
working with you to address this issue.
    I yield back to Mr. Waxman.
    Mr. Waxman. Thank you very much. Mr. Chairman, I want to 
commend Dr. Hamburg and her colleagues and the Secretary for 
their leadership in this effort.
    It will be very helpful for us to discuss with them these 
issues as we prepare legislation. Let me go back to this point 
again that we have been discussing and see if we can get it 
narrowed down.
    Mr. Bilirakis expressed concern about the requirement in 
our bills that the IRB must determine that the importance of 
health research outweighs the intrusion into the privacy of 
protected individuals before approving use of the information.
    Do you believe this requirement is burdensome on the review 
process? I want to note that we are going to hear testimony 
from the Biotech Industry Organization, BIO, where they express 
the same concern, they even said that we have standards more 
restrictive than used by our IRBs. Tell us more about--in the 
answer to this criticism----
    Ms. Hamburg. I think Dr. Eisenberg wants to take----
    Mr. Waxman. [continuing] expressing legitimate concern. How 
do you respond to them?
    Mr. Eisenberg. I think the second comment that you made 
about BIO's position is absolutely accurate. That is that the 
vast majority of the researchers and the vast majority of 
research organizations in this country have standards that are 
even more careful, restrictive, if you want to use that word, 
than we are proposing and more restrictive than current or even 
future IRBs would require.
    The purpose of the proposal is not to make life harder for 
these organizations, but to be sure there is uniformity so that 
every patient who is in every study can be sure that they are 
protected in the way that the best members of BIO are 
protecting the people in their studies.
    I think that is also the case for universities. In all of 
the universities with which I have been involved, the 
universities' institutional review board has not really cared 
whether the study is federally funded or privately funded. The 
point is that there are patients whose confidential information 
is at risk and needs to be preserved. Therefore, the standards 
hold no matter what the source of funding, no matter what the 
type of study, if the basic principle is followed, which is 
that you have got to keep personal health information 
confidential.
    We are not, though, suggesting that the current pattern of 
the IRB for a clinical trial needs to be replicated exactly for 
the preservation of personal health information's 
confidentiality. I think that we would prefer to call it an 
IRB-like mechanism which means that it is an oversight group 
who provides assurances to the public that that data is 
maintained in confidentiality.
    We would like to work with organizations like BIO and 
others in the research field to be sure that if there are parts 
of this process that are burdensome and not necessary that 
those are eliminated.
    Mr. Waxman. Do you use IRB-type organizations or IRBs 
themselves when there is Federal funding for research to look 
at this very issue of privacy?
    Mr. Eisenberg. As Dr. Skirboll mentioned, the common rule 
requires that if there is Federal funding that an IRB be used.
    Mr. Waxman. Have we found a problem with that? Has it been 
burdensome or difficult for researchers?
    Ms. Skirboll. I first want to add that beyond the common 
rule there is a separate set of regulations that FDA, when 
people come in for an IND that is quite similar to the common 
rule in many ways.
    We believe research has been able to move forward under the 
context of both the common rule and FDA regulations.
    Mr. Waxman. One of the most contentious issues in the 
health privacy debate is whether Federal legislation should 
preempt State and local laws that are more protective of an 
individual's privacy.
    Proponents of preemption argue that laws that differ from 
State to State would make business transactions very difficult 
while opponents argue that a Federal law that preempted all 
State and local laws would represent a setback to patients of 
States that have already passed stronger protections.
    One compromise that has been proposed is to grandfather in 
existing State and local laws that are stronger than the 
Federal statute while preempting any future State and local 
laws. It seems to me that one drawback of this approach is that 
States would not be able to respond to privacy issues that may 
arise in the future, things that we haven't thought about yet.
    Would you comment on this? You indicated States are a place 
where we have a lot of experimentation. We learn from what the 
States do.
    Should we preempt them and stop them from acting in this 
area?
    Ms. Hamburg. I will try to be brief because I know time is 
limited.
    Mr. Waxman. Time is only limited for my asking the 
question.
    Mr. Bilirakis. And he still feels that he is chairman 
sometimes.
    Ms. Hamburg. Well, I think the answer is reasonably 
straightforward, which is that we clearly need some sort of 
national legislation which is comprehensive that will set a 
clear and appropriate floor. States can then elaborate as 
needed to suit their particular set of needs and concerns, but 
we do need some sort of baseline and comprehensive floor.
    We need that uniformity as illustrated by some of the 
discussions that we have had this morning.
    Mr. Waxman. Thank you. Thank you, Mr. Chairman.
    Mr. Bilirakis. Thank you Mr. Waxman. Mr. Deal.
    Mr. Deal. I will follow up on Representative Waxman's 
question, and recognizing that all three of you disavowed being 
associated with the legal profession, my question is somewhat 
legal in nature but procedural also.
    As I understand the timetable we are facing is under the 
HIPAA Act of 1996, and unless we legislatively here at the 
Congressional level establish these guidelines by statute, the 
Secretary would have the responsibility of developing the 
guidelines through rules and regulations.
    In order to determine where we are on this issue of 
preemption, is it your understanding that in the absence of 
Federal action before August that the rules and regs 
promulgated by the Secretary would, by the HIPAA Act, be given 
the force and effect of law?
    I assume the answer to that would be yes. But if they are 
given the force and effect of law by that delegation of 
authority to the Secretary, do they necessarily preempt State 
statutes? Is there wording enough in HIPAA to preempt State 
statutes? Where would that stand?
    Ms. Hamburg. I think the most critical issue to put on the 
table with respect to the Department moving forward with 
regulations if the Congress doesn't act is that we would not 
have the authority to provide the kind of comprehensive privacy 
legislation that we have been talking about today.
    The HIPAA requirements clearly limit the authority of the 
Department in terms of the types of information and the 
entities that would be regulated. So that through the HIPAA 
mechanism, I don't think that we would be able to achieve the 
kind of comprehensive privacy legislation that we feel is so 
vitally important to the American people.
    Mr. Deal. So you believe then that there is a need for 
action here to address the issue in a more comprehensive 
fashion?
    Ms. Hamburg. I think the President and the Secretary feel 
very strongly that that is the desirable approach.
    Mr. Deal. Taking it one step further, we commonly pass 
statutes that preempt States for the provisions of existing 
State law that are not as comprehensive, but allow them to go 
further than the Federal standard that is established.
    My question is in the earlier discussions about the 
problems that you were running into from State-to-State 
variations, it was the State statutes in Minnesota, for 
example, that went further that were the impediments to the 
research component.
    So if we pass a Federal statute, but still allow States to 
go further, do we not still leave intact those impediments to 
research and compilation of information by those who are so 
restrictive that they are an impediment?
    Ms. Hamburg. I think as Dr. Eisenberg pointed out earlier, 
one of our concerns is that States are moving because they are 
trying to fill a vacuum that exists because we don't have a 
national approach. So it is our hope that if we do achieve a 
national comprehensive legislative approach that much of what 
we have seen on the State level will not be necessary.
    But our health care system is very complex. How it is--how 
health care is delivered varies by State to State. Technologies 
are changing, and it raises different issues and States may 
react differently. So that if we established uniform and a more 
comprehensive set of protections at the national level, it 
would address many of the concerns that States are currently 
experiencing.
    But there would still be flexibility for modifications 
based on the particular set of needs and concerns that might 
exist within a State.
    Mr. Deal. One final quick question, if I might. In 
reviewing the recommendations from the Southern Governors 
Association and their concerns as we address this issue, one 
issue they have raised is that consent forms not be so broad as 
to allow consent for one purpose but be broad enough to allow 
the sale of information for other purposes.
    Are you seeing problems with consent forms being so broad 
that a person waives rights that perhaps were never intended, 
and if that is the case, is that an issue we need to focus on 
in drafting legislation?
    Ms. Skirboll. That is an important point. I think it is 
important to note that most of the legislation that has been 
drafted so far, most of the considerations that really have 
been addressed in terms of privacy and confidentiality, have to 
do with records for which there is no consent without 
disclosure to the patient.
    There hasn't been a lot of consideration if there is 
consent, what that consent might look at. That is something an 
IRB does, but most of the legislation has really been 
addressing disclosure without patient authorization.
    Mr. Deal. Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Burr.
    Mr. Burr. Thank you, Mr. Chairman.
    Dr. Hamburg, let me go back to Mr. Deal and Mr. Waxman's 
question.
    I read your testimony, and I actually wrote on that 
testimony that it said you wanted to preempt. But I heard your 
answer to both questions where both times you stated what we 
need to do is create a floor and to allow States to go further. 
And I would only ask you is that inconsistent with what your 
testimony says, which is the concern of patchwork, a patchwork 
situation.
    And I know that you referred to the patchwork in the 
context of the privacy protections that Americans need and 
expect. Is it the floor or is it the preemptive ceiling that 
HHS would choose?
    Ms. Hamburg. It is clearly our strong desire and preference 
to have a strong national privacy legislation that would 
address the set of concerns that American citizens have 
regardless of where they live.
    We recognize also, though, that there are differing issues 
in different States with respect to constituencies, how health 
care is delivered, et cetera, and that we need to have a 
somewhat flexible approach.
    But there needs to be a floor in terms of a set of 
comprehensive national standards.
    Mr. Burr. I think what I just heard was a modified 
preemption. Would that be an accurate depiction of it? A fluid 
process; let's say?
    Ms. Hamburg. A flexible approach, but I think building on a 
foundation that represents a set of uniform national standards.
    Mr. Burr. Ms. Skirboll--is that it? I am sorry; I came in 
late.
    Let me just ask--NIH has been used in the IRB for archival 
research and I guess I would ask you, have you ever found 
incidents of abuse? Has the NIH experienced incidents of abuse?
    Ms. Skirboll. Abuse with regard to privacy and 
confidentialty?
    Mr. Burr. Yes, ma'am.
    Ms. Skirboll. That is really under the responsibilities of 
OPRR which is housed in NIH, but really is responsible for the 
coverage of the common rule which is 17 agencies. You probably 
have to ask the director of OPRR that. But I think, in general, 
where there is regulation there certainly can be abuse, but the 
purpose of this--the purpose of having the common rule and 
having a local jurisdiction is that there is monitoring by the 
IRB during the process of research, and that if exigencies 
happen, they can be found.
    Mr. Burr. I would assume if there was this horror story of 
abuses, that would not be limited in the knowledge of it to 
just that area of NIH, but it would be known throughout NIH.
    Ms. Skirboll. Privacy is an interesting thing with regard 
to abuse.
    Most people, and I take this from the director of OPRR, 
most people say when there has been a breach of privacy, by 
definition, people don't want to talk about it because it 
causes the further breach of whatever private information was 
breached in the first place.
    So perhaps knowledge--breaches of privacy are not known as 
widely as information of other problems that may arise. So we 
really haven't tracked that.
    Mr. Burr. I am also not a lawyer, never professed to ever 
want to be, have discomfort sitting next to one, but Dr. 
Hamburg, let me ask you more of a legal question and it comes 
from your testimony.
    You said information should not be used or given out unless 
either the patient authorizes it or there is a clear legal 
basis for doing so. Can you give me an example of a clear legal 
basis?
    Ms. Hamburg. Well, for example, before I joined the 
department, I was commissioner of health in New York City and 
responsible for the public health and safety of New Yorkers.
    In order to respond to unusual clusters of disease and 
apparent outbreaks of an infectious disease, we often needed to 
access information with identifiers so that we could do a 
complete and appropriate outbreak investigation, identify the 
source of whatever infectious agent or contaminant was 
threatening the health of the public and ameliorate that threat 
by instituting the appropriate measures.
    And we had the legal authority to do that, and it was 
extremely important to public health and safety.
    Mr. Burr. But HHS would not see defining what a clear legal 
authority would be?
    Ms. Hamburg. Well, I think----
    Mr. Burr. Every time I see ``clear legal authority,'' I 
think that we have--we have punted to the judicial system which 
is not necessarily a comfort for everybody involved to think 
that either HHS would promulgate some new regs or the Congress 
would pass new legislation, only for the courts to try to 
figure out how to share with everybody what we meant.
    Mr. Bilirakis. The gentleman's time has expired. If you 
have a quick response to that, please feel free.
    Ms. Hamburg. I think it is very important that we define 
the set of circumstances under which health information could 
be disclosed without authorization.
    The example I gave of public health was one that was 
identified within the secretary's recommendations. Clearly we 
live in a very complicated and changing world. And I think that 
we could not produce legislation that would clearly identify 
and define all of the specifics, but I think that there is a 
framework that is reasonably straightforward and put forward in 
the Secretary's recommendations that I think can serve as the 
strong basis for the crafting of appropriate legislation.
    Mr. Burr. I thank you and I yield back, Mr. Chairman.
    Mr. Bilirakis. Yield back. Mr. Markey who is not a member 
of the subcommittee----
    Mr. Eissenberg. Is there time for me to add something very 
quick?
    Mr. Bilirakis. Very quick. He yielded back, you understand, 
time that he did not have.
    Mr. Eissenberg. The other area that is very important that 
we haven't talked about today is the quality of care area. And 
in some of the legislation that exists and in the Secretary's 
language we specify more clearly the kind of legal authority 
that would be provided for assuring quality of care and the 
need for personal information as well.
    Mr. Bilirakis. Mr. Markey, who is not a member of the 
subcommittee but whom we respect greatly.
    You are more than welcome, sir, to inquire.
    Mr. Markey. Thank you very much, sir, and I thank you for 
your typical courtesy. You have always been gracious. I 
appreciate it very much.
    This issue is, without question, the other side of the 
information-age coin. There is no question that because of 
rapid technological change and globalization that there are 
tremendous pressures upon our society to become more efficient. 
And the technology drives it and it makes it possible for 
consolidation across all industry lines, but it also creates 
other problems for individuals.
    So what is good for a corporation is no longer necessarily 
good for individuals, although we can, in fact, find a way of 
reconciling the differences. So the truth of the electronic era 
is that there is a Dickensian quality to it. It is the best of 
wires, and the worst of wires simultaneously. It has the 
ability to enable and to ennoble and it has the power to 
degrade and to debase all at the same time.
    The question for us is whether or not we want to animate 
the technologies with human values or just allow the 
technologies to take their own course knowing that without 
those values, that there will be a compromise of the 
individual.
    And I think that we have to have this debate because I 
believe that we need the same values in the virtual world as we 
have in the real world, and only by debating these issues do we 
make sure that we separate the privacy keepers from the just 
curious peepers who increasingly, on-line, have the capacity to 
be able to move through all of our private lives.
    And then you have this most dangerous of all categories, 
and that is the information reapers, that is, companies, 
corporations, software companies put together just to collect 
all this data and then to market it to a third party--to third 
parties, to sell it, to sell our secrets, our health, our 
privacy, our financial services, any of our electronic 
transactions, children's transactions on-line.
    All of it is valuable information. And so the question for 
us is whether or not we are going to act before the privacy 
pirates move in and create a new world that is very difficult 
for us legislatively to capture. My question to you, doctor, is 
the biotech industry has objected to imposing any privacy 
oversight over research which is privately funded.
    Does privacy deserve less protection based on its source of 
funding, doctor? Is the IRB oversight process a significant 
barrier to good research? Isn't it true that many researchers 
view IRBs as helpful in ensuring research is doing well? Is 
there any reason why we can't extend the common rule in other 
words, to private research?
    Ms. Hamburg. As we have discussed already here this 
morning, we feel that the ongoing health and vitality of the 
research enterprise whether publicly supported or privately 
supported is critical to the future of our health care system 
and our Nation. But in order for that research enterprise to 
move forward, those participating in research have to have 
confidence and trust that their sensitive health information 
will be protected and that the data collected on them will be 
treated in a confidential and an appropriate way.
    Clearly people participating in research are not looking to 
see where the funding comes from and will not be attuned to the 
specifics of privacy protections afforded in one context versus 
another. And we believe that we can achieve the goal of having 
both a healthy ongoing research enterprise and a set of privacy 
protections.
    I think it is very important that we hear the concerns of 
people engaged in different types of research and in different 
contexts for the conduct of research, but that experience 
already has told us that you can move forward with good 
research, quality research.
    Mr. Markey. Excellent, thank you.
    Let me ask you this. Genentech's written testimony opposes 
any of the privacy legislation which is being proposed on our 
side. Mr. Waxman, myself, others moving forward are trying to 
get a debate on it, and they argue there is only minimal risk 
to human subjects.
    Do you consider denial of health insurance a risk? Do you 
consider denial of a job a risk? Or should we just consider 
those minimal?
    Ms. Hamburg. I think it is clear, as your question 
suggests, that there are very serious consequences to the 
inappropriate divulging of certain sensitive health information 
and it is clear that we need to protect individuals. And it is 
ultimately in the interest of research to insure participants 
in the public-at-large that research activities are sensitive 
to those needs and address them.
    Mr. Markey. Thank you, doctor.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. I thank the gentleman.
    Mr. Brown. Mr. Chairman, could I ask unanimous consent for 
five additional questions?
    Mr. Bilirakis. Without objection.
    Mr. Brown. Thank you.
    Dr. Hamburg, I understand the Secretary doesn't have the 
authority to issue regulations as comprehensive as many of us 
on this panel--and perhaps you too, but many of us want to see 
addressed or are necessary. Spell out for us the areas, if you 
would, the Secretary's regulations can't cover that what we, in 
fact, want to protect?
    Ms. Hamburg. I think that with respect to the HIPAA privacy 
regulations, clearly it would be tied to information that is 
electronically managed, and we are still exploring the extent 
of what that means. But clearly tied to electronically managed 
data and also limited to a specific set of entities, providers, 
payers, and clearing houses, so that does limit the scope of 
the activity.
    Mr. Brown. So paper-based medical records, you cannot 
promulgate regulations to govern paper-based medical records.
    Ms. Hamburg. On exclusively paper-based. As I said, we are 
currently exploring the extent of our authorities, and so I 
cannot give you an absolute legally clear answer here, but it 
is very explicit information that is tied to electronically 
transmitted information.
    Mr. Brown. I think, Mr. Chairman, that speaks to the 
importance of--particularly since Congress has not addressed 
this issue comprehensively for 20 years or so, and it may not 
again in the near future, speaks to the importance of 
establishing--of moving forward with legislation, establishing 
a floor, and encouraging innovation in the States rather than 
establishing a ceiling and putting up a disincentive for State 
innovation.
    I would like to yield for a couple of minutes to my friend 
from California, Mr. Waxman.
    Mr. Waxman. Thank you very much. I think that last point 
you made was an excellent one because problems do come up that 
are not anticipated, and we ought to allow the Secretary or the 
States to go beyond minimum protections that we will have in 
Federal law. But the Secretary also called for private right of 
action to enforce the privacy provisions. Why do you think that 
is important?
    Ms. Hamburg. I think it is very important that individuals 
have an opportunity through the legal system to redress 
compromises to their privacy and confidentiality protections.
    Mr. Waxman. If they don't have that legal right, it is a 
promise that may not come true?
    Ms. Hamburg. Well, I think that clearly if we are going to 
put forward a set of legal expectations about privacy 
protection and confidentiality, then we need to follow through 
with some teeth and there need to be, I think, both civil and 
criminal penalties for those who misuse or abuse information. 
And I think that individuals whose privacy has been compromised 
need some mechanism for redress.
    Mr. Waxman. I thank my colleague for yielding. Mr. 
Chairman, I wonder if we could keep the record open and have 
them respond to questions that we may have.
    By all means; we make a practice of that and if you would 
be willing to--I might ask if the gentleman would yield the 
balance of his time.
    I guess I am not clear. I know Mr. Burr and others have 
asked about the preemption portion, the need for uniformity, et 
cetera. And I realize maybe it is difficult for you to give us 
a yes or no answer.
    I don't know how we could have uniformity to a point and 
then not preempt to another point; in other words, you are 
talking about this floor business.
    Should we have uniformity where Federal law would preempt 
all State laws?
    Ms. Hamburg. I think there should be as I thought I had 
indicated earlier----
    Mr. Bilirakis. You have said.
    Ms. Hamburg. I guess it is good I am not a lawyer.
    Mr. Bilirakis. You sound like you would make a good one.
    Ms. Hamburg. There should be a set of clear standards that 
are in place that represent a uniform set of standards on a 
national basis, but then that represents a floor, not a 
ceiling, and does allow for State by State innovation based on 
changing circumstances, particular concerns.
    Mr. Bilirakis. What you are saying is uniformity up to a 
point, but the States could--would not be preempted if they 
were to add to those uniform standards?
    Ms. Hamburg. This is, as you are very well aware, a complex 
set of issues that are being discussed in the context of a very 
complex health care system, a very complex set of research 
needs and requirements and, of course, a world where technology 
is changing rapidly. So we think that we need to maintain a 
certain level of flexibility, but there are important issues. 
And we need national legislation to address them.
    Mr. Bilirakis. Couldn't we retain that flexibility on a 
national scale so that the flexibility can be done again on a 
national standpoint so that there would be complete uniformity?
    I am not really expressing a position here. I am asking 
questions because I guess I am not clear given we have been 
working on this quite sometime.
    Mr. Waxman. Would the chairman yield?
    Mr. Bilirakis. Yes.
    Mr. Waxman. I think there are times the States can see 
issues that affect them that may not affect people in other 
States like the HIV epidemic, for example, where we didn't 
anticipate such a thing before it happened.
    When it happened, it hit certain States harder first than 
others. And a State might have wanted to add their own 
provisions, but under no circumstances do we want to have 
American citizens anywhere in this country not have certain 
basic protections of privacy of medical records.
    So I think what you are saying--we do this all the time in 
Federal law--we are going to have certain provisions that will 
apply everywhere, and then States should be able to act when 
unanticipated issues come up. We don't want to tie their hands. 
They're closer to these problems than the people in the Federal 
Government. They can often be very innovative and we shouldn't 
stifle them.
    Mr. Burr. Mr. Chairman, could I ask unanimous consent for 
one question?
    Mr. Bilirakis. Without objection.
    Mr. Burr. It really follows up, to some degree, on that, 
but you talked in your testimony about the sensitivity of 
genetic information. And I think one could conclude from your 
testimony that there might be a belief that there needs to be a 
different set of standards for genetic information than for 
everything else.
    Ms. Hamburg. Actually, we are not recommending that. We 
believe that if we can achieve a baseline that is appropriate 
and sufficiently comprehensive, it would embrace and protect 
for all kinds of health information and that it would be a 
mistake to begin to compartmentalize for the reasons we were 
just discussing about how things will emerge that we haven't 
thought about today.
    Clearly today with all of the advances that are going on in 
the field of genetics, genetic screening is an area of great 
concern to the public, particularly because it is an area where 
science hasn't fully informed us--informed us about what some 
of the genetic screens actually mean.
    So the potential for unintentional misuse as well as abuse 
is very, very clear and present now. And people are concerned 
about it, but there are many types of medical information that 
are sensitive. And we believe we should be striving for a 
comprehensive approach.
    Mr. Burr. So you do see a uniformed approach. I thank you 
and thank the Chair.
    Mr. Markey. Mr. Chairman, could I ask one additional 
question?
    Mr. Bilirakis. After that nice note you just sent me, yes.
    Ms. Eshoo. Mr. Chairman, could I just make a point of 
inquiry.
    Are we doing a second round of questions?
    Mr. Bilirakis. No, we were not contemplating doing that 
although let's face it, that is what we are doing.
    If you have something more by all means.
    Ms. Eshoo. I think he should go first since he asked. But 
since we have done that, I would like to get mine in as well.
    Mr. Markey. Thank you, Mr. Chairman. I will just ask one 
quick question.
    Mr. Bilirakis. By all means.
    Mr. Markey. Which is a clarification on the 
administration's position as to whether or not under existing 
law it has the ability to put a right of action on the books 
that can be exercised by individuals to protect their health 
care privacy.
    Does the administration believe it has that legal authority 
under existing law or does it need new legislation in order to 
accomplish that goal?
    Ms. Hamburg. Certainly we believe it should be a part of 
whatever national legislation would be enacted, and we feel 
that in order to achieve the broad set of goals put forward in 
the Secretary's recommendation that is the right approach 
rather than to build on existing authorities.
    Mr. Markey. The administration does not believe that it has 
authority under existing law?
    Ms. Hamburg. Under HIPAA?
    Mr. Markey. Under any existing law.
    Ms. Hamburg. I don't know the answer to that question. 
There may be those in the department that do. We can get back 
to you on this.
    Mr. Markey. I think it would be very important for the 
administration to clarify your position on the legal standing 
that you have on that issue before we proceed.
    And I want to work with you, Mr. Chairman, through Mr. 
Brown who is the leader of the Democrats on these issues on the 
committee. I want to work through Mr. Brown with the majority 
toward, hopefully, a positive resolution.
    Thank you, Mr. Brown, Mr. Chairman, for your indulgence.
    Mr. Burr [presiding]. The gentleman's time has expired.
    The Chair will recognize Ms. Eshoo.
    Ms. Eshoo. Thank you. Mr. Chairman.
    What kind of civil monetary penalties, criminal penalties 
or other provisions are in the Secretary's recommendations?
    Ms. Hamburg. The Secretary outlines in broad terms the 
concept of the requirements for civil penalties, civil monetary 
penalties for unauthorized disclosure of information and 
criminal penalties for the intentional abuse of information, 
release of information, and in keeping with actually what 
Congress mandated under HIPAA, the point was made that the 
penalties should be--well, perhaps we should get back to you in 
terms of the specific details because I am afraid I might not 
represent them appropriately.
    Ms. Eshoo. That is more than fair.
    I think it would be useful information if in fact there are 
specifics. If it just states that it should be or there are----
    Ms. Hamburg. It is broad in its approach, but it does 
indicate the need for both civil and criminal penalties under 
certain circumstances.
    Ms. Eshoo. Thank you. Thanks again for each one of you 
being here today. Excellent. We learned a lot. This is exactly 
what a hearing should be about.
    Thank you, Mr. Chairman.
    Mr. Burr. I thank the gentlelady.
    The Chair, seeing no requests for additional questions, 
would once again thank our three witnesses today and would 
dismiss the first panel and take this opportunity to call up 
the second panel.
    Mr. Burr. The second panel is comprised of Dr. Steven 
Jacobsen with the Mayo Foundation; Dr. Robert Amdur, associate 
professor and chairman, Dartmouth Committee for the Protection 
of Human Subjects, Dartmouth Medical School; David Stump, 
Genentech Fellow; Ms. Fran Visco, president, National Breast 
Cancer Coalition; Ms. Dawn Gencarelli, Harvard Pilgrim Health 
Care; Ms. Abbey Meyers, National Organization of Rare Disease; 
Daniel Krinsky, Patient Services and Pharmacy Practice; and 
Terry Latanich, Government Affairs, Merck-Medco.
    The Chair would like to welcome our witnesses that comprise 
the second panel. We realize it is rather large. I would ask 
all of our witnesses today to try to hold their opening 
statements to the 5-minute rule. We will attempt to try to 
figure out what is going on on the House floor. I would ask all 
members to try to limit to one round of questioning if we can, 
but certainly the Chair would entertain any requests for 
clarification.
    At this time if I may, I will just start at my left--the 
Chair has changed his mind. I will start at my right with Dr. 
Jacobsen is recognized.

STATEMENTS OF STEVEN J. JACOBSEN, DIRECTOR, SECTION OF CLINICAL 
    EPIDEMIOLOGY, THE MAYO FOUNDATION; ROBERT AMDUR, FORMER 
  ASSOCIATE PROFESSOR OF MEDICINE AND CHAIRPERSON, DARTMOUTH 
   COMMITTEE FOR THE PROTECTION OF HUMAN SUBJECTS, DARTMOUTH 
 MEDICAL SCHOOL; DAVID C. STUMP, GENENTECH FELLOW; FRAN VISCO, 
     PRESIDENT, NATIONAL BREAST CANCER COALITION; DAWN M. 
  GENCARELLI, MANAGER, HEALTH POLICY, HARVARD PILGRIM HEALTH 
 CARE; ABBEY MEYERS, PRESIDENT, NATIONAL ORGANIZATION OF RARE 
 DISORDERS; DANIEL L. KRINSKY, DIRECTOR, PATIENT SERVICES AND 
   PHARMACY PRACTICE, RITZMAN PHARMACIES INC.; AND TERRY S. 
  LATANICH, SENIOR VICE PRESIDENT, GOVERNMENT AFFAIRS, MERCK-
                             MEDCO

    Mr. Jacobsen. Mr. Chairman, members of the committee, I am 
Dr. Steve Jacobsen, a physician researcher at Mayo Clinic. I 
want to thank you for the opportunity to testify about the 
importance of medical records base research and the potential 
impact of legislation restricting access to medical records for 
this category of research.
    For the past 8-years, I have had the privilege to work at 
the Mayo Clinic. I truly believe that Mayo Clinic's 
international reputation as a center of excellence grew out of 
its commitment to improve patient care through research, often 
through the use of the medical record. Our founders, Dr. 
William and Charles Mayo went on record early in this century 
saying the best way to improve care was to rigorously evaluate 
patient outcomes.
    They and their colleagues designed systems that ensure that 
all information about a patient was immediately available for 
care and readily accessible for systematic reviews of the 
outcomes of care. They set a precedence for the scores of 
studies of the outcomes of care that have changed medical 
practice at Mayo Clinic and throughout the world.
    I also need to stress that Mayo Clinic maintains its 
commitment to the confidentiality of medical information. One 
of our most basic tenets is that information is available 
because of the trust between the patient and the providers of 
care. All employees are instructed on the importance of 
confidentiality.
    In regard to medical record-based research, I want to 
emphasize that information from this type of research is vital 
to patients and their physicians. This is not an issue of 
society's need for information versus the patient's right to 
privacy. Patients, individually, have a great need for this 
information. Let me give you an example.
    I have a friend who was recently diagnosed with prostate 
cancer. Upon hearing of the diagnosis, he immediately had a 
number of questions. What was going to happen to him? What were 
the chances of complications? Were there things his sons should 
know about their risk of developing the disease?
    I am sure you can think of similar questions that you have 
wanted to ask your own physician. The answer to these questions 
are often obtained by reviewing medical records. It is because 
of the importance of answering these types of questions for 
patients and their physicians that Mayo Clinic maintains its 
commitment to accurate medical record-based research.
    My second point is that each and every one of us in this 
room needs to be concerned about the potential impact of 
legislation that might block access to some medical records for 
research. This concern comes from the threats of the accuracy 
of findings of studies that can result from missing some 
records. To illustrate, let me go back to my friend.
    One of the important factors in his decision about surgical 
therapy was the risk of certain side effects. Imagine if over 
the past several years men who experienced those side effects 
were upset with their outcome. Maybe they didn't expect it. 
Perhaps they blame their surgeon but regardless refuse access 
to the medical record for research purposes.
    A study based only on patients who did provide the 
authorization, in other words, those who did not experience 
those side effects, would suggest that the surgery was much 
safer than in reality. Thus, my friend could have made a 
decision on the basis of this information.
    This potential inaccuracy is the crux of our concern for 
limiting access to medical records for research purposes. At 
Mayo Clinic we feel it our responsibility to provide patients 
and their physicians the best possible information so the best 
possible decisions can be made.
    Is this threat real? I believe the answer is yes. As you 
know, the State of Minnesota now limits access to medical 
records for research except with prior authorization. In a 
recent study, we found that refusal rates were higher among 
women, persons under 6 years of age, and persons with certain 
underlying illnesses such as mental disorders, breast cancer, 
and reproductive problems. Unfortunately, the degree of 
inaccuracy resulting from the absence of such records is 
probably not knowable in any particular study. The only way to 
ensure accurate information is through a complete and unbiased 
conclusion of all medical records of all appropriate patients.
    Finally, the third point I would like to make relates to 
potential harm if the rules regarding research use of medical 
records vary from State to State. The biases imposed as a 
consequence of different laws could seriously hinder the 
improvement of patient care. For example, in a study of the 
outcomes of prostate cancer surgery in patients from the Mayo 
Clinic sites in Arizona, Florida, and Minnesota, it could be 
virtually impossible to sort out if any observed differences in 
the outcomes of these patients were due to different patient 
characteristics, different processes of care, or simply biases 
introduced by the different laws. It is extremely important 
that laws concerning the research use of medical records are 
uniform across all States.
    In closing, I would like to emphasize that medical record-
based research is vital to the continued improvement of patient 
care and is essential to patients and physicians as they 
consider decisions about the courses of care. This information 
must be as accurate as possible.
    The only way to ensure this is through complete and 
unbiased information. We do recognize the need for 
confidentiality of information, but we must not confuse 
research access with open access to medical information.
    Mr. Chairman, the restriction of these medical records for 
research purposes does not ensure privacy of personal medical 
information. It does not address the public's concern with 
regard to the potential misuse of health information. Instead 
it hinders medical research as directed toward improved patient 
care and puts the public's health and well-being at risk.
    Thank you.
    [The prepared statement of Steven J. Jacobsen follows:]
   Prepared Statement of Steven J. Jacobsen, Associate Professor of 
                       Epidemiology, Mayo Clinic
    Chairman Bilirakis, members of the committee, I am Dr. Steve 
Jacobsen, a physician researcher at Mayo Clinic. Thank you for the 
opportunity to testify before you regarding the important issue of 
medical records confidentiality.
    Today, I would like to discuss two fundamental questions bearing on 
this issue. The first is: What is the importance of medical records-
based research to the public? And the second is: What is the impact of 
legislation restricting access to medical records on this category of 
research?
    For the past eight years, I have been privileged to work at the 
Mayo Clinic. I truly believe that Mayo Clinic's international 
reputation as a center of excellence in medicine and surgery grew out 
of its commitment to improve patient care through research, often 
through the use of the medical record. In fact, our founders, Drs. Will 
and Charlie Mayo went on record in the early years of this century 
saying that the best way to improve care was to rigorously evaluate 
patient outcomes. In order to do this, they and their colleagues 
designed a ``unit medical record'' in which medical data on each 
patient is stored in one self-contained packet that is kept in 
perpetuity. This was done so that all information about a patient was 
immediately available to the physician treating the patient and so that 
a systematic review of the outcomes of care could be performed easily. 
They also built indexes that identified records of patients with 
specific conditions or who had undergone specific procedures. They 
recognized that there was a wealth of information collected as part of 
routine clinical care and that no subset of this information could be 
conceived that would capture sufficient detail for all potential 
studies. Through these efforts, they set the precedent for the scores 
of studies of the outcomes of care that have changed medical practice 
at Mayo Clinic and throughout the world.
    Medical records research is vital to maintaining and improving the 
health of the American public. In fact, virtually every health hazard 
that we know of today has been identified using information from 
medical records. Take AIDS, for example. If researchers had not been 
allowed to study the medical records of patients with unusual immune 
deficiency problems in the late 1970's, the characterization of the 
AIDS epidemic would have been delayed at a substantial cost to the 
public's health. Other examples include studies examining the benefits 
and risks of estrogen treatment, as well as the health risks of 
smoking, dietary fats, obesity, and certain occupations. You may have 
read that an outbreak of invasive streptococcal infection was 
identified at Mayo in 1995. Without access to the medical records of 
patients with these unusual infections, characterization of this 
syndrome and isolation of this deadly bacterial strain would have been 
delayed. And over one hundred school children--which our research 
showed were the unwitting carriers of this deadly germ in their 
throats--would have gone untreated. This discovery led to the 
designation of invasive strep as a reportable disease. Such a 
designation permits earlier recognition and control of epidemics. 
Medical records research is also critical for evaluating the long-term 
side effects of drugs, the safety of medical devices or procedures, the 
cost effectiveness of alternative medical practices, and the usefulness 
of diagnostic tests.
    Mayo Clinic, as I mentioned, is committed to improving the practice 
of medicine and patient care though its long-standing tradition of 
performing these types of studies, looking at groups of patients. This 
approach is important because physicians may remember patients who have 
done well with a particular treatment. Likewise, they can remember the 
patients who have not. However, they cannot remember these results in 
sufficient detail to quantify the likelihood of a good or bad result. 
We use systematic studies of groups of patients so that we can sort out 
true differences from random outcomes. Furthermore, when we perform 
these studies, we have to be sure that the findings reflect any true 
differences and not just the factors related to which medical records 
were reviewed. I will expand on this in a moment.
    Before doing so, however, I need to stress the point that Mayo 
Clinic also maintains its commitment to the confidentiality of medical 
information as well. It is one of our most basic tenets that this 
information is available because of the trust between the patient and 
the providers of care. All employees are instructed on the importance 
of confidentiality; there are strict penalties, including loss of 
employment, for violations of this trust.
    As part of this, we strongly maintain that research access IS NOT 
open access to the medical record. All studies are monitored by our 
Institutional Review Board. Information is collected from the medical 
record by trained individuals, usually just one or two for any given 
study. All of these individuals have been thoroughly briefed about the 
importance of confidentiality and procedures to help ensure it. The 
information is summarized and never published in identifiable form. 
This is not casual access.
    As you consider legislation concerning research use of medical 
records, there are several important factors that I hope you will take 
into account. These include the importance of medical record research, 
the potential impact of legislation blocking access to some medical 
records, and the importance of consistency in the laws across all 
states.
    First, it is important to understand that information from medical 
record research is vital to patients and their physicians. Most 
advocates of increased restrictions paint the issue as one of society's 
need for information versus the patient's right to privacy. However, 
the patients, themselves, have a great need for this information. Let 
me give you an example. I recently had a friend who was diagnosed with 
prostate cancer. Upon hearing of the diagnosis, he immediately had a 
number of questions. What is going to happen to me? Among each of the 
treatments, what are the long-term outcomes? Are there things I should 
tell my sons about their risk of developing this disease? I am sure 
that if you think back to your own encounters with the medical system, 
you can think of when you have asked some of those same types of 
questions. These kinds of questions can only be answered by studying 
the experience of large groups of patients. It is because of the 
importance of answering these questions for patients and their 
physicians that Mayo Clinic maintains it commitment to accurate medical 
record research.
    The second point is that we all need to be concerned about the 
potential impact of legislation that might block access to some medical 
records for research purposes. This concern comes from the potential 
threats to the accuracy of findings of studies due to incomplete 
ascertainment of outcomes. To illustrate, let me go back to my friend 
recently diagnosed with prostate cancer. One of the important factors 
in his decision about whether or not to undergo surgical therapy was 
the risk of certain side effects. Imagine what would happen if, over 
the past several years, men who experienced the side effects were upset 
with their outcome, perhaps blamed their surgeon, and refused access to 
medical record for research purposes. A study based only on those 
patients who did not experience those side effects would suggest that 
the surgery was much safer than in reality. Thus, my friend would be 
making his decision on the basis of misinformation.
    This potential threat is the crux of the concern for limiting 
access to medical records for research purposes. At Mayo Clinic, we 
feel it our responsibility to provide patients and their physicians the 
best possible information so that the best possible decisions can be 
made.
    Is this threat real? I believe the answer is ``Yes''. I was 
principal investigator of a study recently published in the Mayo Clinic 
Proceedings, a copy of which is included in the Appendix to my written 
statement. We conducted this Institutional Review Board approved study 
to compare the characteristics of persons refusing to provide a general 
authorization of the use of medical record for research purposes with 
those who did. This was prompted by passage of a law in the State of 
Minnesota that limits access to medical records for research except 
with the prior authorization of the patients in question. 
Institutionally, we felt it necessary to understand the potential 
impact of the recent Minnesota bill on the quality of information 
generated from medical record studies.
    In this study among patients recently seen at Mayo Clinic, we found 
that slightly over 3% of patients explicitly told us ``I do not 
authorize Mayo to review medical records about me for medical 
research''. Approximately 80% of patients provided us an explicit 
authorization and 17% did not explicitly give us an indication of their 
wishes despite three written contacts. This demonstrates the importance 
of how the response of persons not explicitly expressing their wishes 
are treated. If considered a ``No'', the effective refusal rate would 
have been over 20%. This high proportion greatly increases the chance 
that a bias such as I described in the hypothetical example, could 
influence the results of any study.
    Another important finding was that refusal rates were higher among 
certain subgroups. In general, women were more likely to refuse 
authorization than men, persons under 60 years of age were more likely 
to refuse than older individuals, and patients traveling longer 
distances for care at Mayo Clinic were less likely to refuse than those 
from the local community. In addition, we found that persons with 
certain underlying illnesses, such as mental disorders, breast cancer 
and reproductive problems were also more likely to refuse 
authorization. While some of these findings may be somewhat 
predictable, it is not possible to know how refusal rates might 
systematically differ between any particular comparison groups. 
Furthermore, it is likely that our assessment of potential differences 
underestimates what would likely be happening at other institutions 
that don't enjoy the same level of trust and respect from their 
patients. The bottom line is that the degree of inaccuracy introduced 
by restricting access to medical records for research purposes is 
probably not knowable in any particular study and is likely to vary 
from question to question and from setting to setting. The only way to 
ensure accurate information is through complete and unbiased inclusion 
of all medical records.
    Finally, this third point that I would like to make relates to the 
potential harm of allowing the rules regarding research use of medical 
records to vary from state to state. Mayo Clinic Rochester is about 60 
miles west of the Wisconsin border and 40 miles north of the Iowa 
border. Thus, a substantial proportion of our referral practice comes 
from these two neighboring states. In fact, Mayo operates in five 
states. Imagine if you will, the complexity of trying to deal with 
three separate sets of laws, each with different standards for the use 
of medical records for research purposes. More important, however, is 
the concern for different sets of biases imposed as a consequence of 
these laws. For example, imagine a study comparing the outcomes of 
prostate cancer surgery in patients from the University of Iowa and 
Mayo Clinic Rochester. If different laws affected the selection factors 
for this study, the results would be extremely difficult to interpret. 
It would be virtually impossible to sort out if any observed 
differences were due to patient characteristics, processes of care, or 
simply biases introduced by different laws controlling access to 
medical records for research purposes. This might preclude the 
investigator's ability to identify certain patient characteristics or 
patterns of care that may benefit patients with prostate cancer. It is 
extremely important that laws concerning the research use of medical 
records are uniform across all states.
    In closing, I would like to emphasize that medical record research 
is vital to the continued improvement of patient care. Furthermore, 
information generated from medical record research is essential to 
patients and physicians as they consider decisions about courses of 
care. Consequently, it is absolutely essential that this information be 
as accurate as possible. The only way to ensure this is through 
complete and unbiased information. At the same time, it is important to 
recognize the need for confidentiality of information. We mustn't, 
however, confuse research access with open access to medical 
information. Mr. Chairman, legislation restricting access to medical 
records for research purposes does not ensure privacy of personal 
medical information and does not address the public's concerns 
regarding the potential misuse of public health information. Instead, 
it hinders scientific research and puts the public's health and well-
being at risk for serious harm. Your attention should be focused on 
stopping the actual abuses of medical record information that harms 
patients.
    Thank you for your attention.

    Mr. Burr. Thank you, Dr. Jacobsen.
    The Chair would recognize Dr. Amdur for 5 minutes.

                    STATEMENT OF ROBERT AMDUR

    Mr. Amdur. Good morning. I am a physician with an interest 
in research ethics. I am here to urge you to pass legislation 
that will require that research involving review of 
confidential information from a person's medical record be held 
to the same ethical standards regardless of who conducts the 
research or where the funding comes from.
    Most of the medical research that I perform requires 
confidential information from medical records, so I know how 
important it is to have access to this kind of information.
    I have experience with the Federal regulations related to 
research because for the past 4 years I have chaired the 
institutional review board at Dartmouth. For anybody not 
familiar with that term, an institutional review board is a 
type of ethics committee that is charged with protecting the 
rights and welfare of research participants.
    When considering medical records legislation as you are, it 
is important to understand two main points. The first point is 
that our society currently has only one formal system for 
evaluating the ethics of a research study. And this is the 
system of protection described in our code of Federal 
regulations. These regulations basically present a manual that 
explains the procedure and criteria that should be used to 
determine if a specific research proposal is acceptable from 
the ethical standpoint. The basic criteria for ethical research 
are common sense things like being sure that the risks to 
subjects are minimized and that the risks are in proportion to 
the expected benefits of the research.
    The take-home message that I would like to leave you with 
is that the Federal regulations are good regulations and are to 
help to protect individual subjects and to maintain the 
integrity of our research process. However, what many people 
don't understand is that without Federal legislation--the 
protections that are provided by these regulations are limited 
to studies that are funded by a Federal agency or being done as 
part of an application for FDA licensure.
    Today, if I want to study the medical history of 
congressional representatives like yourself, I don't need to 
get Federal funds, I can finance it myself. I may be able to 
get access to your medical records without going through any 
meaningful review process. That is the problem.
    The final point that I would like to make is a response to 
the arguments that I have read about passing legislation about 
medical records research. As I see it, the main issue of 
concern is that if we require the same standard for both 
privately and federally funded research, the volume of 
regulated activity will increase to the point that society's 
ability to conduct research will be compromised.
    I don't share this concern, and I think that it reflects a 
fundamental misunderstanding in two basic areas. One 
misunderstanding is that there is currently a lot of privately 
funded research going on outside the Federal regulatory system. 
This is not true.
    While we don't have definitive data on this issue, the fact 
of the matter is most privately funded research is done either 
as part of an FDA application for licensure which means it must 
comply with Federal regulations or at academic institutions 
which have signed a type of contract with the National 
Institutes of Health called a multiple project assurance.
    What this contract says is that the institution will 
require that all research under its auspices be done in 
compliance with Federal regulations, regardless of funding 
source. The point is that the great majority of privately 
funded research today is already going on in compliance with 
Federal regulations and reviewed by the IRB system.
    The second misunderstanding is that extending the authority 
of the Federal regulations to privately funded research will 
mean that medical centers, insurance companies, et cetera, 
throughout the country will have to go through the 
institutional review board system every time they want to 
review medical records as part of a quality assessment effort, 
utilization review, outcome evaluation, et cetera.
    This is not going to happen because the regulations only 
apply to medical research. Medical research in the regulations 
is defined to be, ``a systematic investigation designed to 
develop or contribute to generalizeable knowledge,'' a specific 
definition. There is no question that the institutional review 
board authority does not extend to the wide range of non-
research activities that opponents of the effort are concerned 
about.
    Thank you.
    [The prepared statement of Robert Amdur follows:]
   Prepared Statement of Robert Amdur, Former Associate Professor of 
                   Medicine, Dartmouth Medical School
Introduction
    Good morning. My name is Robert Amdur. I am a physician with an 
interest in research ethics. I am here to urge you to pass legislation 
that will require that research that involves review of confidential 
information from a persons medical record be held to the same ethical 
standard regardless of who directs the research or where the funding 
comes from. Most of the medical research that I do requires 
confidential information from medical records so I know how important 
it is to have access to this kind of information. I am familiar with 
federal research regulations because I have chaired the Institutional 
Review Board at Dartmouth for the past 4 years. For those of you who 
are not familiar with this term, the Institutional Review Board is a 
type of ethics committee that is charged with protecting the rights and 
welfare of research subjects.
Main Points
    When considering medical records legislation it is important to 
understand two main points:
    1. The first point is that our society currently has only one 
formal system for evaluating the ethics of a research study and this is 
the system of protections described in our code of federal regulations. 
These regulations basically present a manual that explains the 
procedure and criteria that should be used to determine if a specific 
research proposal is acceptable from the ethical standpoint. The basic 
criteria for ethical research are common sense things like being sure 
that the risks to subjects are minimized and that risks are appropriate 
in relation to the expected benefits. The take home message is that 
these are good regulations that help to protect individual subjects and 
maintain the integrity of the research process. However, what many 
people don't understand is that without federal legislation the 
protections that are provided by these regulations are limited to 
studies that are funded by a federal agency or being done as part of an 
application for FDA licensure. Today if I want to study the medical 
history of congressional representatives, and I don't use federal 
funds, I may be able to get access to your medical records without 
going through any meaningful review process.
    2. The final point that I would like to make is a response to the 
argument against passing legislation about medical record research. As 
I see it, the main issue of concern is that if we require the same 
standards for both privately and federally funded research, the volume 
of regulated activities will increase to the point that the ability to 
conduct research will be compromised. I do not share this concern and I 
think it reflects a misunderstanding in two areas.
    One misunderstanding is that there is currently a lot of privately 
funded research that is being done outside the federal regulatory 
system. This is not true. Most privately funded research is done at 
institutions that sign a type of contract called a ``Multiple Project 
Assurance'' with the National Institutes of Health that commits them to 
conducting all research according to federal regulations regardless of 
funding source. I am happy to explain why an institution would want to 
establish this Assurance in the question period, but for the purpose of 
this discussion the point is that passing federal legislation will not 
meaningfully increase the volume of regulated research because most 
privately funded research is already being reviewed according to 
federal regulations.
    The second misunderstanding is that extending the authority of the 
federal regulations to privately funded research will mean that medical 
centers throughout the country will have to go through the 
Institutional Review Board system every time they want to review 
medical records as part of a quality assessment or utilization review 
activity. This is not going to happen because the regulations only 
apply to medical record review that is being done for research 
purposes. As the regulations define research to be ``a systematic 
investigation designed to develop or contribute to generalizable 
knowledge'' there is no question that Institutional Review Board 
authority does not extend to the wide range of non-research activities 
that opponents of federal legislation in this setting are concerned 
about.

    Mr. Burr. Thank you, doctor.
    The Chair would recognize Dr. Stump for 5 minutes.

                  STATEMENT OF DAVID C. STUMP

    Mr. Stump. Good morning, Mr. Chairman, members of the 
committee.
    Thank you for the opportunity to testify before you today 
regarding this most important issue of confidentiality of 
patient medical information.
    My name is David Stump. I am a physician and vice president 
of clinical research for Genentech, Incorporated, a San 
Francisco, California-based biotechnology company. Genentech is 
the pioneer in the biotech field responsible for the 
development of several breakthrough, life-saving biological 
products, including Pulmozyme for cystic fibrosis; Activase for 
the treatment of heart attack and stroke; Rituxan for the 
therapy of non-Hodgkins lymphoma; and most recently, Herceptin, 
a new treatment for metastatic breast cancer.
    Genentech has been working for several years in support of 
enactment of strong uniform Federal standards designed to 
safeguard the confidentiality of patient health information and 
limit its use to activities which are appropriate and necessary 
to the daily functioning of our dynamic health care delivery 
system, including the use of information for biomedical 
research.
    Throughout this effort, however, we have grown to realize 
that while such Federal standards are clearly needed to help 
assuage concerns over the abuse of patient health information 
and facilitate patient confidence in the system, it is equally 
critical that new Federal law recognize that patient 
information is the foundation of our growing effort to enhance 
the quality of health care we deliver through accountability, 
outcomes analysis, and medical research. Any failure to strike 
this delicate balance could have the dramatic and unintended 
consequence of stifling innovation and limiting the ability of 
companies like Genentech to effectively continue its mission in 
pursuing drug therapies for unmet medical needs.
    In addition, any new Federal standards must create a single 
uniform system of safeguards, accountability, and penalties by 
which the research community must abide by preempting the 
increasing patchwork of State law which is working to minimize 
our ability to conduct research effectively and affordably.
    I understand that this is a first hearing of this 
subcommittee and that you face an August deadline for action. 
While you will no doubt hear about the importance of this issue 
from many other panels today, I personally want to emphasize 
the critical importance of your decisions regarding patient 
confidentiality to the biomedical research community and to the 
patients who suffer from the illnesses we seek to study and 
cure.
    While we at Genentech are firmly committed to protecting 
the confidentiality of every single patient whose information 
we review and use each minute of each day, our ability to 
hypothesize, study, develop, test, and manufacture new products 
is directly related to both the quality and availability of 
information.
    Our founders were the first to conceptualize the process of 
cloning human proteins for the purpose of manufacturing life-
saving therapies. Vital to this process then and now, nearly 20 
years later, is the ability to access patient data past, 
present, and future. Please understand that I will not testify 
today that new Federal standards that limit our ability to 
access patient data will eliminate biomedical research as we 
now know it.
    However, I will say without responsible access to such 
information, patients themselves whom we all seek to protect 
will be the ultimate losers as they will have access to fewer 
important new therapies.
    The medical research community depends upon uniform 
standards for the performance of clinic and medical 
investigations. As we consider new important legislation aimed 
at protecting the privacy and confidentiality of patients from 
abuse, we need to be certain that this legislation does not 
erect unnecessary barriers that will slow and impede medical 
research. To do so will adversely impact all future generations 
who are dependent on the steady progress of medical research in 
order to improve their lives as they encounter and struggle 
with consequences of illness and disease.
    The United States is unquestionably the world's leader in 
medical research. Our leadership to date has been fostered by 
ready, uniform access to key information and data contained in 
the patient's medical records. Our own clinical studies involve 
data from patients all over the country and the world, for that 
matter. We engage in partnerships with research entities, 
health plans, and others located across all 50 States of the 
United States.
    I know that access to data drives research, particularly 
medical research, and access to patient's data has driven 
medical research in the United States since the turn of the 
20th century. Of particular concern to us are proposals that 
would extend Federal oversight into private research where the 
research involves information only and not the patients 
themselves.
    Unfortunately, legislation introduced recently would 
accomplish this by extending the common rule to all research, 
meaning that even our data and archival research would be 
subject to review by an institutional review board. This is 
problematic to us for a number of reasons.
    First, the IRB rules and policies surrounding informed 
consent are intended to ensure that human subjects 
participating in clinical trials are made sufficiently aware 
through the informed consent process of the potential risk of 
their safety. Thus, the rules are intended to ensure the safety 
of the human subject.
    This legislative debate is about the use of medical 
information. The health safety risks to the human subject 
presented by confidential review and use of medical information 
is minimal thus the application of the common rule and of IRB 
review to private, archival data review is an apples to oranges 
comparison.
    Thank you, Mr. Chairman, for allowing me to share with you 
some of Genentech's principles and concerns regarding patient 
confidentiality. The subcommittee has been a vital partner in 
assuring a stable and fruitful environment for biomedical 
research as illustrated by your recent efforts on the Food and 
Drug Administration Modernization Act.
    Please understand that the ultimate impact of this issue is 
no different and is directly related to our ability to continue 
innovative research. Please be assured that we share your 
commitment to protecting and safeguarding patient information. 
After all, patients are ultimately our business.
    Please also understand that information is a lifeblood of 
research. We applaud this subcommittee's effort and very much 
look forward to working with you and others toward the final 
enactment of strong, workable and, most importantly, uniform 
Federal standards protecting the confidentiality of patient 
medical information.
    Thank you.
    [The prepared statement of David C. Stump follows:]
Prepared Statement of Dave Stump, Vice President, Clinical Development 
                  & Genentech Fellow, Genentech, Inc.
    Good morning, Mr. Chairman, and Members of the Committee. Thank you 
for the opportunity to testify before you today regarding this most 
important issue of the confidentiality of patient medical information. 
My name is Dr. Dave Stump, and I am Vice President of Clinical 
Development for Genentech, Inc., a San Francisco, California-based 
biotechnology company. Genentech, Inc. is a pioneer in the 
biotechnology field, responsible for the development of several 
breakthrough, life-saving biological products, including Pulmozyme for 
Cystic Fibrosis; Activase for cardiac disease; Rituxan, for non-
Hodgkins lymphoma; and most recently, Herceptin for metastatic breast 
cancer.
    Genentech, Inc. is an active member of the Pharmaceutical Research 
and Manufacturers of America (PhRMA), the Biotechnology Industry 
Organization (BIO) and the Healthcare Leadership Council (HLC). We have 
been working closely with these organizations and numerous other 
coalition partners through the HLC in support of enactment of strong, 
uniform federal standards designed to safeguard the confidentiality of 
patient health information and limit its use to activities which are 
appropriate and necessary to the daily functioning of our dynamic 
health care delivery system, including the use of information for 
biomedical research.
    Throughout this effort, however, we have grown to realize that 
while such federal standards are needed to help assuage concerns over 
the abuse of patient health information and facilitate patient 
confidence in the system, it is equally critical that new federal law 
recognize that patient information is the foundation of our growing 
effort to enhance the quality of health care we deliver through 
accountability, outcomes analysis and medical research. Any failure to 
strike this delicate balance could have the dramatic and unintended 
consequence of stifling innovation and limiting the ability of 
companies like Genentech, Inc. to effectively continue its mission and 
pursuit of drug therapies for unmet medical needs. In addition, any new 
federal standards must create a single, uniform system of safeguards, 
accountability and penalties by which the research community must abide 
by preempting the increasing patchwork of state law which is working to 
minimize our ability to conduct research effectively and affordably.
    I understand that this is the first hearing of this Subcommittee, 
and that you face an August deadline for action. While you will no 
doubt hear about the importance of this issue from all of the other 
panelists today, I want to emphasize the importance and saliency of 
your decisions regarding patient confidentiality to the biomedical 
research community and to the patients who suffer from the illnesses we 
study. While we at Genentech, Inc. are firmly committed to protecting 
the confidentiality of the patient information we review and use each 
minute of each day, our ability to hypothesize, study, develop, test 
and manufacture products is directly related to the quality and 
availability of information.
    Our founders, Herb Boyer and Bob Swanson, were the first to 
conceptualize the process of cloning human proteins for the purpose of 
manufacturing life-saving therapies. Vital to this process then and 
now, nearly 20 years later, is the ability to access patient data--
past, present and future. I will not testify today that new federal 
standards that limit our ability to access patient data will eliminate 
biomedical research as we know it. I will say, however, that without 
responsible access to such information, patients will be the true 
losers as patients will have access to fewer, more expensive therapies.
    The medical research community depends upon uniform standards for 
the performance of clinical and medical investigations. As we consider 
new important legislation aimed at protecting the privacy and 
confidentiality of patients from abuse, we need to be certain that this 
legislation does not erect unnecessary barriers that slow and impede 
medical research. To do so will adversely impact all future generations 
who are dependent on the steady progress of medical research in order 
to improve their lives as they encounter and struggle with the 
consequences of illness and disease.
    The United States is unquestionably the world's leader in medical 
research. With appropriate pride, we can point to our academic research 
institutions, the National Institutes of Health (NIH) and the Center 
for Disease Control (CDC), to name a few of the more prominent 
institutions. The United States is home to leaders in all types and 
varieties of medical research from epidemiology and outcomes research 
on one hand to the application of novel surgical techniques on the 
other. Our leadership, however, has been fostered by ready, uniform 
access to the key information and data contained in the patient's 
medical records. Our studies involve data as well as patients from all 
over the country, and the World, for that matter. We engage in 
partnerships with research entities, health plans and others also 
located across the 50 United States. I know that access to data drives 
research, particularly medical research, and access to patient's data 
has driven medical research in the United States since the turn of the 
20th century.
    Of particular concern to Genentech, Inc. are proposals that would 
extend federal oversight into private research where the research 
involves information only, and not the patients themselves. Legislation 
introduced by Representative Markey (D-MA) (H.R. 1057) accomplishes 
this by extending the Common Rule to all research, meaning that even 
our data and archival research would be subject to review by an 
Institutional Review Board (IRB). This is problematic for a number of 
reasons. First, the IRB rules and policies surrounding ``informed 
consent'' are intended to ensure that human subjects participating in 
clinical trials are made sufficiently aware, through the informed 
consent process, of the potential risks to their safety. Thus, the 
rules are intended to ensure the safety of the human subject. This 
legislative debate is about the use of medical information. The 
``risks'' to the human subject presented by review and use of medical 
information is minimal and thus, the application of the Common Rule and 
of IRB review to private, archival data review is an apples-to-oranges 
comparison.
    Further, I understand that IRBs do actually review archival 
research projects of institutions which are otherwise subject to the 
Common Rule. However, in those circumstances, the rule provides for 
expedited review of such research as it is considered to present 
``minimal risk'' to the individual. Even the suggestion that we would 
be able to obtain expedited review of our archival research projects 
would add significant new layers of unnecessary federal oversight over 
private activities, depleting time and resources from our research 
endeavors. What appears to be a simple, straightforward requirement 
would directly result in fewer projects being initiated and fewer 
products being discovered. Conversely, we support an approach which 
would impose accountability on our ability to access information, limit 
our use of such information to bona fide research, and impose penalties 
on us for its misuse.
    Thus, workable and uniform rules regarding how we may access and 
use this gold mine of information are critical to our underlying 
success. Let us consider some examples:

1. The Mayo Clinic was founded in 1907. The founders recognized the 
        value of looking critically at their own experience, both in 
        terms of the natural history of disease in their patients and 
        the outcomes of their surgical and medical interventions. The 
        Mayo Clinic has been a leader in the indexing of medical 
        records, the application of the information technologies needed 
        to search and retrieve information from their patient 
        databases, and in outcomes research. Dr. Melton described some 
        of the Mayo Clinic experience in an editorial in New England 
        Journal of Medicine in 1997. He noted that more than 1,000 
        articles have been published in the medical literature based on 
        the Mayo Clinic experience, and described particular 
        difficulties associated with a law passed in Minnesota which 
        has made it more difficult for the Mayo Clinic to conduct 
        epidemiologic research by requiring specific patient 
        authorization for the use of patient data.
    Now that the Mayo Clinic has spread to at least three states 
(Florida, Arizona, and Minnesota), and is a pioneer in the development 
of a computerized medical record, we can look forward to even more 
productive information stemming from their experience, assuming that 
ill-advised legislation from states or the federal government relating 
to patient confidentiality does not dramatically erode our ability to 
use this information to further medical research.

2. The comparison of medical research done in the United States and 
        Europe by pharmaceutical companies reveals some important 
        insights. The United States is a preferred site for drug 
        development. I believe this relates to the presence of uniform 
        standards for pharmaceutical research supervised by the FDA as 
        well as to the similar guidelines adopted by physicians and 
        institutions in the United States. Compare our situation to the 
        diverse array of regulatory agencies one encounters in Europe, 
        not to mention the variations in language, culture, politics, 
        and standards of medical practice. The implementation of 
        different local standards of patient confidentiality in the 
        United States will have the practical effect of erecting 
        barriers to medical investigations of all kinds. Ultimately, 
        these barriers will lead to inefficiency and a loss of the 
        advantages now present in our country. Pharmaceutical companies 
        care deeply about time, resource expenditures, and 
        productivity. Should legislation lead to disincentives for 
        pharmaceutical research, drug development efforts may well be 
        shifted away from the United States towards more favorable 
        environments.
3. Recently the National Registry for Myocardial Infarction (NRMI) 
        showed that important differences exist between different 
        regions of the United States in regard to the diagnosis and 
        treatment of myocardial infarction or heart attacks. Women in 
        general, and older women in particular, were much less likely 
        to have their heart attack diagnosed and treated as compared to 
        men. These differences varied significantly by region in the 
        US. Uniform standards allow ``outcomes research'' to be done 
        across our country and detect deviations that can be addressed. 
        This type of research is critical for improving the quality and 
        reducing the cost of treatment and care.
    In the past few years significant progress has been achieved in the 
understanding of genomics in the metabolism of drugs and in drug 
interactions. The importance of drug metabolism was initially 
recognized as differences in pharmacokinetics and pharmacodynamics in 
racial sub-populations. Subsequently, the differences have been 
attributed to the genetic variations such as cytochrome P450 that are 
responsible for the metabolism of drugs. These differences are critical 
to understanding the safety and efficacy of many drugs across patient 
populations. The study of relevant sub-populations has become a common 
FDA requirement for the approval of many drugs. The majority of some of 
these sub-populations are concentrated in a few states. State 
regulations inhibiting access to patient records will have the 
unintended consequence of inhibiting access to information about the 
sub-populations of patients. As a result, we will know less about their 
diseases, the natural history of diseases in these subgroups, and the 
effects of medical and surgical treatment on their illnesses.
    This is not just a theoretical argument. In the 1960's and 1970's, 
we routinely excluded women and children from research involving new 
drugs to ``protect them.'' As a result, we had almost no information 
about the safety and activity of these drugs in women or children. 
Despite the absence of critical information, these same drugs were 
broadly used in the treatment of women and children once they were 
approved.
    Another example is the FDA's regulations for filing an 
Investigational New Drug Application (NDA) prior to commencing studies 
in humans. This is a significant hurdle that is not present in the 
United Kingdom where research can be done on normal male volunteers 
with informed consent and approval from an Institutional Review Board 
(IRB). Many pharmaceutical companies, even those centered in the United 
States, are performing initial human studies in the United Kingdom. I 
maintain that unnecessary barriers create real disincentives for doing 
medical investigations and fewer investigations are not in the 
patient's best interests. Clearly, we need to avoid legislation that 
will produce similar unintended consequences in the future.
    The economic rationale for a uniform standard for patient 
confidentiality is compelling. Diverse laws governing patient 
confidentiality will create a need for individually ``tailored'' 
programs aimed at gaining access to the data in patient's records. The 
variability and diversity between different states will create a level 
of unnecessary complexity. To address the complexity, researchers will 
need to spend more time and more money to accomplish their research 
goals. The consequences will be to increase the cost of research and 
reduce the number of investigations that are done. Smaller numbers of 
more expensive studies are not in the best interests of patients or our 
country.
    To put this discussion in context, Genentech, Inc., as well as the 
HLC coalition, support the general approach taken in legislation 
introduced in April by Senator Bennett (R-UT). Senator Bennett's bill, 
the ``Medical Information Protection Act of 1999,'' provides for 
comprehensive standards relating to patient confidentiality and imposes 
clear limits on the ability to use information for purposes of health 
care delivery and medical research. Yet, the bill establishes standards 
in a way that provides sufficient flexibility for each health plan, 
researcher, physician and hospital to establish its own system for 
ensuring compliance. Further, the bill provides very thorough 
preemption of state law, creating a uniform, predictable environment 
for the research community while replacing current state law with a 
rational, comprehensive system of federal safeguards, responsibilities, 
limits and penalties. To date, this is the only legislative proposal 
that would effectively address concerns I described earlier, such as 
those of the Mayo Clinic, while not sacrificing any ``protections'' 
provided to patients.
    Conversely, the proposal introduced by Representative Markey would 
undermine our ability to conduct broad, inclusive, population-based 
research using patient data by subjecting us to a new federal standard 
as well as several conflicting state law standards relating to use, 
safeguards and patient authorization. Specifically, the Markey proposal 
would not only expressly extend federal oversight into all private 
research activities involving only information, the proposal also would 
establish a federal ``floor,'' allowing any state law which is 
considered to provide ``greater protection'' than the federal law to 
remain in effect. Even disregarding the practical difficulty of 
determining such a subjective standard as what constitutes ``greater 
protection,'' which would undoubtedly require litigation to mediate, 
this standard would clearly perpetuate the complexity and inconsistency 
that is state law which stifles the industry.
    Here is a practical example. In the wake of concern over genetics--
the power of genetic information and its potential for abuse--some 
states require that ``genetic'' information be segregated from the rest 
of the patient's medical record and subject to different standards. 
Under the Markey proposal, any such state laws would likely remain in 
effect, either by virtue of already being in existence or by virtue of 
being considered more protective than the federal law. As a result, 
health plans, hospitals and providers would have to separate out 
``genetic'' information from the rest of the patient's medical 
information and treat it differently.
    This raises several practical concerns. First, the states may vary 
in terms of what is considered ``genetic.'' Even assuming states could 
agree on what they define as ``genetic,'' as a physician, I can assure 
you that virtually every piece of medical information is, by its very 
nature, genetic. Eye color, gender, the predisposition to breast cancer 
are all examples of genetic information. So, how do we, as a practical 
matter, separate this information out from other, ``non-genetic'' 
medical information. Second, state rules regarding segregation will 
vary. As such, we would be potentially subject to 50 different sets of 
rules regarding segregation and use of this critical information. 
Finally, the practical implication of such limitations is devastating. 
The value of so-called genetic information is immeasurable and is 
directly responsible for the development of such breakthrough drugs as 
Herceptin, which provides, for the first time, real hope to women 
suffering from breast cancer and their families.
    Rather, federal law should subject all patient health information, 
including genetic information, to the same strong standards for 
protection. While each of the Senate proposals would provide new 
federal standards for protecting all such information (albeit 
differently), the on-going ability of states to apply different law and 
the attendant lack of preemption of such state law, directly undermines 
this shared goal.
    Thank you, Mr. Chairman, for allowing me to share with you 
Genentech's principles and concerns regarding patient confidentiality. 
The House Commerce Committee has been a vital partner in assuring a 
stable and fruitful environment for biomedical research, as illustrated 
by your recent efforts on the Food and Drug Administration 
Modernization Act (FDAMA). Please understand that the ultimate impact 
of this issue is no different, and is directly related to innovation 
and research.
    Be assured that we share your commitment to protecting and 
safeguarding patient information; after all, patients ultimately are 
our business. Also understand, though, that information is the 
lifeblood of research and to the ability of the health care delivery 
system to enhance and assure quality. Patients are deserving of one 
strong law that secures all such information equally, and provides one 
clear set of rules regarding how patient information must be 
safeguarded, how it may be used, and the penalties that will apply for 
any misuse.
    We applaud this Subcommittee's effort and look very forward to 
working with you and others toward the final enactment of strong, 
workable and, most importantly, uniform federal standards protecting 
the confidentiality of patient medical information.

    Mr. Burr. Thank you, Dr. Stump.
    The Chair would recognize Ms. Visco at this time for an 
opening statement.

                     STATEMENT OF FRAN VISCO

    Ms. Visco. Thank you. I am here as a breast cancer survivor 
and the president of the National Breast Cancer Coalition, an 
organization that represents more than 500 member organizations 
from across the United States and more than 60,000 individuals.
    Our focus is on eradicating breast cancer. That is our 
goal, our mission. Our focus is on research, making certain 
that there are sufficient high quality research to get the 
answers to this disease and also policies that will support 
access to care, access to quality care. And we understand that 
we need more information and we need research in order to 
determine what do we mean by quality care.
    Access to care is not enough. It has to be access to 
quality care, and we support research that will get those 
answers also. But there is a problem that we are facing. And 
the problem is that the public has lost confidence and trust in 
the medical and scientific community. Perhaps when we had it; 
it was misplaced. But the fact is that now it is lost. The 
evolving health care system is--plays a major role in why we 
have lost that confidence, but there it is.
    Patients won't go into research. It is very difficult to 
get them involved. We are very concerned about the use and 
misuse of information. Information is the lifeblood of 
research. It is my life and it is my blood and I have a right 
to make certain that it is protected and it is used 
appropriately.
    We certainly don't want to hamper research. We don't want 
to erect unnecessary barriers to care. No one wants to do that. 
The issue is what is a necessary barrier? Losing the confidence 
and trust of the people who are the subject of this research is 
the No. 1 barrier to care--to research. That is what hampers 
research. That is what we need to correct.
    What we want to do is create an atmosphere of collaboration 
and partnership where patients and the scientific community 
move forward together in getting the research, where we trust 
that the information that we have given is going to be used. 
And we need a minimal set of Federal standards in order to 
achieve that trust, to reinstate that confidence and that 
atmosphere which would bring us closer more rapidly to the 
answers that we need.
    So what do we need? We need to make certain that, wherever 
possible, the information that is used is identified. We are 
looking at the explosion of technology that Mr. Markey 
described and that you are all aware of. We can use that 
explosion to help.
    Perhaps there are ways we can use it creatively to keep 
track of individuals who have participated in research, to help 
get their consent. We need to have standardized consent that 
will make it easier for individuals to give consent. We need to 
make certain that there is IRB-type review and oversight of 
both public and private research.
    It hasn't created inappropriate barriers in public 
research, and we know it won't in private research always. To 
establish that trust once again, we have to make certain that 
we have anti-discrimination legislation protecting people from 
the abuse and misuse of their genetic information. And we need 
to make certain that Federal legislation and Federal 
regulations are a strong floor.
    Once we have established the trust in the public once 
again, there will be less pressure on the States to establish 
their own regulations and their own laws. And if industry is 
concerned about this, they can adhere to the strong estate 
regulations, and they would have the uniformity that they seek.
    Right now we are looking at the law in Minnesota. I think 
it is a wonderful example of why Federal legislation should be 
a floor. Here we have an evolving situation. The law has 
already been amended once. What we need is to use that kind of 
a situation to educate and inform the American public so they 
understand the importance of giving their consent.
    They understand that the consent they give is for the use 
of research, the use of information and research that will be 
well-protected and will get the answers. If we educate the 
public about the importance of giving their consent, they will. 
They want the answers. If they trust us that we won't abuse the 
information that we are using, they will let us use it. They 
want the answers. They want us to get the answers that will 
further their health and the health of their families.
    And finally, what we need are strong penalties. It isn't 
enough to have a wonderful law in place if there is absolutely 
no strong right to enforce your right under that law, and what 
we need is the right to sue.
    I very much look forward on behalf of the National Breast 
Cancer Coalition to continuing to work with you to make certain 
that we have effective Federal legislation that creates a floor 
that we can buildupon.
    Thank you.
    [The prepared statement of Fran Visco follows:]
  Prepared Statement of Fran Visco, President, National Breast Cancer 
                               Coalition
    Thank you, Mr. Chairman and members of the Committee for inviting 
me to testify today. I am Fran Visco, President of the National Breast 
Cancer Coalition and a breast cancer survivor. I am one of the 2.6 
million women living with breast cancer in the U.S. today.
    The National Breast Cancer Coalition (NBCC) is a grassroots 
advocacy organization dedicated to eradicating breast cancer. We are 
made up of 500 member organizations and more than 60,000 individual 
women, their families and friends. The NBCC seeks to increase the 
influence of breast cancer survivors and other activists over public 
policy in cancer research, clinical trials, and access to quality 
health care for all women.
    The NBCC believes strongly that we need to establish a national 
policy that ensures an individual's right to privacy with respect to 
personally identifiable health information. We believe that our 
illness, diagnosis, treatment and prognosis is very personal 
information, whether we are breast cancer survivors, women battling 
breast cancer, or women with a predisposition to breast cancer. We also 
know that the misuse of our health information can harm us and our 
families. Unauthorized or inadvertent disclosure of our health status, 
genetic or family history can make it difficult if not impossible for 
some women and their daughters to obtain health insurance. At the same 
time, NBBC believes that legislation protecting privacy rights should 
not impede the progress of biomedical, behavioral, epidemiological and 
health services research. Research offers women diagnosed or 
predisposed to breast cancer the best hope for finding a cure, 
improving treatment, and someday preventing breast cancer. NBCC 
believes that research can be carried out in a way that protects the 
privacy rights of individuals and simultaneously enhances public trust 
in medical research.
    We are at a decision point where we can allow the computer 
revolution to make access to our personal health information a free-
for-all or where we can harness the new communications technologies to 
insure that our personal health information remains private. Because 
access to health records and information is so critical to the progress 
of research, we may need a new paradigm to protect an individual's 
privacy--even if it should cost more. Research can not be held to a 
lower standard for protecting privacy: it must be held to a higher 
standard to ensure the public's support and trust.
    How can we maintain the public trust? By establishing key 
safeguards for personally identifiable health information. By requiring 
informed consent and ensuring that it is not coerced. By limiting 
disclosure to the minimal information necessary. By establishing strong 
penalties for those individuals who violate these protections and by 
supporting the highest quality peer-reviewed research.
    NBCC believes that Congress needs to provide consumers with 
important new rights, including:
    Access to Medical Records. Individuals should have certain rights 
with regard to their medical record and information in order to 
understand how they are being used and maintained. Individuals should 
have reasonable access to their records to inspect, copy, supplement or 
amend their medical records. Individuals should also be able to seek 
special protection for certain sensitive information that they do not 
wish to be disclosed. For example, many women would not wish to 
disclose genetic information such as BRCA 1 and BRCA 2 test results to 
insurers or employers, but would want this information made available 
to their health care providers.
    Notice of Information Policies. It is also important that 
individuals understand how their medical records are to be used and 
when and under what circumstances information will be disclosed to a 
third party. Plans and other health care providers should be required 
to notify individuals about their disclosure policies and to keep 
records when information is released, to whom it is provided, and for 
what purpose, and make that information available to individuals. 
Individuals should also be able to withdraw consent or limit what 
information is disclosed.
    Informed Consent. Any legislation should strictly limit the use of 
identifiable health information absent an individual's informed consent 
except as explicitly permitted in legislation for public-interest 
purposes (such as public health for use in legally authorized disease 
and injury reporting, public surveillance or a public health 
investigation or intervention, health oversight, and emergency 
purposes). There should be clear circumstances when protected health 
information will not be disclosed, such as for marketing, insurance 
underwriting, or employment purposes without authorization of the 
individual. Moreover, plans, providers and others should be required to 
de-identify as much protected health information as possible and limit 
disclosure to only the information necessary for the approved purpose.
    Medical Research: There has been much debate about what are 
appropriate safeguards for personally identifiable information with 
regard to research, and much discussion about whether current federal 
regulations can sufficiently protect patient confidentiality. 
Increasingly, much health services, epidemiological, biological and 
statistical research relies on the use of medical or health records and 
does not involve any interaction between the researcher and the 
patients. Researchers have legitimately raised serious questions about 
the feasibility of seeking authorization from thousands or possibly 
millions of individuals. Other research such as retrospective or 
secondary research relies on archival patient materials, including 
medical records and tissue specimens also does not involve interaction 
directly with individuals. And while the data can be encrypted, 
researchers and epidemiologists need to link this data back to 
individuals in order to generate meaningful conclusions regarding the 
benefits and adverse outcomes of particular treatments, as well as 
medical effectiveness.
    The question for Congress, and for patient advocates like NBCC who 
care deeply about the research mission and are committed to privacy 
protection--is when to require voluntary informed consent to conduct 
research and under what circumstances to allow the disclosure of 
protected health information without patient authorization.
    Under the common rule, research organizations conducting federally 
funded or regulated research projects must establish and operate 
institutional review boards (IRBs), which are responsible for reviewing 
research protocols and for implementing federal requirements designed 
to ensure the safety of human subjects. No human-subjects research may 
be initiated, and no ongoing research may continue, in the absence of 
IRB approval. Integral to conducting research under the common rule is 
a requirement that there is proper informed consent and documentation 
of that consent.
    There is also a mechanism under the common rule that allows for the 
IRB to waive the need for informed consent--but only under certain 
limited situations where: 1) the research involves no more than minimal 
risk to the subjects; 2) the waiver or alteration will not adversely 
affect the rights and welfare of the subjects; 3) the research could 
not practicably be carried out without the waiver or alteration; and 4) 
whenever appropriate, the subjects will be provided with additional 
information after participation.
    Thus, IRBs currently deliberate and make decisions about when 
informed consent is and is not necessary. The burden is on the 
researcher to demonstrate to the members of the IRB why informed 
consent is not necessary. There should be another test for deciding on 
whether to waive the requirement for informed consent. The IRB should 
be required (in addition to the criteria above) to determine if the 
importance of the health research outweighs the intrusion into the 
privacy of the individual. In this way, the IRB would be able to 
successfully balance the need for the research with an individual's 
right to privacy.
    There are two problems with the current system I would like to 
note: first, there are serious problems with institutional review 
boards; and second, not all health research is subject to IRB. 
Increasingly, there is health research that falls outside the common 
rule. This raises questions about building a new system, with an 
increased responsibility to protect privacy, on a flawed program.
    Nevertheless, NBCC believes that IRBs are an appropriate paradigm 
to build upon. Before doing that, we recommend that any legislation 
require a serious review by the Secretary and a requirement that the 
Secretary make recommendations regarding standards for protecting 
privacy in research and improvements in the system to ensure its 
success in meeting its responsibility to individuals involved in 
research.
    We also believe that Congress should extend the common rule to all 
research. There is always an opportunity for protected health 
information to be disclosed that could be harmful--even if that 
information is eventually aggregated. There needs to be one system for 
protection that applies to all research; not carve outs for this or 
that type of health research.
    Preemption: In order for any standard to be effective it needs to 
be uniform across the states, but we would only support preemption if 
it sets a floor for the states and not a ceiling. Many states have 
already begun to respond to the many complex issues involved in 
protecting medical privacy and have established strong laws. We should 
not force them to a lower standard.
    Penalties: Finally, we believe there should be strong criminal and 
civil penalties for intentionally or negligently using individually 
identifiable health information. Individuals should also have a civil 
right of action against anyone who misuses their protected health 
information.
    One area that has been sorely absent in the debate over medical 
privacy is the urgent need for adopting genetic anti-discrimination 
legislation. Even if we pass the perfect medical privacy bill, we will 
not be able to entirely prevent unlawful disclosures. When privacy is 
breached, anti-discrimination legislation would prevent misuse of the 
information. These two protections go hand-in-hand. Anti-discrimination 
legislation in itself is hard to enforce, and therefore it is important 
to provide good privacy protection.
    Breast cancer remains the most common form of cancer in women. We 
still do not know the cause or have a cure for this dreaded disease. 
Over the past two years, there have been incredible discoveries at a 
very rapid rate that offer fascinating insights into the biology of 
breast cancer, such as the isolation of breast cancer susceptibility 
genes and discoveries about the basic mechanisms of cancer cells. These 
discoveries have brought into sharp focus some of the areas of research 
that hold promise.
    NBCC believes that legislation protecting medical information and 
privacy should be balanced. We want to see federal standards that 
safeguard personal health information and protect the ability of 
researchers to conduct vital biomedical research. We don't believe that 
you can have one without the other. Knowledge about how to prevent and 
cure breast cancer will only come if women participate in research. But 
without appropriate safeguards against misuse, public distrust will 
increase and few women will be willing to participate in research 
efforts, whether donating tissue or enrolling in clinical trials. Only 
if women believe that their individual health information will be kept 
private so that it can't be used against them by insurers or employers 
or be made public will they have the confidence to participate in 
clinical research. I can't emphasize enough that we must focus our 
attention on building public trust. It has to be something real, 
something believable, if women are to place their trust in the medical 
and research process.
    Mr. Chairman, and members of the Committee, thank you again for the 
opportunity to testify. We look forward to working with you on this 
critically important issue. I'll be happy to answer any questions you 
may have.

    Mr. Burr. Thank you, Ms. Visco.
    The Chair would take this opportunity to announce we expect 
a vote at any minute. There is also reason to believe that 
there will be at least a Republican conference that Republican 
members will have to leave for.
    It is the Chair's intention then to put this committee in 
recess probably about 12:25 or 12:30 depending on when the vote 
is called until 1:15 to allow witnesses to have lunch and to 
allow that conference to take place just so you know.

                 STATEMENT OF DAWN M. GENCARELLI

    Mr. Burr. And at this time, the Chair would recognize Ms. 
Gencarelli for an opening statement.
    Ms. Gencarelli. Mr. Chairman and members of the committee, 
thank you for the opportunity to testify before you today.
    I am Dawn Gencarelli, and I am here today on behalf of 
Harvard Pilgrim Health Care. Harvard Pilgrim is the largest 
health plan in New England and has been caring for patients 
over 25 years. Harvard Pilgrim currently provides for 1.5 
million members in Massachusetts, Rhode Island, Maine, and New 
Hampshire through a network that includes more than 23,000 
physicians and 140 hospitals.
    I am pleased to have the opportunity to testify today and 
would like to review the varied patient interests that must be 
considered in a thoughtful debate about medical record 
confidentiality, describe Harvard Pilgrim's efforts to 
reconcile these multiple interests with strong protections for 
the confidentiality of our members' medical information, and 
highlight the importance of the legitimate uses of medical 
information to assure the quality of care that is delivered to 
our members.
    Harvard Pilgrim recognizes the importance of the many 
issues raised by medical record confidentiality and the 
challenges it poses for patients and health care providers 
during this time of rapid change in both the delivery of health 
care and the technology of clinical health information systems. 
They are complex issues that involve a careful balance to 
ensure that all of our patient interests are served even when 
they appear to conflict.
    Our organization has spent an extensive amount of resources 
exploring our policies and practices around confidentiality. We 
have conducted numerous focus groups and one-on-one interviews 
with our members to better understand their concerns. Patients 
do have a right to expect that their medical information will 
be kept confidential as well as a strong interest in receiving 
high quality integrated health care.
    To assure this quality of care, clinicians must have 
access, in a timely manner, to information pertaining to prior 
medical history and possible drug interactions. In addition, 
health plans must have access to information in order to 
perform functions that are designed to promote quality of care 
including quality assurance, utilization management, disease 
management, case management, and peer review.
    The above functions enable Harvard Pilgrim and other health 
plans to eliminate unnecessary variation and treatments and 
procedures, for example, cesarean sections; identify patients 
who could benefit from specialized care through one of our 
disease management programs; develop educational programs for 
our clinicians regarding specific treatments and advance 
technologies; and ensure that patients being released from the 
hospital have the appropriate support to safely return home.
    In addition to receiving high quality integrated health 
care, patients have an interest in the advancement of research 
through the collection of population-based information in the 
protection of the public health and in having the systems of 
their health care organizations operate smoothly and without 
fraud. At Harvard Pilgrim we have worked diligently to serve 
the many interests of our members even when they appear to 
conflict.
    Organizational flexibility, commitment by senior 
management, as well as cooperation and communication between 
health care providers and their patients are necessary to meet 
these multiple patient needs. Harvard Pilgrim has taken steps 
to optimize its organizational privacy protections including 
the removal of patient identifiers from clinical and 
administrative patient information whenever possible, the 
creation--and the creation of a safety zone to ensure to the 
fullest extent possible that patient information remains 
confidential.
    This safety zone is created through the implementation of a 
number of policies and practices that create heightened 
security around medical information. Within our organization, 
we have established a confidentiality oversight committee that 
is responsible for developing and maintaining a corporate 
confidentiality policy. As part of this process, the committee 
reviews all policies and procedures throughout the organization 
relating to confidentiality.
    In conjunction with our corporate policy, Harvard Pilgrim 
has developed a framework for defining appropriate uses of 
information by third parties as well as guidelines for the 
release of information. Each of these initiatives seeks to 
ensure that only that information which is necessary to meet an 
appropriate clinical or health plan need is accessed or 
released, that it is used by appropriate individuals for the 
amount of time necessary to achieve the designated purpose, 
that it is used within a secure environment, and that it is not 
subject to secondary release to unauthorized users.
    Harvard Pilgrim continues to explore these and other 
innovative efforts in an attempt to respond to our evolving 
understanding of our members' needs and to continue to serve as 
a national leader on the issue of patient confidentiality.
    As this committee contemplates the passage of legislation 
on this very important issue, it must ensure that the 
provisions of such legislation promote quality of care rather 
than prevent functions that support it. As illustrated by the 
recent enactment and subsequent suspension in Maine of a 
medical record confidentiality bill, good intentions can 
sometimes cause unintended consequences that put patients at 
risk.
    The Maine law prevented family members from accessing 
information about the condition of their loved ones and medical 
providers from obtaining information necessary for the proper 
treatment of patients. To severely limit access to information 
will, in fact, lead to increased confidentiality but will 
jeopardize the other very important interests of our members.
    Harvard Pilgrim has invested heavily in our efforts to 
ensure patient confidentiality and respects this committee's 
exploration of this very important issue. We must be cognizant, 
however, of the very real dangers that may result from poorly 
drafted legislation in this area including decreased quality of 
care, increased health care costs, an unhealthy population, and 
systems wrought with fraud.
    Confidentiality can and must be achieved without halting 
appropriate and legitimate uses of information.
    I thank you for your time.
    [The prepared statement of Dawn M. Gencarelli follows:]
 Prepared Statement of Dawn M. Gencarelli, Harvard Pilgrim Health Care
                              introduction
    Mr. Chairman and members of the Committee, thank you for the 
opportunity to testify before you today. I am Dawn Gencarelli, Manager 
of Health Policy for Harvard Pilgrim Health Care (Harvard Pilgrim). 
Harvard Pilgrim is the largest health plan in New England and has been 
caring for patients for over 25 years. Harvard Pilgrim currently 
provides care to more than 1.5 million members in Massachusetts, Rhode 
Island, Maine, and New Hampshire through a network that includes more 
than 23,000 physicians and 140 hospitals.
    I am pleased to have the opportunity to testify today, and would 
like to:

 review the varied patient interests that must be considered in 
        a thoughtful debate about medical record confidentiality;
 describe Harvard Pilgrim's efforts to reconcile these multiple 
        interests with strong protections for the confidentiality of 
        our members' medical information; and
 highlight the importance of the legitimate uses of medical 
        information to assure the quality of care that is delivered to 
        our members.
                                 issues
    Harvard Pilgrim recognizes the importance of the many issues raised 
by medical record confidentiality and the challenges it poses for 
patients and health care providers during this time of rapid change in 
both the delivery of health care and the technology of clinical health 
information systems. They are complex issues that involve a careful 
balance to ensure that all of our patient interests are served, even 
when they appear to conflict. Our organization has spent an extensive 
amount of resources exploring our policies and practices around patient 
confidentiality. We have conducted numerous focus groups and one-on-one 
interviews with our members to better understand their concerns.
     Patients have a right to expect that their medical information 
will be kept confidential as well as a strong interest in receiving 
high quality, integrated health care. To assure this quality of care, 
clinicians must have access, in a timely manner, to information 
pertaining to prior medical history and possible drug interactions. In 
addition, health plans must have access to information in order to 
perform functions that are designed to promote quality of care, 
including quality assurance, utilization management, disease 
management, case management, and peer review.
    The above functions enable Harvard Pilgrim, and other health plans, 
to eliminate unnecessary variation in treatments and procedures (i.e., 
Cesarean sections); identify patients who could benefit from 
specialized care through one of our disease management programs; 
develop educational programs for our clinicians regarding specific 
treatments and advanced technologies; and ensure that patients being 
released from the hospital have the appropriate support to safely 
return home. In addition to receiving high quality, integrated health 
care, patients have an interest in the advancement of research through 
the collection of population-based information, in the protection of 
the public health, and in having the systems of their health care 
organizations operate smoothly and without fraud. At Harvard Pilgrim, 
we have worked diligently to serve the many interests of our members, 
even when they appear to conflict.
    Organizational flexibility, commitment by senior management, as 
well as cooperation and communication between health care providers and 
their patients, are necessary to meet these multiple patient needs. 
Harvard Pilgrim has taken steps to optimize its organizational privacy 
protections, including the removal of patient identifiers from clinical 
and administrative patient information whenever possible, and the 
creation of a ``safety zone'' to ensure to the fullest extent possible 
that patient information remains confidential.
     This safety zone is created through the implementation of a number 
of policies and practices that create heightened security around 
medical information. Within our organization, we have established a 
Confidentiality Oversight Committee that is responsible for developing 
and maintaining a corporate confidentiality policy. As part of this 
process, the committee reviews all policies and procedures throughout 
the organization relating to confidentiality. In conjunction with our 
corporate policy, Harvard Pilgrim has developed a framework for 
defining appropriate uses of information by third parties, as well as 
guidelines for the release of information. Each of these initiatives 
seeks to ensure that only that information which is necessary to meet 
an appropriate clinical or health plan need is accessed or released, 
that it is used by appropriate individuals for the amount of time 
necessary to achieve the designated purpose, that it is used within a 
secure environment, and that it is not subject to secondary release to 
unauthorized users. Harvard Pilgrim continues to explore these and 
other innovative efforts, in an attempt to respond to our evolving 
understanding of our members' needs and to continue to serve as a 
national leader on the issue of patient confidentiality.
                               conclusion
     As this Committee contemplates the passage of legislation on this 
very important issue, it must ensure that the provisions of such 
legislation promote quality of care rather than prevent functions that 
support it. As illustrated by the recent enactment and subsequent 
suspension, in Maine, of a medical record confidentiality bill, good 
intentions can sometimes cause unintended consequences that put 
patients at risk. The Maine law prevented family members from accessing 
information about the condition of their loved ones and medical 
providers from obtaining information necessary for the proper treatment 
of patients. To severely limit access to information will in fact lead 
to increased patient confidentiality, but it will jeopardize the other 
very important interests of our members. As an integrated system of 
care, Harvard Pilgrim relies on the internal use of information, which 
must be distinguished from the external disclosure of information. The 
internal use of information allows us to conduct essential functions, 
including those designed to safeguard the high quality, integrated care 
we deliver to our patients. In some cases, these functions are mandated 
by state law or by national accrediting bodies, including the National 
Committee for Quality Assurance (NCQA).
     Harvard Pilgrim has invested heavily in our efforts to ensure 
patient confidentiality and respects this Committee's exploration of 
this very important issue. We must be cognizant, however, of the very 
real dangers that may result from poorly drafted legislation in this 
area, including decreased quality of care, increased health care costs, 
an unhealthy population, and systems wrought with fraud. Patient 
confidentiality can, and must, be achieved without halting appropriate 
and legitimate uses of information.
    I thank you for your time.

    Mr. Burr. Thank you.
    The Chair at this time would recognize Ms. Abbey Meyers for 
purposes of an opening statement.

                    STATEMENT OF ABBEY MEYERS

    Ms. Meyers. Yes, thank you very much.
    The National Organization for Rare Disorders represents 
approximately 20 million people with rare diseases who are 
spread all over the country. It is a total of 6,000 rare 
diseases, each one affecting fewer than 200,000 Americans.
    Congress needs to pass a medical privacy law not only 
because of the Kassebaum-Kennedy law but because the European 
Union requires that E.U. countries cannot trade with any 
country that does not adequately protect patient 
confidentiality. So it is very important that something is done 
very quickly on this issue because it is liable to turn into an 
international trade problem.
    But also patients want and desperately need medical 
confidentiality on a national basis. People are not telling 
their doctors the truth because they are afraid that if 
something is written in their record, especially about a 
serious disease, that they will lose their insurance, their 
insurance price will go up, or they are going to be stigmatized 
in some way if somebody finds out.
    So it is very important that the public is guaranteed 
confidentiality so that they are truthful with their 
physicians. This covers not only things like sexually 
transmitted diseases or maybe drug abuse problems but also the 
fact that hereditary diseases can be very stigmatizing. People 
are not telling their doctors that their mother or their aunt 
may have had breast cancer, for example, because they are 
afraid it will raise the cost of their health insurance.
    So today the only problems--the only group of people who 
have problems accessing medical records are patients 
themselves. And this is a real problem when you walk into a 
doctor's office, you want copies of your own medical records. 
You have to sign a pile of papers that you don't understand 
because they are written in very legal language. Some of the 
waivers--actually you have to forfeit your legal rights in 
order to get copies of your own records.
    And you sometimes have to wait weeks or months to get those 
records. And you find out that the hospital or the doctor can 
charge you. And there is no standard fee, and some doctors 
might charge you a dollar a page. It might turn out to cost 
hundreds of dollars for a copy of your own medical records. And 
we have heard of many cases where doctors refuse to give the 
patient medical records probably because they are afraid of 
getting sued for malpractice or some personal reason that they 
have, but they absolutely refuse.
    Now, the problem is that there is no Federal law that 
requires that the identifiable medical records are kept in 
locked files. So very often when you walk through your doctor's 
office, you find somebody else's file laying there, and you can 
read it. There is nothing to stop you from reading it.
    Insurers can obtain information about our health that has 
nothing to do with the bills they are paying. They can find out 
the entire record of your mental health treatment when they 
look through your files to pay for the bills for a broken leg. 
Local pharmacies are releasing our prescription data to 
pharmaceutical companies with no regulation at all. And once 
somebody knows what drugs you are taking, they know what is 
wrong with you.
    All confidential information can be sent, and it is, to a 
huge computer up in Massachusetts called the Medical 
Information Bureau. George Orwell could not have invented a 
better model of the intrusive Big Brother. It contains your 
medical information and mine--millions and millions of 
Americans. Anything that you thought could be kept secret in 
your doctor's office is on a computer in Massachusetts that any 
insurance company in this country can access.
    Clerks right out of high school can get into it and find 
out what your medical information is. So we must have 
confidentiality assurances. We must have an absolute minimum 
floor that says no State can legislate less, but States will be 
allowed to legislate more.
    Thank you.
    [The prepared statement of Abbey Meyers follows:]
 Prepared Statement of Abbey Meyers, President, National Organization 
                           for Rare Disorders
    Mr. Chairman, members of the Committee, thank you for inviting me 
to testify before you today on behalf of patients with serious and 
chronic diseases. I am Abbey Meyers, President of the National 
Organization for Rare Disorders (NORD), which represents people with 
over 6,000 rare ``orphan diseases.'' Each rare disease affects fewer 
than 200,000 Americans, but combined together they all affect an 
estimated 20 million Americans. Most rare diseases are genetic, and the 
need for medical privacy profoundly affects not only those who have 
hereditary diseases but also every member of their extended family.
    Today even ``healthy'' people are learning that they are affected 
by privacy issues because, as the Human Genome Project is discovering, 
virtually every human being carries genetic abnormalities that will 
eventually impact our lives or the lives of our children. NORD is also 
an active member of the Consumer Coalition for Health Privacy, which 
includes a broad range of consumer, patient, disability, and 
professional groups committed to the development and enactment of 
public policies and private standards that guarantee the 
confidentiality of personal health information and promote both access 
to high quality care and the continued viability of medical research.
    Besides the obvious need for Congress to enact federal legislation 
governing medical privacy--the August 21 deadline and the European 
Union's privacy regulation that may diminish trade with the United 
States if privacy guarantees are not firmly set in place--American 
consumers are clearly demanding that Congress enacts federal privacy 
guarantees that require an individual's consent before our personal 
medical information is released to anyone.
    The current lack of a federal law safeguarding the privacy of 
medical records significantly diminishes access to and quality of 
health care in the U.S. Out of fear that disclosure of their medical 
records may result in denial of insurance, loss of employment or 
housing, and stigmatization and embarrassment, many people withhold 
information from their doctors or simply avoid seeking care. In fact, a 
survey released by the California Health Care Foundation in January 
found that one in five Americans believes their health information has 
been used or disclosed inappropriately and one in six engages in some 
form of ``privacy-protective'' behavior when they seek, receive or pay 
for health care. As a result, they risk inadequate care or undetected 
and untreated health conditions.
    People are being forced to choose between their privacy and 
receiving health care. In addition, important public health activities, 
such as outcomes research, quality initiatives and population-based 
studies, are compromised by incomplete or inaccurate data.
                   patient access to medical records
    The ironic fact is, under our current patchwork system of privacy, 
the only people who have trouble accessing their medical records are 
consumers themselves. If you want copies of your own medical records, 
you generally have to sign a myriad of legal papers (some of which are 
hardly understandable to the ordinary person), you may have to sign 
waivers forfeiting your legal rights, you usually have to wait days or 
weeks to obtain the copies, and your physician's office or hospital can 
charge you a fee for every piece of paper you request.
    While consumers across the country face extraordinary problems 
accessing their own medical records, pharmaceutical companies can 
easily obtain sensitive information from local pharmacies revealing the 
names of drugs that have been prescribed to you, your neighbor may read 
your entire medical history in your doctor's office because your case 
file is not kept in a locked cabinet, your insurance company can read 
your confidential psychiatric record even though they may be 
investigating billing for your broken leg, and they can send all of 
this information to the huge Medical Information Bureau (MIB) in 
Massachusetts so that clerks at all insurance companies (not just your 
own insurer) will be able to investigate your medical history any time 
they want to.
                           real-life examples
    Examples of abuses of medical information are all too common and 
troubling.

 Just last month, Aetna health insurance claims forms blew out 
        of a truck en route to a recycling center and scattered on I-84 
        in East Hartford during rush hour. Aetna quickly dispatched 
        employees to scoop up the forms, which contained identifiable 
        personal health information. Under company policy, these papers 
        should have been shredded, but were not.
 In another troubling example, the Harvard Community Health 
        Plan, a Boston-based HMO, admitted to maintaining detailed 
        notes of psychotherapy sessions in computer records accessible 
        by all clinical employees. Following a series of press reports, 
        the HMO revamped its computer security practices.
 In a more personal case, a woman who was hurt in an auto 
        accident found that the defendant's lawyer subpoenaed her 
        medical records and announced in court that when she was 16 
        years old this woman had a baby outside of marriage and gave it 
        up for adoption. There is no reason that an attorney in a 
        automobile accident case should have had access to the woman's 
        gynecological records!
    The victims of these privacy violations ranged from large groups to 
a single individual and the causes ranged from negligence to bad 
practices. While no federal law can prevent all future abuses, the 
enactment of a strong, comprehensive law with meaningful enforcement 
will help to create a regulatory and legal framework that will require 
the holders of identifiable health information to protect health 
information and appropriately limit its use or risk significant 
penalties.
                            consumer rights
    Obviously, insurance companies need access to medical information 
for treatment and payment purposes, and scientific researchers require 
access to medical records. But, consumers should give their consent 
before anyone is allowed to access our records, even insurance 
companies. For example, some people do not want their insurance company 
to know that they took a genetic test, so they pay for the test 
themselves. If the doctor writes in the patients record that the test 
was positive for a hereditary disease, the insurance company should not 
be privy to information that the insurance company did not pay for. 
These companies should only gain access to information that is directly 
relevant to the product or service they are paying for.
    Let me explain that the ``consumers'' I am talking about in these 
examples represent two distinct classes of people:
    One class of consumers are generally healthy people who may see a 
doctor irregularly for common maladies such as colds or flu, and who 
may sometimes take pharmaceuticals for occasional fever, colds or pain. 
These people expect the government to protect them, for example, by 
assuring through regulation that treatments are effective and have 
minimal risk. They cannot imagine that strangers would want to see 
their medical records, they have no idea how many people have access to 
this sensitive information, and it does not occur to them that there 
may be a commercial value for the sale of private medical information 
to others. Nevertheless, these ``healthy'' people may have had a 
grandparent who died of Alzheimer's disease, an uncle with 
schizophrenia or epilepsy, or a parent who had breast or prostate 
cancer, and they may not want their next door neighbor to be privy to 
this information nor their employer, nor even their spouse or children. 
There can be medical information that a person will share only with 
their physician. Without a firm guarantee of confidentiality, people 
are unable to talk honestly and openly with their doctors.
    The other class of ``consumers'' is composed of sick people: 
Usually those with serious or chronic illness who see doctors on a 
regular basis because of a health problem. These people may be willing 
to take greater risks in order to identify more effective treatments, 
or to locate superior medical services that might extend their life or 
improve their quality of life. Many of these individuals are willing to 
participate in medical research, and thus they may be willing to endure 
a lesser degree of medical privacy as long as they can maintain control 
over who will be privy to their medical records. If they do not want 
researchers, hospitals, drug companies, etc., to pry into their medical 
records, they want the option of refusing access to this information.
                                research
    Fortunately, people who participate in federally funded research, 
or research that will be used in an application for FDA approval, must 
sign an ``informed consent'' document approved by an Institutional 
Review Board (IRB), and they can choose not to participate if they feel 
their privacy will be violated.
    Certainly one of the most challenging debates now before you is how 
to address privacy concerns related to privately funded research that 
is not being conducted in anticipation of FDA review and therefore not 
required to gain IRB approval. We know that Congress has been examining 
this problem for some time, and we consumers are very aware that you 
are trying to find a solution. .As an advocate for people with serious 
and chronic illness let me make clear that we believe that scientific 
research is extraordinarily important, and you must find a way to 
protect consumer's medical information without hampering the progress 
of medical research.
    The best way to accomplish these goals is to expand the IRB and 
informed consent process to all research, regardless of funding source. 
Through the informed consent process, people who participate in 
research are told how many parties will have access to their records, 
and they are assured that the treating institution will not allow 
access by unauthorized personnel. In those cases where the informed 
consent process is excessively burdensome and the threat of a privacy 
breach to the individual is minimal, the IRB can waive the informed 
consent process.
    The problem now is that these rules apply only to research 
involving federal funds or application to the FDA. The rules must be 
applied all research no matter what the funding source. The ethical 
obligations that researchers have to their subjects, and the 
individual's right to appropriate informed consent, do not change 
depending on the funding stream.
    It is also important to note that some ``medical'' research is 
actually ``marketing'' research, and Congress must clearly define 
parameters that protect consumers from unwanted intrusions of their 
privacy by those who will not actually enhance scientific knowledge. In 
most cases, simply making case records anonymous by replacing a 
person's name with a code number, will solve the problem.
                        preemption of state law
    In the absence of federal protections, the states have acted to 
varying degrees to create protections for their residents and one of 
the major questions before the Congress is how the federal law will 
interact with these state laws. Will the federal law be the ``ceiling'' 
above which states are forbidden to act, or a ``floor'' above which 
states can enact stronger laws.
    Let me say clearly that this is a critical question for people with 
rare diseases because clinical research on orphan diseases is usually 
conducted at numerous sites in various states, primarily because there 
are not often enough patients in any one state available for study. 
Therefore, it is crucial that federal government enact a ``floor'' that 
guarantees all Americans, regardless of their state of residence, a set 
of minimum protections. At the same time, as people with serious and 
chronic illnesses, we believe that states must maintain their right to 
enact stricter privacy laws to address the specific needs of their 
residents. If local laws become too strict, certainly local residents 
and lobbyists will point the flaws out to local policymakers.
    In other words, the federal government, by enacting a national 
medical privacy law, will set absolute minimum standards that all 
states must obey. Such a minimum will create broad uniformity across 
the country, preempting the vast majority of state laws, which are 
weaker than the federal proposals. Any state, however, that wants 
stricter privacy laws should be allowed to enact and enforce them.
    In addition, we firmly believe there are at least two areas of 
medical information that deserve special protections: 1) genetic 
information, and 2) psychiatric records. Several states have already 
enacted laws to protect these very sensitive areas and more states 
should be encouraged to do so. Mental health treatment notes are 
particularly sensitive. Insurance companies used to ask therapists for 
summarized notes and treatment plans. But in the last few years they 
are asking for complete copies of patient records that reveal the most 
sensitive private information that should never leave a therapists 
office.
    Mr. Chairman, the esteemed members of this committee should 
understand that at this very moment your personal medical records may 
be known to people in this room. They may know the medicines you take 
and the diseases you are being treated for, as well as your spouse and 
your children. Certainly you can remember a few years ago when a Vice 
Presidential candidate had to withdraw his name because his psychiatric 
record was made public (Senator Eagleton). Only a few years ago Senator 
Pryor's medical record was made public when he had a heart attack. 
There may be people in this very Congress who have a stigmatizing 
psychiatric diagnosis, or a history of a sexually transmitted disease 
that you caught at the age of 18, or a predisposition to a genetic 
disease that, if known, could put your next election at risk. These 
facts ought not to become public record. In the absence of a federal 
``floor'' for medical privacy, there is nothing to prevent the wrong 
people from using your medical history for the wrong purposes.
    No one should have access to your medical information or mine 
without our knowledge and consent. This is what consumers want and 
need. We urge you to do so quickly.

    Mr. Burr. Thank you, Ms. Meyers.
    The Chair would recognize, for purposes of an opening 
statement, Mr. Krinsky.

                 STATEMENT OF DANIEL L. KRINSKY

    Mr. Krinsky. Mr. Chairman, Congressman Brown, members of 
the subcommittee, the National Association of Chain Drugstores 
appreciates the opportunity to present testimony today 
regarding the important issue of protecting the confidentiality 
of patient medical records in today's modern health care 
delivery system.
    My name is Daniel Krinsky. I am a registered pharmacist. I 
am the director of patient care services and pharmacy practices 
at Ritzman Pharmacies in Wadsworth, Ohio. Ritzman Pharmacies is 
a small family owned eight store chain located just outside of 
Akron, Ohio. We specialize in a wide range of innovative and 
advanced pharmacy services including diabetes management, home 
infusion, and hypertension management.
    Let me begin by stating that NACDS supports enactment of a 
strong confidentially law that will preempt the patchwork of 
existing State laws and protect patient privacy. We want our 
patients to have confidence that their personal information is 
secure while allowing chain pharmacies to appropriately utilize 
medical information as health care providers to maintain and 
improve patient care.
    NACDS has worked for years to take a leading role on 
protecting patient privacy. Attachment one to my statement are 
``Ten Principles To Protect The Confidentiality Of Consumer 
Medical Records'' that our industry created and continually 
updates to ensure chain pharmacies operate with protecting 
patient privacy as a top priority.
    To mention some of the key pharmacy confidentiality 
legislative issues--because retail pharmacies process about 50 
percent of all health care payment claims, it is important that 
new Federal requirements for patient confidentiality not have a 
disproportionate effect on the ability of retail pharmacies to 
operate efficiently or provide integrated comprehensive 
patient-oriented prescription services.
    NACDS supports Federal standardization of patient 
confidentiality safeguards that includes:
    First, Federal preemption of State laws. There are 
approximately 31,000 chain community pharmacies many of which 
operate across State lines. However, more and more States have 
been enacting their own new and differing privacy laws and 
regulations making it increasingly difficult for multistate 
pharmacies to understand and comply with these laws in an 
efficient manner. Adding another Federal law on top of this or 
trying to determine which law is stronger as some bills call 
for would create even more challenges.
    Second, NACDS supports the use of a single consolidated 
authorization for the purpose of obtaining patient 
authorization to use and disclose patient information for 
payment, treatment, and health care operations. Such 
authorization is provided at the time that the patient enrolls 
in a health plan or when an uninsured patient provides an 
authorization for these purposes to an originating provider of 
a prescription. Under this approach, the patient's prescription 
will be sufficient to use patient information for the purpose 
of practicing pharmacy as defined in State practice laws and by 
regulatory boards. This approach also limits the recordkeeping 
and recording burdens of the patient or the provider.
    Since up to 40 percent of patients have others pick up or 
deliver both new and refill prescriptions, obtaining the 
additional separate authorization from all patients would be 
next to impossible. Imposing a requirement that the patient 
personally pick up a prescription would inconvenience the 
patient and could jeopardize the health of the elderly, 
children, or the infirm who can't otherwise physically get to 
the drugstore.
    In 1990, Congress passed the Omnibus Budget Reconciliation 
Act, OBRA 90, which recognized that delivering pharmacy service 
involves more than just filling an original prescription. The 
role of the pharmacist, which continues to evolve, includes 
enhancing outcomes for medication use. In part, as a result, 
pharmacy providers now engage in a wide range of activities 
that use patient information. These include refill reminder 
programs, prospective and retrospective drug use review, 
disease management, physician-pharmacy collaborative practice 
agreements, and formulary management.
    The definitions of health care and treatment of any 
confidentiality legislation should include compliance programs, 
refill reminder programs, and pharmacy programs recognized by 
Federal and State agencies as disease management programs. Any 
Federal confidentiality law must recognize and provide 
flexibility for the evolving role of community pharmacy in the 
health care system. Most recently, the Health Care Financing 
Administration issued regulations reimbursing diabetes 
education management programs and pharmacies and many States 
recognize the value of pharmacy professionals providing 
educational and counseling services.
    Some legislative proposals will require pharmacies to 
maintain records for 7 years and document each and every case 
in which patient information was disclosed to create an audit 
trail, such as the date, purpose, and description of 
information disclosure even when patient information is used 
for treatment or obtaining payment.
    Such a proposal would result in enormous if not impossible 
workload requirements on our pharmacists and disclosure records 
would number in the multiple billions. The benefit of an audit 
trail and how often it is used must be weighed against the 
increased cost to the health care delivery system.
    Patient care must not be compromised in the name of added 
paperwork. Consumer costs must not be driven up by excessive 
regulation and basic common sense protections for privacy must 
take precedence. Let me reiterate that the use of electronic 
records and technology, if carefully coordinated and protected, 
results in a much safer and secure system that protects patient 
confidentiality while providing for optimum care.
    In conclusion, we applaud you for holding this hearing on 
this complex but critical issue. With my testimony, I have also 
attached a list of key implementation issues and questions for 
persons to think about while drafting provisions with a 
potential impact on pharmacy.
    Thank you for providing me with this opportunity to testify 
today on behalf of Ritzman Pharmacies and NACDS.
    [The prepared statement of Daniel L. Krinsky follows:]
Prepared Statement of Daniel L. Krinsky, Director, Patient Services and 
  Pharmacy Practice, Ritzman Pharmacies, Inc., on Behalf of National 
                    Association of Chain Drug Stores
    Mr. Chairman and Members of the Subcommittee, The National 
Association of Chain Drug Stores (NACDS) appreciates the opportunity to 
present testimony today regarding the important issue of protecting the 
confidentiality of patient medical records in today's modern health 
care delivery system.
    Founded in 1933 and based in Alexandria, Virginia, the NACDS 
membership consists of over 130 retail chain community pharmacy 
companies. Collectively, chain community pharmacy comprises the largest 
component of pharmacy practice with over 93,000 pharmacists. The chain 
community pharmacy industry is comprised of over 19,000 traditional 
chain drug stores, 7,000 supermarket pharmacies and nearly 5,000 mass 
merchant pharmacies. NACDS members operate more than 31,000 retail 
community pharmacies with annual sales totaling over $135 billion 
including prescription drugs, over-the-counter (OTC) medications and 
health and beauty aids (HBA). Chain operated community retail 
pharmacies fill over 60% of the more than 2.73 billion prescriptions 
dispensed annually in the United States. Additionally, NACDS membership 
includes more than 1,400 suppliers of goods and services to chain 
community pharmacies and 96 international members from 26 foreign 
countries.
Executive Summary: NACDS Supports a Strong National Law
    Let me begin by stating that NACDS supports enactment of a strong 
Federal confidentiality law that will preempt the patchwork of existing 
state laws and protect patient privacy. We want our patients to have 
confidence that their personal information is secure, while allowing 
chain pharmacies to appropriately utilize medical information as health 
care providers to maintain and improve patient care.
    On this note, I'd like to point out that NACDS has endorsed S. 881, 
``The Medical Information Protection Act of 1999,'' introduced by 
Senator Robert Bennett (R-UT). Senator Bennett has been working to 
perfect his legislation for over five years and the resulting ``Bennett 
bill'' is the most comprehensive and thoughtful medical records privacy 
legislation introduced in Congress to date. While the legislation 
rightfully imposes tough penalties for the misuse of confidential 
patient information, it is carefully balanced to allow providers 
sufficient flexibility to appropriately utilize patient information to 
optimize patient care. It would also protect patient data without the 
inconvenience of burdensome paperwork on patients and providers.
    NACDS also has worked for years to take a leading role on 
protecting patient privacy. Attached to my statement are ten 
``Principles to Protect the Confidentiality of Consumer Medical 
Records'' that our industry created and continually updates to ensure 
chain pharmacies operate with protecting patient privacy as a top 
priority.
Key Pharmacy Confidentiality Legislative Issues
    Because retail pharmacies process about fifty percent of all health 
care payment claims, it is important that new Federal requirements for 
patient confidentiality not have a disproportionate effect on the 
ability of retail pharmacies to operate efficiently or provide 
integrated, comprehensive patient-oriented prescription services. NACDS 
supports Federal standardization of patient confidentiality safeguards 
that includes:
    Federal Preemption of State Laws: There are approximately 31,000 
chain community pharmacies, many of which operate across state lines. 
However, more and more states have been enacting their own new (and 
differing) privacy laws and regulations, making it increasingly 
difficult for multi-state pharmacies to understand and comply with 
these laws in an efficient manner. Adding another Federal law on top of 
this or trying to determine which law is stronger, as some bills calls 
for, would create even more challenges for multi-state pharmacy 
operations.
    Conflicts between Federal and state law could be virtually 
impossible for health care providers to identify and resolve on a 
patient-specific basis. Moreover, does the law in the state in which 
the patient resides prevail, or does the law in the state in which the 
product or service is being provided govern the transaction? This 
question is particularly important for pharmacies located near state 
borders.
    Without Federal preemption, patients will be required to wait 
longer to obtain their prescription medications because pharmacies will 
be required to take additional time to determine whether to follow a 
specific provision of state or Federal law. For each patient, the 
pharmacist must first identify any conflicts between provisions of 
Federal and state law and then compare those provisions to determine 
which is the most restrictive. The pharmacist must make these two legal 
decisions while patients, or their designees, are waiting for their 
medications.
    Making legal decisions is a job for attorneys, NOT for health care 
providers who are trying to provide medication as efficiently and 
expeditiously as possible to sick patients. The impact on our patients 
is our most paramount concern, and, therefore, NACDS supports a 
comprehensive Federal standard that preempts state confidentiality 
laws.
    A Single Consolidated Authorization for the Use and Disclosure of 
Personally Identifiable Health Information (PHI): NACDS supports the 
use of a single consolidated authorization for the purpose of obtaining 
patient authorization to use and disclose PHI for payment, treatment 
and health care operations. Such authorization is provided at the time 
that the patient enrolls in a health plan, or when an uninsured patient 
provides an authorization for these purposes to an ``originating 
provider'' of a prescription. Under this approach, the patient's 
prescription will be sufficient to use PHI for the purpose of 
practicing pharmacy as defined in state practice laws and by regulatory 
boards. This approach also limits the recordkeeping and reporting 
burdens of the patient or the provider.
    To maximize patient convenience, any Federal confidentiality law 
must require employers, health plans, and originating providers to 
obtain from the patient a single consolidated authorization to use and 
disclose that patient's personally identifiable health care information 
for the purposes of treatment, payment, and health care operations.
    Down-stream health care providers MUST be able to legally assume 
that the single consolidated authorization has been obtained, otherwise 
these providers will be forced to require patients to take the time to 
fill out an additional separate authorization form to protect 
themselves from litigation alleging a breach of the patient's 
confidentiality.
    Since up to 40% of patients have others pick up or deliver both new 
and refill prescriptions, obtaining the additional separate 
authorization from all patients would be next to impossible. Imposing a 
requirement that the patient personally pick up a prescription would 
inconvenience the patient and could jeopardize the health of the 
elderly, children, or the infirm who can't otherwise physically get to 
the drug store. Under some legislation already introduced, 
prescriptions could not be refilled until patients have signed the 
necessary multi-point authorization form, causing yet another patient 
inconvenience.
    Recognition of Pharmacy Practice Activities as a ``Continuum of 
Care'': In 1990, Congress passed the Omnibus Budget Reconciliation Act 
(OBRA 90), which recognized that delivering pharmacy services involves 
more than just filling an original prescription. The role of the 
pharmacist, which continues to evolve, includes enhancing outcomes from 
medication use. Pharmacy providers engage in a wide range of activities 
that use PHI. These include refill reminder programs, prospective and 
retrospective drug use review, disease management, physician-pharmacy 
collaborative practice agreements, and formulary management.
    Moreover, given that over 70 percent of all prescriptions are 
``managed'' by pharmacy providers for PBMs and third party payors, 
pharmacies are often contractually obligated to provide some of these 
services, to a range private and public plans, including 
Medicare+Choice plans, Medicaid and some Federal Employee Health 
Benefit (FEHBP) plans. NACDS believes that any new Federal law should 
recognize that pharmacy is an evolving health profession whose role is 
to enhance appropriate outcomes from medication use through a continuum 
of care approach.
    The definitions of health care and treatment in any confidentiality 
legislation should include compliance programs, refill reminder 
programs and pharmacy programs recognized by Federal and state agencies 
as disease management programs. Any Federal confidentiality law must 
recognize and provide flexibility for the evolving role of community 
pharmacy in the health care system. Most recently, the Health Care 
Financing Administration issued regulations reimbursing diabetes 
education management programs in pharmacies and many states recognize 
the value of pharmacy professionals providing educational and 
counseling services.
Implementation Issues for Retail Pharmacies
    There are several important issues for chain community pharmacy 
relating to the implementation of new Federal privacy laws. Some of the 
more important considerations include:
    Originating Providers: NACDS supports the rights of patients to 
inspect, copy and amend their medical records, and that the originating 
provider is the appropriate place for these operations to occur. 
Originating providers are those that initially prescribe a course of 
treatment and create the historical medical record, such as health 
plans, physicians or emergency rooms.
    The originating provider of the prescription must be the primary 
source for patients to access, copy, and amend their health care 
information.
    Audit Trail Related to Disclosures: Some proposals would require 
pharmacies to maintain records for seven years and document each and 
every case in which PHI was disclosed--such as the date, purpose, and 
description of information disclosure--even when PHI is used for 
treatment or obtaining payment.
    Such requirements would create tremendous time and work burdens on 
pharmacy providers, given that PHI is used for multiple operations each 
day to assure that the patient receives the appropriate therapy, the 
pharmacy meets operational guidelines of third party payors, and the 
pharmacy is reimbursed for providing the service. Such a proposal would 
result in enormous if not impossible workload requirements on our 
pharmacists and disclosure records would number in the multiple 
billions. The benefit of an audit trail and how often it is used must 
be weighed against the increased costs to the health care delivery 
system.
    Sufficient Time to Modify Computer Systems: Like most health care 
providers, chain pharmacies have invested in expensive and 
sophisticated computer software systems to help process claims and help 
deliver pharmacy services. NACDS believes that a realistic time frame 
is needed to implement new uniform confidentiality standards, including 
time to develop software and hardware, test and distribute new 
products, and train employees in their use. Retail pharmacy estimates a 
minimum of 18 months would be needed to implement a new confidentiality 
law, once a law is passed or regulations are finalized.
    Use of NCPDP Standards: The entire pharmaceutical industry relies 
on the National Council for Prescription Drug Programs (NCPDP) to 
establish standards for electronic transmission of prescription payment 
claims. Any new Federal confidentiality law must recognize the 
important role that NCPDP has and should continue to have as a 
standard-setting organization for the billions of retail pharmacy 
payment claims.
Other Key Issues
    Other issues not specific to pharmacies are also extremely 
important to the entire health care continuum. Expanding or creating 
new Federal regulatory oversight of health provider operations must be 
examined carefully. Patient care must not be compromised in the name of 
added paperwork; consumer costs must not be driven up by excessive 
regulation; and basic common sense protections for privacy must take 
precedence.
    For instance, creating an entire new right of private action 
specific to privacy should not be necessary. Consumers currently have 
legal recourse to sue if their medical records are used 
inappropriately.
    In addition, especially when it comes to prescription drugs, 
falsely obtaining a prescription drug or controlled substance without a 
valid script from a physician can result in severe penalties and 
prosecution under Federal and state law. The penalties included in 
legislation introduced to date are severe, and would certainly deter 
any effort by a business or entity to illegally use or disclose patient 
identifiable information.
    Let me reiterate that the use of electronic records and technology, 
if carefully coordinated and protected, results in a much safer and 
secure system that protects patient confidentiality, while providing 
for optimum care. Avoiding millions of pieces of paperwork that must be 
filed and maintained increases the protection of health care records.
    Because this issue is so complex and so dependent upon the use of 
technology, detailed attention must be given to the coordination of 
technology and health care systems. It is critical that legislators and 
regulators ``get it right.'' As was seen earlier this year in the state 
of Maine, a law that may sound good to consumers, but is not perfected 
before implementation, can disrupt the entire health care system. The 
Maine law was suspended by the legislature after being in effect for 
just two weeks and is currently under a two-year review.
    In conclusion, we applaud you for holding this hearing on this 
complex but critical issue. With my testimony, I have also attached a 
list of key implementation issues and questions for persons to think 
about when drafting provisions with a potential impact on pharmacy. 
Thank you for providing me with the opportunity to testify today on 
behalf of Ritzman Pharmacies and NACDS. I'll be glad to answer any 
questions you may have.
                              ATTACHMENT 1
  NACDS Principles to Protect the Confidentiality of Consumer Medical 
                                Records
    1) Patients Have the Right to Know Who May Access, Use, Share, or 
Further Disclose, Patient Identifiable Health Care Information. Insured 
patients' informed consent must be in writing, signed, and obtained by 
either the employer or the health plan. Uninsured patients' informed 
consent must be in writing, signed, and obtained by the originating 
provider who prescribes or orders the health care services.
    2) A Patient's Informed Consent Should Authorize . . . health care 
providers to access, use, and share or further disclose patient 
identifiable health care information, to: 1) Provide treatment; 2) Seek 
payment; 3) Manage programs which improve outcomes and health care 
quality or result in reduced costs to consumers; and, 4) Undertake 
health care operations and utilize sufficient administrative 
information to support all of the above.
    3) One National Law . . . must be the product of a national debate 
to assure confidentiality of patient medical records, while at the same 
time promoting quality of care and not unnecessarily increasing health 
care costs. It will be much easier for both patient and health care 
provider to understand and comply with one national law rather than 51 
laws . . . a national law plus 50 different state laws.
    4) Employers Must be Prohibited from Accessing Patient Identifiable 
Health Care Information . . . unless the patient signs a separate 
informed consent form.
    5) Non-Patient Care or Marketing Activities . . . must be 
authorized by a separate patient consent for programs that are outside 
of the scope of treatment, payment, management of programs which 
improve outcomes and health care quality or result in reduced costs to 
consumers, and health care operations/administrative information.
    6) ``Treatment'' . . . is defined as everything that state boards 
of pharmacy allow pharmacists to do within the definition of the 
practice of pharmacy, including compliance, disease management, 
outcomes, and other quality assurance programs, from which patients may 
freely choose to withdraw or opt-out.
    7) Patients Must have the Right to Inspect, Copy, and Amend (but 
not change) their Medical Records . . . at the originating provider, 
for a fee to cover copying and administrative costs.
    8) Computer Security Must . . . safeguard patient identifiable 
health care information that is maintained or transmitted for any 
purpose.
    9) The National Law Must Go into Effect Within a Reasonable 
Timeframe . . . to provide patient confidentiality protection as soon 
as possible, but also to allow health care providers reasonable time to 
develop, test, distribute, and to be trained to use new software to 
help them comply with this lengthy and complex legislation.
    10) Those With Legitimate Access to Patient Identifiable Data Must 
Commit to Maintain and Abide by Confidentiality Laws. Penalties and 
fines should be imposed if individuals or entities knowingly and 
intentionally break the law.
                              ATTACHMENT 2
  Key Pharmacy Issues with Medical Records Confidentiality Legislation
                              May 27, 1999
Key Issues
 Full Federal preemption of the patchwork of state privacy 
        laws, with an allowance for exceptions for communicable disease 
        reporting, essential health data and vital statistics 
        collection, is critical. Precedent exists in the financial 
        institution sector. Without Federal preemption . . . pharmacies 
        and pharmacists will NOT be able to comply with laws that 
        cannot be readily found or quickly compared for conflicts 
        between Federal and state law.
 Written authorizations should be obtained by originating 
        providers, such as health plans and physicians, but not be 
        required for downstream treatment authorized by those 
        providers. Pharmacies account for about 50% of all consumer 
        health care payment claims and patients and pharmacies could 
        not handle additional form requirements for each prescription 
        or initial visit.
 Consolidated authorizations for treatment and payment must 
        create a ``legal presumption'' that allows pharmacies and other 
        downstream health care providers to rely upon: that 
        individuals, presenting health insurance cards or a valid 
        prescription, have provided the necessary authorization for 
        treatment and payment from their employer or health plan. The 
        same assumption must be recognized for the non-insured . . . 
        the originating provider obtained the necessary authorization.
 The definition of health care or treatment should include 
        pharmacy compliance and disease management programs that are 
        often required by Federal laws and rules and are a continuation 
        of dispensing the prescription.
 Electronic data collection and data transmission provisions 
        dealing with payment must not limit our ability to perform drug 
        utilization review (DUR) and other quality enhancement 
        measures, often required by Federal and state law.
 Pharmacists should not be required to obtain authorizations 
        for counseling patients on OTC drugs.
 The definition of ``individual representative'' or next of kin 
        should not interfere in allowing family members, friends, 
        caregivers or neighbors to pick up prescriptions for patients.
 Pharmacy benefit cards must NOT be included in payment and 
        electronic payment transaction limitations. If so, pharmacies 
        which would no longer be allowed to transmit the NCPDP payment 
        claim for payment because its information is MUCH broader than 
        that required for payment. As a result, pharmacy benefit 
        managers and health plans would no longer have access to the 
        clinical information contained on the NCPDP payment claim 
        necessary for DUR.
 Assurances should be made that Federal agencies will not use 
        new penalty authority as they have under the False Claims Act 
        or Controlled Substance Act to pursue providers for innocent 
        and technical errors. If there is no harm to the patient and 
        mistakes are innocent, providers should not be unduly punished 
        for employee error.
Key Questions in Drafting Confidentiality Legislation
 Does the definition of health care include over-the-counter 
        (OTC) drugs and medically ``related items''? It should not, as 
        the workload, confusion and consumer inconvenience would be 
        prohibitive.
 Will bill language interfere in the common tradition of 
        allowing relatives, friends, caregivers and neighbors pick up 
        prescriptions for patients?
 Is it the intent of legislation to require separate, written 
        authorizations for each pharmacy customer, despite the fact 
        that patients have their choice in deciding where to deliver 
        prescriptions to pharmacists directly, asking for treatment and 
        granting permission for pharmacists to dispense and be paid?
 Have members and staff contemplated the impact of 
        ``Administrative Billing Information'' and payment provisions 
        and their possible impact on the use of the NCPDP prescription 
        payment claim forms and PBM clinical data collection used for 
        utilization review?
 Is it clear that pharmacy benefit cards are not considered a 
        ``payment card''?
 Do lawmakers know that software experts have told industry 
        that 18 months is the minimum time needed to create, test, and 
        train pharmacists in using new software for pharmacy compliance 
        with a new Federal privacy law and that it is unlikely that 
        software can be developed and implemented for a bill that does 
        not substantially preempt state laws?
 Is it the intent of legislators to limit the use of 
        prescription information to issue discount coupons for over-
        the-counter drugs and products related to the treatment or 
        prescription by requiring a written authorization?

    Mr. Burr. Thank you, Mr. Krinsky.
    The Chair would recognize for purposes of an opening 
statement Mr. Latanich.

                 STATEMENT OF TERRY S. LATANICH

    Mr. Latanich. Thank you, Mr. Chairman.
    I have been watching to see if I was going to be the last 
witness on this panel or the first half of the recess, but I 
guess I will go last.
    My name is Terry Latanich. I want to thank you, Mr. 
Chairman, and members of the subcommittee. I am senior vice 
president of Merck-Medco Managed Care which is a subsidiary of 
Merck. We do manage the prescription drug benefit for more than 
1,100 health plans and cover more than 50 million people.
    The patients that we serve, as well as the plant sponsors, 
count on us to protect the patient's health and their 
confidential medical information. We take both of these 
responsibilities very seriously. I would like to begin today by 
giving you one real-world example of how we use patient 
identifiable information.
    A member of one of the health plans that we serve was 
taking a medication for an enlarged prostate. Later, this 
patient was prescribed medicine to treat depression. 
Unfortunately, the use of that anti-depressant not only 
worsened the patient's prostate problem, it can also result in 
serious problems for elderly patients like fractures.
    We were able to use this patience's prescription history to 
identify this potential health problem. Our pharmacist 
contacted the physician who had prescribed the anti-depressant. 
The physician was not aware that the patient had a prostate 
problem or that he was taking medications for it. Once 
informed, the physician changed the patient to an anti-
depressant that was safe for the patient and didn't exacerbate 
the prostate problem.
    This interaction was identified by a program which we call 
Partners for Healthy Aging. Merck-Medco processes more than 300 
million drug claims a year and maintains a point-of-sale data 
base that includes about a billion claims. But the use of this 
data set demonstrates the power of the ability to protect 
patient health and safety.
    Last year two drugs were voluntarily withdrawn from the 
market. Posicor, a drug used to treat hypertension and angina, 
and Duract which is used to manage acute pain. Studies showed 
that Posicor had potentially serious interactions with nearly 
two dozen commonly used drugs. Duract was withdrawn because its 
use may have resulted in up to four deaths and the need for 
several liver transplants.
    Many physician's offices lack the computer systems to 
readily identify patients using a specific drug. Merck-Medco's 
immediate access for our patients' specific data base enabled 
us to take immediate action. On the day that each product was 
withdrawn from market, we stopped dispensing those drugs in our 
pharmacies and alerted our retail pharmacy networks that no 
further prescriptions of the recalled drugs should be filled.
    Within days of the withdrawals, we sent out over 81,000 
letters to physicians who had prescribed Posicor or Duract to 
the members of any health plan that we serve. These letters 
identified patients under their care who had received a 
prescription for the recalled drugs. In addition, we sent more 
than 233,000 letters to patients using these medications and 
encouraged them to contact their doctor.
    One of the emerging capabilities of prescription drug 
management is improving the health of patients with chronic 
diseases through patient and physician education. As indicated 
by the earlier witness, we also provide programs here such as 
diabetes, MS, asthma and cardiovascular disease.
    We also use patient information to communicate with 
physicians best medical practice guidelines. Studies indicate 
that compliance with just one of these practice guidelines in 
the area of cardiovascular disease reduces mortality by 30 
percent and morbidity by 50 percent. Yet this practice standard 
is followed less than 50 percent of the time.
    Medco identifies patients through our data base who are 
potential candidates for modification therapy based on these 
medical practice guidelines. We inform the prescribing 
physician of the practice guideline, see if the physician wants 
to alter the regimen to comply with that best practice 
guideline, and then give the opportunity for the physician to 
make that decision.
    Such use of patient identifiable information allows for 
dramatic improvement in health and safety. We take seriously 
our responsibility to protect patient medical information. We 
use advanced security systems on our data bases to ensure that 
patients inside or outside the company do not have access to 
patient identifiable information unless authorized and that 
authorization is strictly limited to those with a need to know.
    Merck-Medco does not provide patient-identifiable 
information to any marketing firm, any drug manufacturer, or 
even our parent, Merck and Company. Let me emphasize this 
again. No identifiable information is given to anyone for 
marketing purposes. We view this being consistent with our role 
as a health care provider and our professional standards of 
ethics.
    While we believe that our stand is sufficient to provide 
medical record confidentiality, we do support the enactment of 
legislation in this area. Our hope is that any legislation will 
meet three tests.
    First, it should not create any impediments to the kind of 
activities which I just discussed and which clearly improve 
patient health and safety.
    Second, it is imperative that any provisions that require 
patients to authorize the use of this information provide for 
consolidated authorization. As an organization, to provide 
services to health plans, we need to be able to rely on the 
plan sponsor's enrollment of a member as evidence that 
disclosure has been made and consent has been obtained. It 
would be very difficult for us to collect individual consent 
forms for these services. We would have to obtain more than 50 
million consents annually and maybe even more under some 
legislative proposal.
    Finally, we strongly encourage the development of a uniform 
Federal standard for medical record confidentiality that will 
set the bar high enough to provide the requisite level of 
protection. Without such a uniform national standard, we will 
face the daunting challenge of determining which State law to 
apply.
    If I could just close with one example of the difficulty 
that we face operating in 50 States, it may resonate with you. 
A patient may live in one State, work in another, they may 
receive Medicare and use pharmacies in both States. The plan 
they use may be located in yet another State. The patient may 
see a physician or pharmacist in another State on vacation and 
the records of the health plan may be maintained in the data 
base located in another.
    With legislators considering a staggering number of medical 
record confidentiality bills, we face the practical problem of 
how you maintain confidential against a patchwork of 
legislation. We would submit that a floor is very difficult for 
a provider to deal with on a real world day-to-day basis. In 
trying to understand which State's law to apply where there may 
be conflicts is very, very difficult.
    There are opportunities to look to see whether there can be 
secretarial discretion so we do not have to deal with the 
problem of not having the bar high enough.
    We would encourage you to adopt the uniform standard and 
have it be preemptive across the States.
    [The prepared statement of Terry S. Latanich follows:]
 Prepared Statement of Terry S. Latanich, Senior Vice President, Merck-
                       Medco Managed Care, L.L.C.
    Good morning Mr. Chairman and members of the subcommittee. My name 
is Terry S. Latanich and I am Senior Vice President for Government 
Affairs for Merck-Medco Managed Care, LLC, a subsidiary of Merck & Co., 
Inc. I am responsible for directing Merck-Medco's federal legislative 
and regulatory programs, including developing our legislative policy on 
medical record confidentiality. In addition, however, I have 
significant business responsibilities including overall management 
responsibility for our largest client, the Blue Cross and Blue Shield 
Federal Employee Program which covers nearly 5 million individuals. In 
my testimony today I would like to focus on five issues:

1. The roles and responsibilities of managers of the pharmacy benefit;
2. The importance of developing, maintaining, and using large 
        computerized medical record databases to protect health and 
        safety;
3. The importance of using both patient-specific and encrypted data to 
        manage the health status or disease states of persons using 
        prescription drugs;
4. The importance of having a statutory authorization or consolidated 
        consent to enable those who manage the benefit plans to 
        effectively, and efficiently, administer prescription drug 
        benefits; and
5. The need for a uniform national standard for medical records 
        confidentiality.
                       background on merck-medco
    Merck-Medco has been managing prescription drug benefits since 
1982, initially as a public company called Medco Containment Services, 
Inc., which was acquired by Merck & Co., Inc., in 1993. Merck-Medco 
manages the prescription drug benefit for more than 50 million 
Americans. Our customer base includes (1) more than 50 percent of the 
Fortune 500 companies; (2) more than 20 Blue Cross and Blue Shield 
plans; (3) more than 60 percent of the lives covered in the Federal 
Employee Health Benefit Program (including the plans offered by BCBS, 
GEHA, APWU and SAMBA); (4) several state employee/retiree programs 
including CALPERS and all or part of the state employee/retiree 
programs in Ohio, Texas, Massachusetts, Louisiana, and Georgia; and (5) 
several union sponsored health plans.
    Merck-Medco provides prescription drug care primarily through 
operating subsidiaries. The first, PAID Prescriptions, processes more 
than 270 million drug claims annually from 55,000 retail pharmacies 
nationwide. To do this, Merck-Medco operates a highly sophisticated 
point-of-sale (``POS'') claims system that verifies eligibility and 
drug coverage, checks for drug interactions, and informs the retail 
pharmacy of the amount it should collect as the copayment from a member 
of a health plan to which we provide service. Merck-Medco's POS system 
takes less than one second to process each claim once we receive it 
from a retail pharmacy. Three years of history are maintained in Merck-
Medco's POS system, creating a database of nearly one billion claims.
    Merck-Medco's other subsidiaries, the Merck-Medco Rx Services 
pharmacy companies, constitute the largest mail service pharmacy 
organization in the world. We fill more than 50 million prescriptions 
annually through 12 pharmacies located in eight states. Each of these 
pharmacies uses the most sophisticated dispensing technology available. 
The combination of high technology and strong pharmacist involvement in 
the dispensing process allows Merck-Medco to be very cost effective 
while maintaining the highest dispensing accuracy rates in all of 
pharmacy. Merck-Medco employs more than 11,000 employees including 
1,700 pharmacists. Merck-Medco also operates two licensed pharmacies 
that do not dispense drugs; but that are dedicated to counseling 
patients and physicians on appropriate prescribing and prescription 
drug use.
1. The Role and Responsibilities of Pharmacy Benefit Managers
    Merck-Medco is sometimes referred to as a ``PBM'' or ``Pharmacy 
Benefit Manager''. But there are a variety of organizations that 
provide ``PBM services'' by internal management including a number of 
HMOs (e.g., Kaiser Permanente), integrated health systems, hospitals, 
some Blue Cross and Blue Shield plans, and a number of insurance 
carriers. Whether a sponsor offering a prescription drug benefit 
decides to ``build or buy'' pharmacy benefit manager capabilities, the 
principal services required to manage the prescription drug benefit 
include:

 Processing prescription drug claims through sophisticated, 
        real-time point-of-sale computer systems that adjudicate claims 
        in a matter of seconds
 Negotiating provider contracts with retail pharmacies, 
        including performance standards and reimbursement schedules, to 
        provide services to members of health plans
 Providing a mail service pharmacy option through which members 
        can fill prescriptions for medications, generally involving 
        chronic conditions
 Reviewing the drugs that have been prescribed, at the point-
        of-sale, before those prescriptions are dispensed, to minimize 
        the potential for adverse or dangerous drug/drug interactions 
        or other potentially life-threatening problems
 Creating procedures to review drugs that may (i) be 
        appropriate for some, but not all, members, (ii) require 
        special management due to especially high costs or (iii) 
        require controls because they are susceptible to abuse
 Managing drug utilization by reviewing patterns of the use of 
        prescription drugs (e.g., by reviewing the claims database it 
        can be determined whether a patient is consistently late 
        refilling prescriptions for chronic illnesses which suggests 
        that the patient is not taking the medication as prescribed 
        (e.g., skipping days or taking the drug at wrong dosages)
 Managing patients' health by using prescription drug history 
        to identify persons with specific diseases and offering them 
        programs and/or information to improve their health status
 Managing the cost of a health plan's prescription drug program 
        by working with the health plan to develop strategies for 
        negotiating pricing concessions from pharmaceutical 
        manufacturers through the use of formularies or similar 
        strategies.
2. Maintaining and Using Large Computerized Databases
    Patient-identifiable data is critical to the services provided by 
Merck-Medco, whether for purposes of processing claims, auditing for 
fraud and abuse, verifying prescriptions, checking for drug 
interactions or dispensing prescriptions. Our data inputs are three-
fold:

 Plan sponsor provided information such as eligibility files 
        and in some instances medical claims;
 Patient supplied information including prescriptions, self-
        reported information from patient profile forms, and 
        information submitted by the patient in health or disease 
        management programs; and
 Physician supplied information including prescription 
        information and diagnoses and related information necessary to 
        conduct health and disease management programs.
    As I noted earlier in my testimony Merck-Medco manages a database 
of nearly one billion drug claims. It is our experience that 
confidentiality can be maintained in such systems. At Merck-Medco 
access to this database is limited to those with a ``need-to-know.'' We 
employ state-of-the-art security systems for ensuring that persons 
inside or outside the company do not have access to patient-
identifiable information unless specifically authorized. Most views of 
the data are on a blinded basis (e.g., epidemiological research). 
Systems capabilities are continuously improved, for example, improving 
the ability to track and audit any instance in which a patient record 
has been viewed.
    Merck-Medco does not provide patient-identifiable information to 
any marketing firm or drug manufacturer, including our parent Merck & 
Co. We do, however, use aggregated, non-identifiable data for a variety 
of purposes. Encrypted or blinded data has many important uses, such as 
epidemiology, outcomes research and health economics.
    An example of how our use of data is protecting patient safety was 
the 1998 market withdrawal of two prescription medications due to 
serious and even potentially fatal adverse drug reactions. Merck-Medco 
immediately implemented safety measures to prevent dispensing of 
Posicor', a drug used for hypertension and angina, when it 
was voluntarily recalled by Roche Laboratories on June 8th, and when 
Duract', a nonsteroidal anti-inflammatory (NSAID) used for 
short-term treatment of acute pain was pulled by Wyeth-Ayerst 
Laboratories on June 22nd. The voluntary withdrawal by Roche of Posicor 
was due to the possible dangerous interactions with two dozen other 
widely used medications. Duract was withdrawn from the market because 
of several reports of deaths or liver transplants required because of 
liver function problems associated with the drug.
    On the day the drugs were withdrawn from the market, Merck-Medco 
took several steps to prevent possible harm or death to the 
beneficiaries of our health plan clients. Physicians often do not have 
the office-based computer systems to readily identify patients using a 
specific medicine. Identifying patients at risk involves a slow and 
inefficient process of manually reviewing each patient's medical record 
in the doctor's office. Merck-Medco's immediate access to patient-
specific data enabled it to take swift and decisive action to address 
this situation. On the day each product was withdrawn from the market 
Merck-Medco suspended dispensing of all prescriptions for Posicor and 
Duract in its mail service pharmacies. Merck-Medco also sent electronic 
messages to all 55,000 pharmacies in its PAID Prescriptions pharmacy 
network advising them of the market withdrawals and recommending that 
no further prescriptions of the recalled drugs be dispensed.
    Within days of the withdrawals Merck-Medco sent letters to the 
prescribing physicians for patients prescribed Posicor or Duract 
reimbursed under a Merck-Medco managed prescription benefit plan. Each 
physician letter was accompanied by a customized list of current or 
past patients under their care who had received a prescription for the 
recalled drugs to assist them in checking on those patients. Merck-
Medco sent over 233,000 letters to patients and 81,000 letters to 
physicians during these two product withdrawals.
Using Patient-Identifiable Medical Records in Disease Management 
        Programs
    One of the emerging benefits offered by health plans are programs 
to help manage the progression of disease states through patient and 
physician education. Merck-Medco provides a number of these programs in 
areas such as diabetes, multiple sclerosis, asthma, and cardiovascular 
disease. Merck-Medco can improve patient self-management of these 
conditions through the patients' participation in such programs. We 
identify patients who could potentially benefit from such programs by 
analyzing their existing prescription drug records. In other cases, 
patient-identifiable data are used in communicating with physicians 
treating the patient enrolled in one of these programs to encourage 
compliance with ``best medical practice standards.''
    For example, the best medical practice guidelines as outlined in 
the 1997, Vol. 336, New England Journal of Medicine article by Magnus 
Johannesson states that a certain type of cholesterol reducing drug, an 
HMG (e.g., Lipitor', Mevacor', 
Pravachol' or Zocor') should be started post 
myocardial infarction. Studies indicate that compliance with this 
protocol reduces mortality by 30 percent and morbidity by nearly 50 
percent. Yet, this practice standard is followed less than 50 percent 
of the time. Through Merck-Medco's health management program for 
congestive heart failure, we are able to identify those patients who 
are potential candidates for this modification in therapy, contact the 
prescribing physician, inform the physician of the practice guideline, 
and see if the physician wishes to modify the prescribed drug regimen. 
The use of patient-identifiable information and a sophisticated 
database allows for this dramatic improvement in patient health and 
safety.
    Another compelling example of the need to continue to allow for the 
use of patient-identifiable information in the management of 
prescription drug benefits is found in Merck-Medco's Partners for 
Healthy Aging' program which is designed to improve 
appropriate prescribing and prescription drug usage among the elderly. 
At the core of the Partners for Healthy Aging program are a series of 
drug utilization review rules that protect seniors from drugs and 
dosages that are inappropriate given their age. For example, the use by 
the elderly of long-acting benzodiazapines such as Valium' 
or Librium' can result in dizziness, loss of balance and 
increased risk of hip fracture. Other drugs require dosage reductions 
in the elderly. Merck-Medco's Partners for Health Aging program is 
succeeding in improving health outcomes because of our ability to 
combine and analyze patient-specific information from prescription 
information and self-reported profile data from patients and to 
communicate what we know from this analysis to patients and their 
physicians. I have attached to my testimony a copy of the recent JAMA 
article describing the outcomes of this program. Nearly 25 percent of 
the time a physician was contacted through the program, the physician 
either modified the prescription previously written or discontinued the 
drug.
4. The importance of a Consolidated or Statutory Authorization
    One of the key issues that Congress must consider in developing 
legislative standards for maintaining the confidentiality of patient 
identifiable medical information is whether and how to implement an 
authorization process for the use and disclosure of such data--separate 
from the consent to be treated by a health care provider or separate 
from the enrollment by an individual in a health plan.
    Ideally, Congress could draft a law that statutorily sets out and 
defines certain circumstances or specific purposes or activities for 
which identifiable patient information could be used or disclosed 
without an individual's consent. For example, Congress could create a 
``statutory'' authorization for health plans and providers to use an 
individual's identifiable health information for purposes of treatment, 
payment and specified ``health care operations'' once that individual 
has enrolled in the health plan or consented to be treated by the 
health care provider.
    Some have argued that separate, discrete authorizations should be 
obtained from individuals each and every time that their health care 
information is accessed. Such a multiple authorization scheme would 
unnecessarily interfere with, or even shut down, the ability to provide 
quality, cost-effective health care.
    While the statutory authorization approach may be preferable, from 
our viewpoint, it may not be achievable. An alternative approach 
embraced by a number of existing proposals involves the concept of a 
``consolidated authorization''. We think that the ability to obtain a 
single, consolidated authorization from an individual upon enrollment 
in a health plan or when consenting to treatment by a health care 
provider that authorizes the use of the individual's information for 
purposes of providing treatment, securing payment for that treatment 
and conducting health care operations of the plan or provider is 
crucial. It is essential, from our perspective, that Congress 
recognizes the need to use a ``consolidated'' authorization for the use 
of patient-identifiable information.
    Merck-Medco is an organization that provides services as an agent 
to a health plan. We are not a stranger to the patients in these plans, 
but a critical part of the continuum of their care. It is imperative 
that we be able to rely on the plan sponsor's enrollment of a member 
into its health plan as evidence that disclosure of the possible uses 
of patient-identifiable information has been made and consent obtained. 
It would be extremely burdensome, perhaps impossible, for a PBM to 
collect individual consent forms for the services we provide. In the 
case of Merck-Medco, we would have to obtain 50 million consent forms 
annually, more often under some legislative proposals under 
consideration. In the context of electronically adjudicating a 
prescription drug transaction in under one-second we must be able to 
look to the patient's enrollment in a health plan as evidence of their 
authorization to use and disclose their personally identifiable health 
information for treatment, payment and their plan's health care 
operations activities. As a downstream provider of treatment, payment 
and health care operations to a health plan, we would then have 
assurance that the uses of patient-identifiable information we have 
described above fall squarely within the requirements imposed under any 
legislation adopted. Today, Merck-Medco and other PBMs rely on the 
health plan to provide us with a list of persons eligible to use the 
prescription drug benefit. The integrity of that eligibility transfer 
must be maintained.
5. Creating a Federal Standard--the need for Preemption of State laws
    Merck-Medco operates in a ``real-time'' electronic environment with 
nearly one million transactions being adjudicated daily. Each year our 
customer service representatives and pharmacists handle in-bound or 
place out-bound calls to physicians and their patients across the 
country more than 25 million times. Our pharmacies receive prescription 
from patients in every state, and we receive refill orders by 
telephone, IVRU, fax, and Internet. Absent the adoption of a uniform 
national standard for the protection of medical records, companies such 
as Merck-Medco will face the daunting challenge of determining which 
state's law to apply to any given circumstance. This problem is growing 
daily as state legislatures consider a staggering number of medical 
record confidentiality bills. Enrollees in health plans often obtain 
medical services or prescription drugs from multiple providers in many 
states. Consider, for example, the situation that may be faced by a 
Member of Congress.
    The Member may:

 Have a permanent residence in his or her home state;
 Live in Virginia while Congress is in session;
 Use a hospital in Maryland;
 Fill prescriptions in DC, Virginia and Maryland
 Travel to other states while on vacation, during which time 
        prescriptions may need to be filled or refilled;
 Have a son or daughter attending college in a state other than 
        the Member's home state; and
 Fill his or her maintenance medications through a mail service 
        pharmacy in yet another state.
    What state law would control the prescription drug records in this 
hypothetical? How should inconsistencies in state laws be resolved? 
Which state's law should be considered ``primary'' in the case of 
conflict? We strongly encourage the development of federal standard of 
medical record confidentiality that will set the bar high enough that 
its uniform application in all jurisdictions will provide the requisite 
level of protection for personally identifiable health information.
    Thank you Mr. Chairman and Members of the Subcommittee for the 
opportunity to appear before you today. I would be happy to answer any 
questions you may have.

    Mr. Burr. Thank you, Mr. Latanich.
    The Chair at this time would ask unanimous consent to enter 
into the record a February 18, 1998, Washington Post editorial 
and a February 19, 1998, correction. The editorial suggests 
that CVS had arranged to supply the names of their pharmacy 
customers to drug companies similar to what you said, Ms. 
Meyers, in 1998. The Post went on to add a correction, that CVS 
sent data to a marketing company to track, but that the company 
was under contract not to release the personal data to drug 
companies or to others. So the Post certainly clarified their 
editorial based upon what the record was. Without objection 
that would be entered into the record.
    [The information referred to follows:]
                       When Private Means Private

                  [Washington Post, February 18, 1998]

    Does the average person mind when, after having a prescription 
filled at the pharmacist, he or she starts getting related junk mail 
from drug companies to which the pharmacy has passed along his or her 
name, address and medical condition? Are such customers likely to be 
pleased at the convenience--as the pioneers of this new form of medical 
marketing insist they ought to be--or are they likelier to bristle at 
the implied violation of their privacy? Anyone who finds this a 
difficult question ought to glean a big, broad hint at the answer from 
the fierce consumer reaction to a report in this newspaper Sunday that 
several large area pharmacies, including those at the Giant Food Inc. 
and CVS chains, have entered into such arrangements with a 
Massachusetts-based company called Elensys. Today, in full-page ads and 
other formats, Giant announces it will stop providing such 
information--reacting to what spokespeople said had been a flood of 
calls from angry consumers.
    And what were pharmacists--next door to doctors in their access to 
privileged, personal knowledge about people's ailments--doing marketing 
such information in the first place? The answer casts some light on the 
strange tensions being set up everywhere by the financial 
possibilities--one might better call them temptations--of the so-called 
``information economy,'' in which information about one's customers and 
their needs had become a vast new resource to be mined. It shouldn't 
surprise anyone that consumers feel more strongly about their medical 
prescriptions than they do about the great amounts of other information 
now routinely collected from every financial transaction, whether it's 
traveling, shopping or browsing the Internet. But information about 
people's preferences--meaning the sorts of things they are likely to 
do, or read or buy--is by far the most valuable of the various sorts of 
information now being briskly harvested and traded on all sides. Any 
company that collects such information in the ordinary course of 
business is sitting on a gold mine--and can be expected to act on that 
fact in the absence of specific, spelled-out public limits.
    To what extent should people's needs be allowed to be treated this 
way, as some sort of naturally occurring resource available to anyone 
who can grab it? The outcry over drug prescriptions suggests one such 
limit. While some forms of sensitive information, such as credit 
information, are now protected, the sheer variety of types of medical 
data have made progress slow on protecting them.
    Prescription information falls near the line between purely medical 
data and commercial information, but as the reaction makes clear, that 
line has been crossed. Besides being inherently more sensitive and 
personal then information about shopping choices, prescriptions are 
also in a real sense less optional: Nobody ``chooses'' to have a 
particular ailment or to release the information about that ailment 
into the wider data stream of junk mail. The arrangements with Elensys, 
which contracts to manage pharmacists' data about patients and to make 
selected bits of it available so drug companies can send potential 
patients ``educational material'' about their inferred ailments, are 
just ingenious enough to focus people's attention on where they want 
that line drawn.
CORRECTION DATE: February 19, 1998
    An editorial yesterday incorrectly stated that several large 
pharmacies, including Giant and CVS, passed along to drug companies the 
names of persons having prescriptions filled at the pharmacy. In fact, 
Giant and CVS sent data to a marketing company to track and write to 
pharmacy customers who had not re-filled prescriptions, but that 
company was under contract not to release the personal data to drug 
companies or others.

    Mr. Burr. For the purposes of our witnesses at this time, 
we will recess, hopefully, for 35 minutes; and we will 
reconvene this hearing at 1:15.
    [Brief recess.]
    Mr. Burr. The Chair would call the hearing back to session. 
I hope everybody had an opportunity to get enough to eat. The 
Chair would recognize himself for the purposes of questions for 
5 minutes.
    Let me ask you, Mr. Jacobsen, could you tell me what 
happened in Minnesota and specifically at Mayo with the new law 
as it might or might not have affected pediatric research?
    Mr. Jacobsen. Pediatric research?
    Mr. Burr. Pediatric research is a tough one to get people 
to commit to allow to happen anyway.
    Mr. Jacobsen. Right. I am trying to think back to 
information that we have got on that. I don't have that on the 
top of my head.
    We did look at a study of those that gave us authorization 
to use the medical records versus those that didn't, but 
restricted that to ages 20 and older in that study. Obviously, 
I can't tell you what has happened with response rates for 
pediatrics.
    Mr. Burr. Let me ask you because I have got the Bowman Grey 
School of Medicine, part Wake Forest University, in my 
district. What would researchers there be subject to if the 
Minnesota law were adopted in North Carolina?
    Mr. Jacobsen. It was really quite a bit of work to try to 
implement this. For those of you that don't know what this law 
was, it required us to ask all patients seen after January 1997 
for a general authorization to use the medical record for 
research purposes.
    As originally written, the default was set to no. We had to 
get an explicit yes. That was the amendment alluded to earlier 
so that the default was set to yes with reasonable contact. The 
systems to put that into place with close to 300,000 patient 
visits per year were really quite substantial. Systems to try 
to contact patients before they came in for their scheduled 
visits, to try to capture them at the time when they enter the 
system, which you can imagine the many different portals for 
entry, urgent care, emergency care, X-rays, all sorts of 
places. To try to catch patients that didn't have patient 
registrations ahead of time was really quite a task to put this 
altogether.
    Mr. Burr. You alluded to a study that you had done. Can you 
tell us about the specifics of the findings of that study?
    Mr. Jacobsen. Sure. What we did was we selected a sample of 
patients who had been seen in the previous 3 years at Mayo and 
went through the same procedures that were being used 
clinically to comply with the law and asked them about their 
preferences for authorization.
    We had three written contacts. What we found overall about 
3 percent of people explicitly refused. About 80 percent 
explicitly gave us that authorization, but 17 percent didn't 
express their wishes at all despite three written contacts 
asking them for their wishes and explaining to them what would 
happen if they didn't give it to us.
    I alluded to the findings in my testimony that there were 
some subject patients where their refusal rates were quite a 
bit higher. It all sort of makes sense intuitively in terms of 
younger persons, persons with conditions that some might 
consider sensitive, and so on. I think one of the most 
important things was looking at what happened with those 
people, that large number of people that didn't express their 
wishes despite asking them. I think that it is very important 
to keep in mind that we have got to make sure that defaults to 
a yes with reasonable contact with whatever legislation we 
have.
    Mr. Burr. Let me go to Ms. Gencarelli. You stated in your 
testimony that the Maine law prevented family members from 
accessing information about the condition of their loved ones 
and medical providers from obtaining information necessary for 
the proper treatment of patients.
    What happened to the Maine law?
    Ms. Gencarelli. The Maine law contained extensive 
provisions and requirements that required written disclosure 
for basically any and all release of information. Clearly it 
was not intended in the bill, but that was the ultimate 
consequence, was that it was written in such a way that 
authorization was required in so many circumstances that the 
things such as delivering flowers, administering last rites, 
even notifying family members of a loved one's condition were 
prohibited by the law and that law was sequentially suspended. 
And they are currently redrafting and cleaning up that law.
    Mr. Burr. How fast did they suspend that law?
    Ms. Gencarelli. I believe 2 weeks.
    Mr. Burr. Mr. Stump, let me ask you.
    I worked closely on the pharmaceutical and biologics 
portion of the FDA Modernization Act. One of my goals was to 
streamline that approval process from the 12 to 15 years that 
it took to bring patients a particular treatment.
    I am curious what would happen to the drug development 
process if archival research had conditions that--for those 
patients who were no longer with us that it was left up to 
their estates to access for permission to use that archival 
research?
    What would it do?
    Mr. Stump. The ramifications would be substantive and 
significant. We are obligated to do outcome research on our 
products at the time they are approved. We don't have the 
answer to every interesting question at the time of approval.
    We need to do continuing surveillance in order to ascertain 
how our product is doing once it goes into the general 
prescribing population. In order to access that data, we need a 
pretty efficient and streamlined process. We will do that. We 
have to do that. If that process becomes so cumbersome that 
resources have to be diverted to that process, which we would 
do, the costs will be products like Herceptin, that development 
was long and hard.
    My colleague on the panel, Fran Visco, was of immense help 
to us in getting the patient community to even make it happen. 
It is that kind of high risk, high impact, meet the critical 
need project we're talking about. The project could have easily 
been sacrificed at various points along the way had we been 
diverting resources away from that into more complex archival 
studies.
    Mr. Burr. Thank you.
    My time has expired. The Chair would recognize Mr. Waxman.
    Mr. Waxman. Thank you, Mr. Chairman. I thank Mr. Brown for 
allowing me to start my questions first because I have another 
hearing to attend.
    Dr. Stump, let me ask you this. There is a common rule and 
it requires informed consent, an IRB review for practically all 
research conducted in this country including federally funded 
research and almost all research conducted at universities, 
major hospitals, and academic centers, and then there are 
similar rules when working with the FDA approvals.
    You object to applying the common rule requirement of 
informed consent to records-based research. I hope that you are 
aware that the common rule specifically provides for the waiver 
of consent, waivers permitted when the research presents, 
quote, no more than minimum risk of harm to subjects and 
involves no procedures for which written consent is normally 
required outside of the research context.
    How do you justify treating your records-based research 
differently from all such research sponsored today by the 
Federal Government or conducted at institutions like UCLA or 
Harvard?
    Mr. Stump. I guess it is a question of how much time, 
energy, and resources you spend overseeing what is minimally 
risky investigation. I am not aware of abuse of that process. 
These IRBs do perform a critical function. We use them just 
like any publicly sponsored research does as well under 
oversight from the FDA. I want IRBs to be paying very close 
attention to that work and protecting patients from the near-
term risk of being exposed to uncertainties in their products. 
I would rather not have them spending their time and energy 
where there is really minimal risk.
    Mr. Waxman. Well, if you think that IRBs have done a good 
job and you welcome them, the IRBs are under the common rule 
where we have supervision over the information disclosures, and 
the common rule also explicitly grants expedited IRB review for 
records-based research.
    You claim that even expedited IRB review would add 
unnecessary Federal oversight to some mysterious unquantified, 
unidentified body of research. I want to figure out exactly 
your concerns. If Genentech conducts records-based research to 
support a new drug application, it would be subject to the 
FDA's equivalent of the common rule; isn't that correct?
    Mr. Stump. It would be in that situation.
    Mr. Waxman. UCLA has multiple-project assurance with the 
Federal Government. If Genentech sponsors records-based 
research at UCLA, it has got to be subjected to the common 
rule; right?
    Mr. Stump. In that situation, yes.
    Mr. Waxman. So much of the research you conduct or sponsor 
is already subjected to what you call unnecessary Federal 
oversight. I think you are vastly exaggerating the impact of 
common rule scrutiny on the remainder of whatever research you 
conduct or sponsor.
    That is my view. I would like to hear you respond to it.
    Mr. Stump. I guess that I would agree with you on the 
preapproval research. Actually, the vast majority of outcome 
research, so-called archival research, is done post-approval.
    It is done in product surveillance. It is done in 
establishing the outcome experience of your product after 
approval by the FDA as it should have been predicted by your 
approval clinical trial base. That is actually where the vast 
majority of information is collected.
    We have tracked most of our products. As one example, our 
heart attack drug, Activase, we track about 100,000 patients a 
year prospectively to determine whether that drug is working 
successfully, which is save lives for heart attack patients 
that we showed in early clinical trials. We show that very 
well. If every IRB at every site that provides this anonymous 
information had to go through the approval process, it would 
add an additional significant burden.
    Mr. Waxman. It would if you did it under every single case. 
But if you do it under those circumstances where you are 
already involved in research where there is a Federal 
involvement, either FDA or research involving some other 
university, what proportion of the research conducted or 
sponsored by Genentech is records-based or not currently 
subject to the common rule?
    Mr. Stump. I don't have the fact right at hand. I could get 
that and provide it to you. I could tell you along the size of 
patient data bases that we collect----
    Mr. Waxman. Why don't you get it for the record. Do you 
conduct any human subject research which is not regulated under 
the common rule? By human subject research, I mean research 
involving patients?
    Mr. Stump. We do no research for preapproval clinical 
trials that is not covered by the common rule.
    Mr. Waxman. Dr. Amdur, how do you respond to what Dr. Stump 
is saying? Is this going to be unnecessary burdensome 
regulation?
    Mr. Amdur. I think this is one of those nice situations 
where everybody can be happy because I think that Dr. Stump's 
concerns about the things that he does not want to be subject 
to burdensome regulations, regardless of how minimal that 
burden is, indeed under the current common rule regulations 
would not be burdened.
    The types of activities that he is speaking of, in my 
opinion as an IRB chair, are not research. We can review the 
regulatory definition of research. I have it here if you would 
like me to explain my answer, but these are things that are not 
being done with the goal of producing scientific generalizable 
knowledge. They are being done for product evaluation and 
marketing information. And in my opinion, that does not satisfy 
the definition of research. It is certainly not a scientific 
study that any of us normally think of.
    And the intent of the regulations was not to go around and 
meddle in areas that do not have to do with specific and 
traditional focus of research. So I think that an IRB is 
inappropriately misusing its authority to try and get Dr. Stump 
and his company to go through their system, and I don't think 
that that will happen to any large degree.
    Mr. Waxman. Maybe we need to clarify these issues because 
it sounds like concerns that Dr. Stump is raising are concerns 
that you think are really not valid if we draft this thing 
appropriately.
    Mr. Amdur. Absolutely. To answer the second part of that, 
this issue of archival data on people who are deceased and 
going to their estates, as a question was raised, the 
regulations specifically define a human subject to be a living 
individual. And so archival research on people who are deceased 
is outside the authority of the Federal regulations, and 
companies and investigators do not have to worry about any kind 
of regulatory burden.
    However, as you have mentioned in your response, the burden 
is extremely small because expedited review is a one page 
electronic mail application that is reviewed in real time. It 
is a minimal burden.
    Mr. Waxman. Thank you, Mr. Chairman.
    Mr. Burr. The gentleman's time has expired.
    Could I just ask Dr. Stump for a clarification for all of 
the members? I think I heard you say that if we do this wrong, 
we will adversely affect the post-approval review of 
pharmaceuticals that enter the marketplace? Did I hear that 
correctly?
    Mr. Stump. That is not exactly what I intended if that is 
how it came across. I think that we will continue to do what we 
need to do to monitor what our products are doing post-
approval.
    Mr. Burr. Will it alter your access and ability to do that?
    Mr. Stump. We will figure out a way to do it. What it will 
alter is our ability to maintain those early stage products 
that are a higher risk who must be resourced from the same pool 
that have much longer term benefits to the general public 
health. We will be missing on the treatments for stroke and 
heart attack and cancer that are in our pipeline now at an 
early stage, but would be therapies 5 to 10 years from now.
    Mr. Burr. The Chair would recognize the ranking member, Mr. 
Brown.
    Mr. Brown. Thank you, Mr. Chairman. First of all, Mr. 
Krinsky, thank you for joining us. I don't have a question for 
you, one more statement, but your comments about family, 
friends, designated care givers, making sure they could pick up 
medication at Ritzman or any other pharmacy is especially 
important. I think that any legislation that we draft will make 
sure that is protected.
    Mr. Latanich, your comments I appreciate on the disease-
management programs. Again, any legislation that we come up 
with as it goes through this process we will make sure that 
this actually has the authority to allow that. I think that is 
especially important.
    Ms. Meyers, a question for you, if I could. The patients 
that you represent very clearly had the most to gain from 
medical research, yet you say they support the toughest form of 
Federal medical records privacy legislation because of the 
nature of disorders, the consequent difficulty of attracting 
research dollars to them.
    It seems you, perhaps among all of the witnesses, would 
seem to be the most interested in making sure there were no 
disincentives erected by us or anybody, disincentives to do the 
kind of research that many people need. Expand, if you would, 
on understanding that, on making sure that strong patient--
explain how strong patient protections are especially necessary 
to cultivate and protect a robust research environment, if you 
will.
    Ms. Meyers. Research under the common rule gives consumers 
much more protection than they get when they go to their 
private doctor's office. The federally funded research and 
research leading to an FDA approval for a drug give privacy 
guarantees. When you sign an informed consent document, it 
tells you who is going to have access to your medical records, 
it will be the FDA, it will be the drug company, et cetera. It 
gives you a guarantee that the university or the hospital will, 
in some way, keep your record confidential and if papers are 
published, your name will not be identifiable.
    And so you have wonderful guarantees that don't exist 
outside of the medical research arena where they are doing 
clinical trials on something. There are specific areas in 
private research that it doesn't cover. For example, in vitro 
fertilization is not covered by any Federal regulation and 
organ transplantation. So there are a number of areas where it 
should apply.
    What we are saying to Congress basically is that consumers 
who aren't in research want the same protections that subjects 
get when they go into research. They want the benefit of 
signing an informed consent document that will tell them who 
has access to their medical record.
    And if they want to refuse, they can refuse to sign it and 
refuse to be a subject in that trial.
    Mr. Brown. Dr. Amdur, one of the concerns raised today 
from--let me just--background reading on this from panelists 
talking today is that anything that creates any administrative 
burden may delay or inhibit the conduct of research. Run 
through for us how much work is involved in getting IRB 
approval for medical records research?
    Mr. Amdur. Okay. First, if I could just as background 
address something that I see as a systemic issue in all of 
these questions or many of these discussions, which is the 
issue of do we have a large body of privately funded research 
currently that is going on outside the Federal regulations? 
Meaning, that if you pass legislation that requires these 
administrative issues that you are asking about, will that 
create a change compared to what is going on now.
    The answer is there won't be a big change because medical 
research in this country, by and large today, is being done for 
FDA application or at institutions that have already committed 
in writing to conducting research regardless of funding source 
according to Federal regulations. So enacting legislation for 
medical records privacy in general may very well change a lot 
of things compared to how they are done now, but for research--
for the most part research is being done with medical records 
or otherwise according to the Federal regulations. So there 
wouldn't be a big increase in burden compared to what it is 
now.
    What is the burden now? To get to your specific question. 
The burden according to Federal regulations, if you will, is 
stratified by risk, the potential risk to the subjects. If 
there is no more than minimal risk and the data is already 
existing, it has been collected for other reasons and there are 
no identifiers, it doesn't even have to go through the IRB 
system.
    However, most research that we are discussing with medical 
records and that we see in this country has identifiers. And 
the regulations say that if you can put protections in place, 
encryptions, that kind of thing, locked file boxes that 
decrease the risk of a problem from a breach in confidentiality 
to no more than minimal risk from this study, then it could be 
dealt with by expedited review.
    It is a minimal administrative burden for an investigator 
to obtain expedited approval for their research. At our 
institution it is a one page application and can be handled by 
electronic mail. It is reviewed by one member of the IRB or a 
small subcommittee rather than a full committee meeting. So it 
is done real time. You have a study. You call on the phone. You 
put a paragraph together, send it in. The next day you have 
approval. So it is a very low burden thing.
    Mr. Brown. Thank you. Let me shift, Ms. Visco, to you. You 
talked a lot about public and private, privately--publicly and 
privately funded research and your assertion that research 
should be, whether it is public or private, be held to the same 
standards for ensuring protection of patient confidentiality.
    Do women who participate in breast cancer clinical trials, 
are they generally aware of the different standards for public 
and privately funded?
    Is that even an issue that is raised in their mind?
    Ms. Visco. No, I don't think so as all. It is one of the 
things that we are trying to educate our constituency about, 
but it is not something that an individual patient who walks 
into her doctor's office and her doctor is knowledgeable enough 
to talk to her about clinical trials. No, I don't think that 
the question is ever asked.
    Mr. Brown. The physician would be unlikely to raise it, and 
the patient would be equally unlikely to inquire whether it is 
public or private?
    Ms. Visco. Yes, that is absolutely true. I think the system 
that we are talking about putting into place is not expanding 
the existing IRB system. There are many problems with the IRB 
system that we are all aware of and there are many people 
working on correcting those.
    What we would like to see is an IRB-type system so that we 
don't have to--we are not asking that the Minnesota law become 
Federal legislation. We are asking for an oversight, a 
threshold that everyone has to walk through to determine 
whether face-to-face informed consent is appropriate in each 
instance.
    That is what we are asking for, that threshold. We are not 
saying that you need to have that informed consent on a one-on-
one basis in every instance.
    Mr. Brown. Okay. Thank you.
    Thank you, Mr. Chairman.
    Mr. Burr. Dr. Amdur, let me come back to you because I need 
a clarification. Under the current law, you are not required to 
get consent for deceased records, correct?
    Mr. Amdur. Correct, although it is not a law.
    Mr. Burr. Per regulations, excuse me. There are proposals 
out there to expand that authority to include the need to get 
consent for those archival records.
    Would that present a problem if that were proposed and 
adopted?
    Mr. Amdur. Yes, I believe that it would. Let me say that 
there are certain very select situations where doing research 
on a deceased person's information has direct implications and 
is linked in an intimate way to living people, such as very 
specific genetic research or sexually transmitted disease 
research.
    I have never seen one of these proposals, but the point is 
I could imagine a situation where we could say that the 
research regulations indeed apply even though the subject is 
archival information, meaning specimens, for example, of dead 
people, because the very unusual nature of it directly links it 
to a living person with implications with identifying 
information.
    That is a theoretical problem. I just want to record that 
issue. But for the types of research that are going on today, 
the answer is that the current regulations do not cover them, 
and I think that it would be an unnecessary burden and an 
expansion of regulatory authority to a lot of different areas 
that really don't need that type of protection.
    Mr. Burr. I hope all of you realize the difficulty that I 
think most of the members are having at distinguishing a lot of 
different proposals that are out there and the technical nature 
and all of a sudden you cross the line and it does cause a 
problem, stay on this side of the line and it doesn't cause a 
problem, understanding what different recommendations are being 
made for person-to-person approval and that type of thing.
    I want to come back to you, Dr. Stump. I want to go back to 
the question that I asked you, and I will ask it in a different 
way. If we did the wrong thing, could this committee possibly 
have Sidney Wolf in here telling us because we wrote it this 
way, drug companies and possibly the FDA and the post-approval 
review that goes on, that we limited the amount of information 
that you could accumulate on the effects of a drug that had 
just been approved and that was adverse to the health----
    Mr. Stump. What Mr. Wolf regularly refers to is detecting 
these previously unknown types of adverse events beyond the 
life of approval. When this happens, it is the rare event. That 
doesn't mean that it is not a severe event, it is just rather a 
event. Your chance of detecting that is directly related to the 
amount of information you can recover and analyze and the time 
with which you can do it.
    Anything that delays that time or constrains your ability 
to expand that data base will delay your ability to detect 
their----
    Mr. Burr. There are things that we could do that would, in 
fact, hurt the availability----
    Mr. Stump. Yes. The process needs to be simple, and it 
needs to be uniform.
    Mr. Brown. Will the gentleman yield?
    Mr. Burr. I would be happy to.
    Mr. Brown. There is information on the other end. There is 
something on the other end we could do which would cause 
information to be disseminated that violated a patient's rights 
that might cost her a job or cost him health insurance.
    So we obviously have to walk a pretty fine line; correct?
    Mr. Stump. We fully agree. There has to be accountability 
and those who handle this information, ourselves included, need 
to be held accountable through existing law. We take that very 
seriously.
    What we are asking though is find a way to do that to 
protect us. All of us are patients, protect us now, but not at 
the needless expense of real potential long-term benefits.
    Mr. Burr. I think Dr. Hamburg covered that as well with the 
need for there to be uniformity in what we do.
    The Chair would take this opportunity to thank all 
witnesses and also to this panel of so many, that the lack of 
member participation is not an indication of lack of interest 
of this issue or the understanding of the seriousness of this 
issue.
    It is more an indication of the schedule today and some 
significant mark ups that are taking place in this building to 
the significance that members on both sides of the aisle are 
not able to go from the first floor to the third floor in fear 
of the vote process that may be going on.
    But I am sure that all members will take full opportunity 
to read your statements, to read the questions and the answers, 
and at this time I would recess the second panel and call up 
the third panel.
    This panel is going to challenge me with the pronunciation 
of these names so I would take this opportunity to--Mr. 
O'Keefe, I can do yours, but I apologize to the other ones 
right up front. Dr. Zubeldia? Am I close?
    Mr. Zubeldia. Yes.
    Mr. Burr. And Ms. Koyanagi?
    Ms. Koyanagi. Yes.
    Mr. Burr. Mr. O'Keefe and Ms. Meyer.
    The Chair would recognize the good doctor to my right.

  STATEMENTS OF KEPA ZUBELDIA, VICE PRESIDENT OF TECHNOLOGY, 
  ENVOY CORPORATION; CHRIS KOYANAGI, DIRECTOR OF LEGISLATIVE 
 POLICY, JUDGE BAZELON CENTER FOR MENTAL HEALTH LAW, ON BEHALF 
    OF CONSUMER COALITION FOR HEALTH PRIVACY; MARK O'KEEFE, 
 COMMISSIONER OF INSURANCE, DEPARTMENT OF INSURANCE, STATE OF 
MONTANA; AND ROBERTA MEYER, SENIOR COUNSEL, AMERICAN COUNCIL OF 
                         LIFE INSURANCE

    Mr. Zubeldia. Thank you, Mr. Chairman. My name is Kepa 
Zubeldia. I am a physician, and I am here today representing 
the Association for Electronic Health Care Transactions, 
AFEHCT.
    I am also vice president of technology for Envoy 
Corporation. Envoy is the largest medical transactions 
clearinghouse in the country. We process an average of 3.5 
million transactions per day and provide connectivity between 
270,000 providers and 800 payers.
    We have been processing administrative transactions for 17 
years; 62 percent of all health care claims are processed 
electronically today. The AFEHCT member companies take the 
issue of privacy very seriously. Since 1982 we have processed 
over 15 billion transactions. No AFEHCT member has experienced 
an instance in which protected health information was disclosed 
without authorization or in which an individual was harmed.
    My written testimony addresses several issues of importance 
to your committee. First, the need for preemption to establish 
a single national law protecting patient privacy and 
facilitating the privacy of administrative records.
    Second, the desirability of a consolidated patient consent 
for the transfer of personal and identifiable information.
    Third, the need to support industry-driven security 
measures such as the standards adopted by the Secretary of HHS 
under HIPAA.
    And fourth, the encouragement of the use of nonidentified 
patient information for medical research. I would center my 
remarks on two of these four issues.
    First, the strong preemption of State law. The member 
companies of AFEHCT agree that protected health information 
should be granted the best protection necessary to keep the 
information confidential. Most health plans are administered at 
the national level. In order to accommodate the flow of 
information, it is imperative that national rules govern.
    Subjecting administrative health care information to a 
multitude of State-specific requirements would cause harm to 
the processing infrastructure with immediate and significantly 
negative consequences for providers and payers alike. Health 
care is provided locally but administered nationally. We 
believe that preemption in this field will facilitate patient 
care, health care operations, and health research enormously. 
Individual patient's rights should not be based on an accident 
of geography.
    My second topic is research. Legislation should encourage 
the creation of nonidentified data in order to accommodate the 
analysis of hundreds of millions of bytes of electronic data 
that can be gathered through various systems of collection each 
year. It is well to distinguish this potential for creating 
non-identified data on the electronic arena from the use of 
private patient records in clinical research.
    In the majority of the circumstances, certainly consent 
should be obtained for the use of identifying private health 
information. We have heard much testimony regarding the proper 
times for an exception to the consent rules in dealing with 
identifiable protected health information in research 
situations. This is a different case, however, from the growing 
ability to create nonidentified information from electronic 
records of health transactions and employ this unanimously 
aggregated data in health research.
    We believe that this approach provides both patient privacy 
and a powerful research tool to help reduce the cost of health 
care and should be favored by legislation. I wish to thank the 
chairman and members of the committee for the opportunity to 
speak to you today on behalf of AFEHCT, and I look forward to 
working together with you and your staff on these very 
important issues.
    [The prepared statement of Kepa Zubeldia follows:]
   Prepared Statement of Kepa Zubeldia, Vice Chair, Association for 
                  Electronic Health Care Transactions
    Mr. Chairman, members of the Committee, Ladies and Gentlemen, good 
morning.
    My name is Kepa Zubeldia, I am here today speaking on behalf of the 
Association For Electronic Health Care Transactions (AFEHCT). I 
currently serve as Vice Chair of AFEHCT, which is a trade association 
whose member companies are actively involved in the electronic 
transmission of health care financial and administrative transactions. 
These transactions include claims and patient encounter information, 
electronic remittance advice, eligibility, referrals, and related 
transactions listed in section 1173(a)(2) of the Social Security Act as 
amended by the ``Administrative Simplification'' provisions of the 
Health Insurance Portability and Accountability Act (HIPAA). An AFEHCT 
membership list is in Attachment A of my written testimony.
    I am also Vice President of Technology for ENVOY Corporation, which 
is an AFEHCT member. ENVOY is a healthcare administrative transactions 
clearinghouse. We receive the administrative transactions specified 
under HIPAA, process them to ensure they have complete and correct 
information, and forward them to the health plan for payment. ENVOY is 
the largest medical transactions clearinghouse in the country, 
processing an average of 3.5 million transactions per day and providing 
connectivity between 270,000 providers and 800 payers. We have been 
processing administrative transactions for 17 years, with an 
accumulated experience totaling billions of transactions. Our corporate 
office is in Nashville, Tennessee, with sales offices in 14 states, 
data processing centers in 6 states, and a roster of about 1,000 
employees. We have recently become part of Quintiles Transnational 
Corp., a diversified contract health organization based in Research 
Triangle Park, North Carolina, with over 17,000 employees in 31 
countries.
Clearinghouses
    ENVOY and other clearinghouse members of AFEHCT receive electronic 
transactions from providers, payers and vendors. The transactions are 
processed to ensure they are complete and accurate, and are then 
forwarded to the appropriate insurer or health plan. By processing 
these transactions electronically, rather than in paper format, a 
managed care referral or authorization, or a determination of 
eligibility and benefits can be obtained on a real-time basis, allowing 
patients to receive needed health care quickly.
    Electronic claims represent a significant portion of the electronic 
transactions processed by ENVOY and other such clearinghouses. The 
charts in Attachment B of my written testimony show the growth of 
electronic claims. Sixty two percent (62%) of all healthcare claims are 
processed electronically with over 80% of hospital and pharmacy claims 
being processed electronically. Out of last year's total of 4.4 billion 
claims, 2.7 billion were processed electronically by ENVOY and other 
clearinghouses. Members of AFEHCT are intimately involved in 
administrative simplification that is currently saving the country 
billions of dollars in health care costs.
Support for privacy
    The AFEHCT member companies take the issue of privacy very 
seriously. Since 1982, we have processed over 15 billion transactions. 
We actively protect the confidentiality of the protected health 
information that we process. No AFEHCT member has experienced an 
instance in which protected health information was disclosed without 
authorization or in which an individual was harmed. Indeed, we support 
a strong federal statute addressing privacy and confidentiality, and 
are actively involved in the privacy and confidentiality issues being 
addressed by your Committee.
    In that spirit I would like to speak on several issues of 
importance to your Committee: the need for preemption to establish a 
single national law protecting patient privacy and facilitating the 
privacy of administrative records; the desirability of a consolidated 
patient consent for the transfer of personally identifiable 
information; the need to support industry driven security measures such 
as the standards adopted by the Secretary of HHS under HIPAA; and the 
encouragement of the use of non-identified patient information for 
medical research.
Strong preemption of state law
    The member companies of AFEHCT agree that protected health 
information should be granted the best protection necessary to keep the 
information confidential. Most health plans are administered at the 
national level by a network of payors, third party administrators, 
administrative services organizations, peer review systems, foundations 
for quality review, and actuarial services. In order to accommodate the 
flow of information over these national electronic systems, it is 
imperative that national rules govern. It would be a daunting burden 
for the current payment system if local laws were able to create 
differing regulations for the processing and analysis of electronic 
records. Subjecting administrative healthcare information to a 
multitude of state specific requirements would cause harm to the 
processing infrastructure with immediate and significantly negative 
consequences for providers and payors alike.
    The member companies of AFEHCT believe that private health 
information should be granted the best protection possible. We strongly 
support the desires of the states to protect medical record 
information, which we believe can best be accomplished through a 
comprehensive federal statute that sets out clear unified guidelines 
for the handling of the millions of electronic claims that cross all 
state lines.
    It is a favorite truism that health care is provided locally but 
administered nationally. The system receives its funding on a national 
basis and record keeping of the providers and payors is accomplished on 
a national basis. We believe that preemption in this field will 
facilitate patient care, health care operations and health research 
enormously. Individual patient's rights should not be based on an 
accident of geography.
Consolidated patient authorization
    To operate the intricate electronic system described above, it 
would be impossible for clearinghouses to obtain consent from the 
patient for each transfer of personally identifiable information along 
the communication channel between the provider and the health plan. 
Therefore, AFEHCT urges that legislation endorse a consolidated consent 
provision to facilitate this process. The general authorization granted 
by the patient at the point of health plan enrollment should stand as 
this consolidated consent. It provides clear notice to the patients of 
the handling of their claims information, as well a unitary guideline 
for all handlers of electronic data expressing personally identifiable 
health information.
Preserve administrative simplification provisions of HIPAA
    We need to develop and employ from existing technologies the very 
best practices in encoding data so as to make sure patient privacy is 
strictly protected. Legislation before the Senate HELP Committee is 
takes steps in this direction. We believe that the health care industry 
should be given great incentives to adopt the highest standards for 
encoding electronic data and to use non-identifiable patient 
information for research. We support the Secretary of Health and Human 
Services in her effort to adopt industry driven standards as the 
standards adopted under HIPAA, rather than creating new standards.
Research
    We agree with the stated purpose of the bipartisan legislation 
being considered this week in the Senate Committee on Health Education, 
Labor and Pensions (HELP) to encourage the use of non-identified health 
information, both in its creation by a recipient who is authorized to 
receive it and in its broad application by health researchers. This is 
a sensible way to increase the ability of researchers to create ever 
more powerful analytical studies while preserving patient privacy 
rights. The increased use of non-identifiable health information is a 
particularly attractive approach in the field of healthcare 
transactions because the immediate ability to encode information 
permits rapid access on an anonymous basis for health researchers. 
Therefore, legislation should encourage the creation of non-identified 
data--which does not require the further consent of the patient--in 
order to accommodate the analysis of hundreds of millions of bits of 
electronic data which can be gathered through various systems of 
collection each year.
    It is well to distinguish this potential for creating non-
identified data in the electronic arena from the use of private patient 
records in clinical research. In the majority of circumstances, 
certainly, consent should be obtained for the use of identified private 
health information. You will no doubt hear much testimony regarding the 
proper times for an exception to the consent rules in dealing with 
identifiable protected health information in research situations. That 
is a different case, however, from the growing ability to create non-
identified information from electronic records of health transactions 
and employ this anonymous aggregated data in health research. We 
believe that this approach provides both patient privacy and a powerful 
research tool to help reduce the cost of healthcare, and should be 
favored by legislation.
Conclusion
    In conclusion, in order to protect patient privacy, enhance the 
accurate and rapid administration of healthcare transactions, and to 
fulfill the aims of health research, it is important that:

 Federal standards, with state preemption, should be required 
        to keep secure and confidential all identifiable health 
        information including any administrative transactions that 
        utilize identifiable health information;
 General authorization by means of a consolidated patient 
        consent at the point of health plan enrollment should be 
        adequate for the use of protected health information for 
        purposes of treatment, payment and health care operations;
 The new legislation should not override, but support the 
        security measures adopted by the Secretary of Health and Human 
        Services implementing the Administrative Simplification of 
        HIPAA;
 Conversion from personally identifiable information into non-
        identifiable information for the purposes of health research 
        should be encouraged, while preserving the patient's privacy 
        and without specific consent.
    I wish to thank the Chairman and the Members of the Committee for 
the opportunity to speak to you today on behalf of AFEHCT. I look 
forward to working together with you and your staff on these very 
important issues.
                              ATTACHMENT A
                                 AFEHCT
          association for electronic health care transactions
Thomas J. Gilligan, Executive Director & Washington Representative; 
3513 McKinley St. NW, Washington, DC 20015-2513, Tel (202) 244-6450, 
Fax (202) 244-6570, E mail [email protected]
                               membership
    The Association For Electronic Health Care Transactions (AFEHCT) is 
a trade association, the membership of which include: health claims 
clearinghouses; health insurers; value added networks; software 
vendors; health care data processing companies; practice management 
companies; data communications systems operators; and credit card 
issuers.
    Each of these member companies is involved in the electronic 
transmission of health care financial and administrative transactions 
such as those listed in section 1173(a)(2): Health claims or equivalent 
encounter information; Health claims attachments; Enrollment and 
disenrollment in a health plan; Eligibility for a health plan; Health 
plan premium payment; First report of injury; Health claims status; and 
Referral certification and authorization.
                         afehct membership list
ANTHEM, Indianapolis, IN; BC/BS OF GEORGIA, Columbus, GA; BEACON 
PARTNERS, Hoffman Estates, IL; CARE-FULL SOLUTIONS, Cecil, PA; 
CONSULTEC, Tallahassee, FL; DIFFERENTIAL INC., Cupertino, CA; EDI-COMM, 
Woodland Hills, CA; EDS, Plano, TX; ELECTRONIC CLAIMS SERVICE INC., 
Houston, TX; EMPIRE BLUE CROSS, Syracuse, NY; ENVOY CORPORATION, 
Nashville, TN; HBO & CO, Atlanta, GA; IDX, Malvern, PA; HEALTHEON, 
Santa Clara, CA; IBM, Tampa, FL; INTEGRATED VISION SYSTEMS, Sebastion, 
FL; IVANS, Tampa, FL; JOHN DEERE HEALTH CARE INC., Moline, IL; 
MASTERCARD INTERNATIONAL, Purchase, NY; MEDAPHIS, Elgin, IL; MEDIC 
COMPUTER SYSTEMS, Raleigh, NC; MEDE AMERICA INC. Mitchell Field, NY; M 
& M COMPUTER SYSTEMS, San Antonio, TX; NATIONAL DATA CORPORATION, 
Atlanta, GA; PASSPORT HEALTH COMMUNICATIONS, Nashville, TN; PARAMORE 
CONSULTING, Louisville, KY; POINTSHARE, Seattle, WA; PRAGMATIX, 
Elmsford, NY; QUADAX, INC., Cleveland, OH; STERLING COMMERCE, Dublin, 
OH; TERBUSH & PARKER SYSTEMS, Richmond, VA; THE CENTRIS GROUP, Atlanta, 
GA; THE HEALTH INFORMATION NETWORK CONNECTION (THINC), New York, NY; 
UNISYS, Fairfax, VA; VISA INTERNATIONAL, San Francisco, CA; and 
WELLPOINT, Los Angeles, CA.
                              ATTACHMENT B

[GRAPHIC] [TIFF OMITTED] T7441.001

[GRAPHIC] [TIFF OMITTED] T7441.002

[GRAPHIC] [TIFF OMITTED] T7441.003

    Mr. Burr. Thank you, doctor.
    The Chair would recognize Ms. Koyanagi.

                   STATEMENT OF CHRIS KOYANAGI

    Ms. Koyanagi. Right, thank you, Mr. Chairman.
    I am speaking today for a coalition of consumer and patient 
groups, the consumer coalition concerned with health care 
privacy. I wanted to begin by saying that we have talked a lot 
about research this morning, but in terms of health care 
delivery, privacy is a very, very important fundamental factor.
    Some of the concerns that our group has is that, in fact, 
the quality of health care is affected if individuals are not 
assured of the privacy of the medical information. A recent 
survey in California looking at this issue found that as many 
as one in six people will engage and do engage in behaviors to 
protect themselves because they fear that their medical records 
will leak out.
    They doctor shop, they withhold information, they give part 
of the information, or they don't provide information to their 
treating professionals perhaps not understanding what some of 
the consequences of that might be. But that means that this is 
a very, very critical area and that patient confidence is very, 
very important in response to the legislation that you pass.
    I was asked today to talk specifically about the issue of 
preempting State laws. I want to say first that a strong 
Federal floor is something that we clearly endorse and urge you 
to enact. That will give patients much greater confidence with 
respect to the privacy of their information.
    On the other hand, there is a lot of reasons to continue to 
permit States to act in this area. The strong Federal floor in 
any of the bills, any of the major bills being considered in 
the House or the Senate, represent a strong Federal floor 
compared to all of the existing State laws.
    Most of the provisions in current State laws would be 
overridden by any of the bills pending in the committee. So we 
are talking about a few provisions; and, in fact, we are 
talking about not all of the States in terms of having stronger 
provisions for privacy than might be in the Federal 
legislation.
    Earlier somebody was discussing the fact that States had 
moved into this area because there is no Federal legislation. I 
think that is very true. I think that States have been forging 
new ground in a very complex arena. If there were a Federal 
statute, I think it very, very likely that you would see great 
uniformity across the country, that many States would conform 
their legislation to the Federal legislation, and they would go 
beyond it only in specific areas for specific reasons.
    For example, Vermont right now has a cancer registry. They 
want specific rules around privacy for that registry. They 
should retain the flexibility when they have a situation like 
that that is not addressed in the Federal law to have their own 
provisions to protect their own citizens. I think it is 
important to continue to negotiate these things on the State 
level.
    State legislatures do know their own local situation. They 
do balance the interests of, say, a research entity in the 
State and their citizens concerns. They can go back and amend 
legislation. As you heard this morning, the Maine legislation 
was withdrawn almost immediately when it was realized that they 
had made mistakes and gone too far. The Minnesota legislation 
has been amended once. If there are significant concerns and if 
the citizens of Minnesota think that it has gone too far, I 
assume it will be amended again.
    But many things happen very quickly, much more quickly than 
the Congress can respond. We don't know where we are going in 
this area. With the explosion of technology and access through 
the Internet, things are happening today that we never would 
have dreamed much a year ago. I think that it is very important 
because privacy is such a fundamental aspect of patient care 
and good quality of care, and it is a fundamental concern of 
Americans to have privacy in areas where they don't believe 
others should be intruding.
    I think it is very important that the States continue to 
have that kind of flexibility and to act quickly. So we would 
urge you to go ahead and pass a strong Federal floor, but to 
resist the temptation to make it a ceiling.
    Just in closing, I would point out that there are other 
industries where you have done this. The banking industry 
operates where States can go beyond the Federal statute, and 
the same is true for credit card regulations.
    So in conclusion, that is our recommendation, that you 
enact a floor but not a ceiling. Thank you.
    [The prepared statement of Chris Koyanagi follows:]
 Prepared Statement of Chris Koyanagi, Policy Director, Judge David L. 
    Bazelon Center for Mental Health Law on Behalf of The Consumer 
                      Coalition for Health Privacy
                      i. introduction and overview
    Mr. Chairman and Members of the Committee: I very much appreciate 
the opportunity to testify before you today on the preemption of state 
laws relating to medical privacy, confidentiality, and security. I am 
Chris Koyanagi, Policy Director for the Judge David L. Bazelon Center 
for Mental Health Law in Washington D.C. The Bazelon Center is a legal 
advocacy organization concerned with the rights of persons with mental 
impairments.
    I testify today on behalf of the Consumer Coalition for Health 
Privacy (CCHP), a broad coalition of consumer, disability and patient 
advocates. The mission of the Consumer Coalition for Health Privacy is 
to educate and empower healthcare consumers to have a prominent and 
informed voice on health privacy issues at the federal, state, and 
local levels. Members of the coalition are committed to the development 
and enactment of public policies and private standards that guarantee 
the confidentiality of personal health information and promote both 
access to high quality care and the continued viability of medical 
research. The Coalition is an initiative of the Health Privacy Project, 
Georgetown University Medical Center.
    As a member of the Coalition's Steering Committee, I have been 
working with my colleagues in the disability rights, consumer, and 
patient advocacy communities to make the case that protecting privacy 
must be a ``first principle'' of enhancing the quality of health care, 
of fostering research and public health initiatives, and of broadening 
access to critical health care services. We believe that without trust 
that the personal sensitive information that they share with their 
doctors will be handled with some degree of confidentiality, patients 
will not fully participate in their own health care.
    A survey released by the California Health Care Foundation in 
January 1999 found that ``public distrust of private and government 
health insurers to keep personal information confidential is pervasive. 
No more than about a third of U.S. adults say they trust health plans 
(35%) and government programs like Medicare (33%) to maintain 
confidentiality all or most of the time.'' 1 The 
consequences of such distrust--real or perceived--are significant. The 
Foundation's survey identified that:
---------------------------------------------------------------------------
    \1\ The poll was conducted for the Foundation by Princeton Survey 
Research Associates. The survey topline is available at http://
www.chcf.org.

 One in every five people believe their health information has 
        been used or disclosed inappropriately.
 One of six people engage in some form of ``privacy-
        protective'' behavior when they seek, receive or pay for health 
        care in this country. Such behavior includes paying out of 
        pocket for care; intentionally seeing multiple providers to 
        avoid the creation of a consolidated record; giving inaccurate 
        or incomplete information on a medical history; asking a doctor 
        to not write down the health problem or record a less serious 
        or embarrassing condition; and even not seeking care to avoid 
        disclosure to an employer.
    The consequences of people not fully participating in their own 
care are quite troubling, for individual patients as well as the larger 
community. For instance, incomplete or inaccurate information can 
hamper a doctor's ability to accurately diagnose and treat a patient, 
inadvertently placing a person at risk for undetected and untreated 
conditions. In turn, if doctors are receiving incomplete, inaccurate 
information, the data they disclose for payment, research, public 
health reporting, and outcome analysis will be unreliable. Ultimately, 
information that lacks integrity at the front end will lack integrity 
as it moves through the health care system. Thus, protecting patient 
privacy is integral both to improving individual care, and to the 
success of public health initiatives and quality of care.
    Members of the Consumer Coalition are keenly aware of the 
importance of good, solid data for research. As health care patients 
and providers, our members stand to benefit the most from advances in 
research, public health initiatives, and improvements in quality of 
care. People with disabilities, in particular, are frequent users of 
health care services, and are also deeply invested in ensuring that the 
health care system operates efficiently and effectively. As such, the 
Consumer Coalition for Health Privacy is committed to ensuring that 
protecting privacy and promoting health are values that must go hand-
in-hand.
    Towards this end, the Consumer Coalition has established a set of 
health privacy principles to guide our efforts (see attached principles 
and sign-on). We believe that public policy in this area should 
guarantee individuals: a right to see their own medical records; the 
ability to exercise voluntary, informed choices about the use of their 
health information; a court order or warrant requirement for law 
enforcement access to medical records; and a comprehensive set of 
enforcement mechanisms.
    We hope that Congress will meet the deadline established in the 
Health Insurance Portability and Accountability Act (HIPAA) to pass 
comprehensive health privacy legislation by August 1999, and we also 
hope that the new law will go a long way in helping us to meet these 
public policy goals set forth in our principles. However, in many ways, 
one of the most critical issues for the Coalition is preemption. The 
Coalition arrived at a firm consensus that ``federal legislation should 
provide a floor for the protection of individual privacy rights, not a 
ceiling.''
    At issue here is how a federal health privacy law will relate to 
existing and future stronger state laws. Will Congress choose to 
establish a federal ``floor'' above which states would be free to enact 
greater protections? Or will the federal law fully preempt state laws 
by creating a ``ceiling,'' thus eliminating both weaker and stronger 
state laws and preventing the passage of future stronger state laws?
    The two comprehensive health privacy bills pending in House--The 
Health Information Privacy Act, co-sponsored by Reps. Waxman(D-CA), 
Condit (D-CA), and Markey (D- MA), and H.R.1057, The Medical 
Information Privacy and Security Act, introduced by Rep. Markey (D-
MA)--would both set a federal preemptive floor, eliminating weaker 
state laws, and allowing states to continue to enact heightened 
protections where necessary to guard against public health threats.
    Both bills mirror the Coalition's principle on preemption. However, 
a number of other proposals do include some form of preemption of 
stronger state laws. Most notably, a provision in the Patient 
Protection Act of 1999 (H.R. 448) includes very broad preemption 
language. Particularly troubling is that it would preempt stronger 
state laws relating to authorization for ``health care operations'' 
without replacing them with a meaningful set of federal protections.
    In addition, a bill scheduled to be marked-up in the Senate HELP 
Committee would preempt certain stronger state laws in the future, 
grand-fathering in existing stronger protections. Again, we strongly 
oppose federal preemption of state laws that provide greater consumer 
protections--including heightened safeguards for certain medical 
conditions and circumstances. Our testimony today is intended to 
demonstrate that the federal law should establish a floor of 
protections, not a ceiling. We believe that a fully-preemptive federal 
law in this area is unprecedented, unwise, and may be a danger to 
public health.
    Our testimony highlights specific state laws at risk of being 
preempted under a total preemption approach. It should be emphasized, 
however, that preemption is a moving target. Until there is a consensus 
bill, it will be impossible to determine the full impact of preemption.
    The Consumer Coalition for Health Privacy opposes the preemption of 
stronger state laws for the reasons outlined in this testimony.
                      ii. the need for uniformity
    Congress will create a high level of uniformity by preempting 
weaker state laws. Passage of proposed federal health privacy bills 
will result in substantially greater uniformity, given that all the 
proposals preempt weaker state laws. Simply by preempting these weaker 
state laws, Congress will eliminate the vast majority of state laws and 
create a high degree of uniformity.
    Preliminary research on state health privacy laws conducted by the 
Health Privacy Project shows that most state laws governing the broad 
areas sought to be regulated by the federal bills--patient access to 
records, notice of information practices, patient authorization for 
disclosure, remedies for violation of the law--would fall under the 
floor laid down by the House proposals.
    Consider the state of affairs today: health care entities that do a 
great deal of business across state lines are currently required to 
comply with fifty different--and often conflicting--state laws. At the 
same time, the vast majority of these laws are weaker than the 
standards proposed in most the pending bills. Therefore, far from 
adding additional burdens, the federal law will provide a substantial 
degree of uniformity simply by preempting weaker state laws. A federal 
floor--if it is set at an appropriate level--will actually standardize 
the vast majority of health privacy and security practices.
    Moreover, there is no evidence that the interplay between state and 
federal laws in these areas significantly interferes with interstate 
commerce. The Right to Financial Privacy Act, the Fair Credit Reporting 
Act, and the Electronic Communications Privacy Act regulate the 
banking, credit, and communications industries, all of which conduct 
extensive business across state lines. All of these laws, however, 
leave states free to enact more protective laws as they see fit.
         iii. precedent in federal civil rights and privacy law
    No precedent exists in federal privacy or civil rights law for 
preempting stronger state laws. In the past, when Congress has 
considered preemption, it has recognized the importance of allowing 
states to address issues unique to the states and their citizens. 
Historically, the federal government establishes a ``floor'' of 
protections, leaving the states free to provide greater protections.
    The proponents of total preemption express fear that states will 
pass laws that are ``too privacy protective,'' thereby interfering with 
important health-related activities. But the facts are reassuring: 
states have been quick to respond to the concerns of health care plans, 
researchers and others. Where a ``privacy protection'' was deemed to 
interfere with vital health care functions, states have quickly amended 
their laws. Minnesota, for example, amended a law relating to 
researcher access to medical records after hearing objections from 
health care organizations in the state. More recently, Maine postponed 
implementation of a health privacy law after objections on the part of 
press and family members.
    Many states are considering pending health privacy bills, in an 
attempt to fill the vacuum created by the existing gap in federal 
health privacy law. However, in the past, following the passage of 
comprehensive federal legislation, the momentum behind such state 
initiatives drops significantly. After passage, state activity is 
likely to reflect the standards proposed in the federal law, thereby 
increasing uniformity.
                iv. state laws more detailed and nuanced
    State health privacy laws address a level of detail not found in 
any of the federal proposals. For the most part, state health privacy 
laws are organized by entity, and the statutes include requirements and 
specifications explicitly related to that entity. There may be separate 
statutes governing many different entities: employers, nursing homes, 
Health Maintenance Organizations, health and life insurers, 
psychiatrists, chiropractors, hospitals and insurers.
    In addition, there are numerous issues traditionally acted on at 
the state level that include privacy provisions. These include anti-
discrimination laws, commitment proceedings for the mentally ill, 
adoption, foster care, mental health treatment, reproductive health, 
parental involvement, partner notification, and abuse and neglect.
    In comparison, the federal proposals have, on the whole, treated 
all health care organizations in a similar fashion. The federal 
proposals have also established--with a broad brush--general rules 
about the use or disclosure of health information. These rules will 
address the vast majority of circumstances in which health information 
is used and disclosed, but they do not approach the level of detail 
that has been developed at the state level over many years.

 California law provides patients a right to see and copy their 
        own medical record, as do all the Senate proposals. The state 
        law, however, also explicitly provides that access can not be 
        denied because the individual owes money for past 
        services.2
---------------------------------------------------------------------------
    \2\ California Health and Safety Code, Section 123100 et seq.
---------------------------------------------------------------------------
 Maryland has an intricate statutory system for dealing with 
        mental health records. The disclosure of mental health records 
        is governed by the state's Confidentiality of Medical Records 
        Act. One provision stipulates that mental health records may 
        not be disclosed between health care providers that participate 
        in an approved plan of a core service agency 3 for 
        the delivery of mental health services unless a patient has 
        received a current list of the participating providers and has 
        signed a written agreement to participate in the client 
        information system developed by the agency.4
---------------------------------------------------------------------------
    \3\ A ``core service agency'' is an organization approved by the 
Mental Hygiene Administration to manage mental health resources and 
services in a designated area or to a designated target population. Md. 
Health-General Code Ann. Sec. 4-307(a)(3) (1999).
    \4\ Maryland Id. At Sec. 4-307 (e).
---------------------------------------------------------------------------
 Vermont requires the Health Commissioner to maintain a cancer 
        registry and to keep all information confidential, except in 
        limited circumstances.5 Most of the Senate bills 
        would allow for greater disclosure of the information 
        maintained in the registry than is currently permitted under 
        Vermont law. Many states have established similar cancer 
        registries by statute.
---------------------------------------------------------------------------
    \5\ 18 V.S.A. Sections 154 et seq.
---------------------------------------------------------------------------
    Such a level of detail is not even contemplated by any of the 
federal proposals, and regulating these spheres is clearly not the 
intent of any of the federal proposals. By fully preempting state law, 
Congress would likely preempt important state laws without providing an 
equal level of guidance, or necessary protections.
       v. value of ``heightened protections'' at the state level
    Most of the pending proposals treat health information the same. 
Unlike the state laws, the proposals do not establish specific rules 
for certain kinds of information. However, the Waxman-Condit-Markey 
bill does allow for heightened protections for especially sensitive 
information.
    The result is that even the strongest federal proposals have not 
set the bar as high as some state laws. If any of the current federal 
health privacy proposals were to pass with a preemptive federal ceiling 
included, the citizens of some states would actually forfeit the 
protections they are now guaranteed under their state laws.

 California has enacted a number of HIV/AIDS specific 
        confidentiality laws, covering testing, reporting, partner 
        notification, and discovery. The results of an HIV/AIDS test 
        may not be disclosed in a form that identifies an individual, 
        without patient consent for each disclosure, except in very 
        limited circumstances. For instance, a physician or local 
        health officer may disclose HIV test results to the sex or 
        needle-sharing partner of the patient without consent, but only 
        after the patient refused or was unable to make the 
        notification. The law also requires patient authorization in 
        more circumstances than provided for under the Senate 
        proposals. In California, an individual's health care provider 
        may not disclose to another provider or health plan without 
        written authorization, unless to a provider for the direct 
        purposes of diagnosis, care, or treatment of the 
        individual.6
---------------------------------------------------------------------------
    \6\ See California Health and Safety Code, Section 120975 et seq; 
121015 et seq, Insurance Code, Section 799 et seq.
---------------------------------------------------------------------------
 In Georgia, heightened protection is given to information 
        derived from genetic testing. This information is considered to 
        be strictly confidential and may be released only to the 
        individual tested and to persons specifically authorized by 
        such individual to receive the information. Any insurer that 
        possesses information derived from genetic testing may not 
        release the information to any third party without the explicit 
        written consent of the individual tested.7
---------------------------------------------------------------------------
    \7\ Ga. St. 33-54-3.
---------------------------------------------------------------------------
 New York has a comprehensive set of statutes providing 
        additional protection of the confidentiality of HIV related 
        information. New York generally prohibits the disclosure of HIV 
        related information without the patient's consent. Accordingly, 
        a patient's consent to the release of HIV related information 
        specifically limits to whom disclosure may be made, the purpose 
        for such disclosure and the time period during which the 
        release is effective. Unlike the federal proposals, a general 
        authorization for the release of medical information does not 
        encompass the disclosure of HIV related information unless it 
        specifically states so.8 In enacting these statutes, 
        the New York legislature expressly stated that it intended to 
        ``encourage the expansion of voluntary confidential testing for 
        . . . HIV so that individuals may come forward, learn their 
        health status, make decisions regarding the appropriate 
        treatment, and change the behavior that puts them and others at 
        risk of infection.'' 9
---------------------------------------------------------------------------
    \8\ NYCLS Public Health Law Sec.2780 et seq.
    \9\ NY Laws 1988, ch 584, Sec. 1.
---------------------------------------------------------------------------
 Tennessee law stipulates that the State Department of Health 
        records on STDs may not be released even under subpoena, court 
        order, etc. unless the court makes a specific finding 
        concerning each of five criteria including: weighing probative 
        value of the evidence against the individual's and public's 
        interest in maintaining its confidentiality; and determining 
        that the evidence is necessary to avoid substantial injustice 
        to the party seeking it and either that the disclosure will not 
        significantly harm the person whose records are at issue or 
        that it would be substantially unfair as between the requesting 
        party and the patient not to require disclosure.10
---------------------------------------------------------------------------
    \10\ Tenn. C.A. Sec. 68-10-113 6(A).
---------------------------------------------------------------------------
    Many states have laws similar to the ones cited above for certain 
information such as mental health, genetic tests, and HIV/AIDS. Again, 
none of the federal proposals reach these levels of protection. In some 
circumstances, states enacted these heightened protections to respond 
to critical public health issues. Wiping out such laws could create a 
public health crisis, leaving people vulnerable by undoing protections 
that encourage people to seek testing, counseling, and treatment for a 
number of conditions.
               vi. the danger of unintended consequences
    Laws relating to the confidentiality of medical information are 
found throughout state codes. In California, for example, citizens have 
a right to privacy in the State Constitution. Major statutes are found 
in the Civil Code, the Insurance Code, the Health and Safety Code, the 
Penal Code, and the Welfare and Institutions Code. The laws cover a 
wide range of activities including treatment, payment, insurance-
related activities, peer review, research, and prescribing drugs. Most 
importantly, states have developed bodies of law around discreet 
issues--that touch on the use of health information--such as anti-
discrimination, worker's compensation, parental involvement, adoption, 
HIV/AIDS partner notification, and access by law enforcement, and even 
real estate.
    It is not possible to predict in advance the full impact of such 
broad preemption on state law and consumer protections. The ``relating 
to'' language used to preempt state law in some federal proposals casts 
a wide net in terms of the state laws that would be eliminated 
completely. The preemption of all state law ``related to'' the federal 
law could have significant unintended consequences.

 At risk of being preempted is a California law that prohibits 
        insurers from discriminating on the basis of a person's 
        ``genetic characteristics that may, under some circumstances be 
        associated with disability in that person or that person's 
        offspring.'' The law includes a provision on authorization 
        requirements for the disclosure of genetic information, which 
        may open up the entire statute to preemption.11
---------------------------------------------------------------------------
    \11\ Insurance Code, Section 10140 et seq.
---------------------------------------------------------------------------
    A larger issue is at hand. Many state health privacy laws were 
enacted specifically to address public health concerns. Mental health 
and HIV/AIDS confidentiality laws, for example, were enacted 
specifically to encourage people to seek appropriate care, without 
fearing harmful reprisals.
    The states are best equipped to respond to many new, unique, and 
inherently local challenges in health care and public health. It is 
impossible to predict what issues will require prompt attention in the 
future, but a preemptive federal law would prevent states from 
responding at all.
                            vii. conclusion
    Most importantly, Congress will create a high level of uniformity 
simply by preempting weaker state law with a strong federal law. This 
is true under most of the Congressional health privacy proposals' the 
research of state health privacy laws bears this out. Thus, there is no 
overriding justification to totally preempt state law in order to 
achieve substantial uniformity.
    The interests of health care consumers and providers will be best 
served by Congress establishing a federal floor that leaves the states 
free to enact greater protections, as Congress has done for every other 
privacy and civil rights laws, regardless of how complex or interstate 
the area to be regulated. Such a solution would allow the states to 
address the specific--and unique--needs of their citizens while 
providing a great deal of national uniformity regarding the use and 
disclosure of health information. A federal ceiling, on the other hand, 
could have profound negative consequences for consumers and health care 
providers by inadvertently eliminating important protections, or 
restricting the ability of states to respond to the privacy needs of 
their residents.
    Passage of a federal health privacy law will necessarily involve 
compromises. The stakeholders are diverse, as are the states and their 
constituencies. It is appropriate that the federal law would reflect 
these compromises, but it raises a troubling possibility: that the 
federal law will set a relatively low standard and preempt state law. 
This is the worst-case scenario. The result would be to eliminate 
existing state protections without replacing them with comparable 
federal standards, locking the states out of taking steps to address 
local health needs.
    We urge this Committee, and the rest of the Congress, to resist the 
proponents of total preemption. Such a radical approach would undo 
legal protections put in place by states responding to pressing public 
health concerns.
    In order to encourage people to seek testing, counseling, 
treatment, and other health care services, many states have established 
heightened protections for people with mental illness, HIV/AIDS, drug 
and alcohol dependence, and other circumstances where people face 
stigma, discrimination, and embarrassment. If these safeguards were 
wiped off the books, as they would be under H.R. 448, the most 
vulnerable people in our communities would immediately be put at risk 
of exposure, and faced with the cruel choice of either protecting their 
privacy or seeking health care. Such a result, we believe, would 
substantially undermine state--and national--health initiatives.
    Rather than undermining our nation's existing system of checks and 
balances, we should continue the tried and true practice of allowing 
states to decide when it is appropriate to provide consumer protections 
stronger than the federal law.

    Mr. Burr. We thank you for that testimony. And there will 
be some question as to whether the banking industry, after 
today's mark up, you could still say that about.
    I would also make one point that Maine did have the ability 
to react quickly. We have not found this institution to have 
the ability to fix mistakes very quickly other than the 
legislative process, so I hope we will all attempt to get it 
right the first time.
    Mr. Brown. Mr. Chairman, we did today, when the House 
adjourned. Never mind.
    Mr. Burr. The gentleman just missed his questions.
    Mr. O'Keefe.
    Mr. O'Keefe. Mr. Chairman, members of the committee, let me 
begin by asking to submit a letter from the National Conference 
of State Legislatures for the record, if I could.
    Mr. Burr. Without objection so ordered.
    [The information referred to follows:]
          National Conference of State Legislatures
                                             Washington, DC
                                                       May 27, 1999
The Honorable Thomas J. Bliley, Jr.
Chairman, Commerce Committee
U.S. House of Representatives
Washington, D.C. 20510
    Dear Chairman Bliley: On behalf of the National Conference of State 
Legislatures (NCSL), I would like to take this opportunity to briefly 
comment on federal proposals regarding medical records confidentiality. 
NCSL will be submitting more detailed testimony for the record at a 
later date.
    NCSL firmly believes that states should regulate insurance. That 
being said, we recognize that there is a legitimate role for the 
federal government, particularly regarding the development of uniform 
national standards that establish a basic level of protection for 
consumers nationwide. Federal medical records confidentiality 
legislation should provide every American with a basic set of rights 
regarding their health information. These federal standards, in concert 
with state law, should be cumulative, providing the maximum protection 
for our citizens. At the end of this process, when federal legislation 
has been enacted, I hope we will be able to say that not one 
individual's health information is more vulnerable on that day, under 
federal law, than it was the day before without it.
Preemption of State Law
    Federal law should establish basic consumer rights and should only 
preempt state laws that are less protective than the federal standard. 
Unfortunately many of the proposals pending before Congress take a 
different approach.
    NCSL is particularly concerned about proposals that would preempt 
all state laws ``relating to'' medical records privacy. The universe of 
state laws relating to medical records confidentiality is extremely 
large and is spread across a state's legal code. For example, state 
laws regarding medical records confidentiality can be found in the 
sections of a state's code regarding: health, education, juvenile 
justice, criminal code, civil procedure, family law, labor and 
employment law. There is currently no compendium of state 
confidentiality laws. NCSL continues to work with Georgetown University 
where a major effort to produce such a compendium is underway. A 
blanket preemption of state law is virtually the same as throwing the 
baby out with the bath water.
    If there is going to be preemption of state law in federal medical 
records confidentiality proposals they should: (1) grandfather existing 
state laws; (2) narrowly and specifically define the scope of the 
preemption, preserving issues not addressed in the federal proposal for 
state action; and (3) permit states to enact legislation that provides 
additional protections. If states are precluded in some general way 
from taking action in specific areas, there should be a mechanism for a 
state legislature to act, if the federal legislation adversely impacts 
the citizens in the state due to a technical error in the legislation 
or to unintended consequences based on state-specific conditions.
    Some of the federal proposals have attempted to address the 
preemption issue through the inclusion of state legislative ``carve 
outs.'' This approach attempts to identify all the areas that states 
would be permitted to continue enact legislation. While well-
intentioned, each bill has a different set of carve-outs and we have no 
way of knowing the full extent and impact of the preemption and carve-
outs until the federal law has been implemented. In other words, we 
won't know what has been missed until after the federal law is enacted. 
NCSL and the National Association of Insurance Commissioners (NAIC) 
recommend another approach. If an issue is not specifically addressed 
in the federal law, states may continue to legislate and regulate in 
the area. Below is language jointly supported by NCSL and NAIC.
        Nothing in this Act shall be construed as preempting, 
        superseding, or repealing, explicitly or implicitly, any 
        provision of state law or regulation currently in effect or 
        enacted in the future that establishes, implements, or 
        continues in effect, any standard or requirement relating to 
        the privacy of protected health information, if such laws or 
        regulations provide protections for the rights of individuals 
        to the privacy of, and access to, their health information that 
        are at least as protective of the privacy of protected health 
        information as those protections provided for under this Act. 
        Any state laws or regulations governing the privacy of health 
        information or health-related information that are not 
        contemplated by this Act, shall not be preempted. Federal law 
        shall not occupy the field of privacy protection. The 
        appropriate federal authority shall promulgate regulations 
        whereby states can measure their laws and regulations against 
        the federal standard.
Current State Legislative Activity
    Through the end of April 1999, sixteen states have enacted laws 
regarding medical records confidentiality. We will provide an update 
that will include actions taken by states that have ended their 
sessions since the end of April in our more detailed testimony that we 
will submit for the record. Montana enacted comprehensive legislation 
addressing the activities of insurers and North Dakota enacted 
legislation that established comprehensive public health 
confidentiality standards. Most of the other states enacted legislation 
building on existing state law or legislation focused on a specific 
issue. Six laws, addressing a wide variety of medical records privacy 
concerns, were enacted in Virginia during the 1999 legislative session. 
Other states that enacted legislation this year are: Arkansas, 
Colorado, Georgia, Idaho, Mississippi, Nebraska, Nevada, New Mexico, 
Oklahoma, South Dakota, Utah, West Virginia and Wyoming.
    Several of these new laws address issues that are not addressed in 
many of the federal proposals. For example, several states have laws 
that set limits on how much a health care provider can charge an 
individual to make copies of their medical records. These laws, 
designed to help assure access, regardless of income, would be 
preempted under some proposals. Many states have laws establishing 
strict confidentiality standards for medical information in the 
possession of employers. These laws would make records from employee 
assistance programs (EAP) and workplace drug-testing results, protected 
health care information, subject to strict disclosure and reporting 
requirements. These are but a few examples that illustrate both the 
breadth and complexity of the preemption issue.
    I thank you for this opportunity to briefly share the perspective 
of state legislatures on this very important issue and look forward to 
working with you and your colleagues over the next several months to 
develop a consensus proposal that will provide basic medical records 
privacy protections for all Americans.
            Sincerely,
                                              William Pound
                                                 Executive Director
cc: Members, House Commerce Committee

                    STATEMENT OF MARK O'KEEFE

    Mr. O'Keefe. I am Mark O'Keefe. I am the elected State 
auditor from the State of Montana, Montana being a fiscally 
conservative State. I also serve as securities commissioner 
and, for the purposes of this hearing today, insurance 
commissioner for the State of Montana and have for the last 7 
years.
    It is a pleasure to be here this afternoon. I appreciate 
the opportunity to discuss medical records confidentiality with 
you.
    I would like to make some brief comments recognizing the 
desire for a minimum Federal standard. I will then address the 
need for Congress to clarify the scope of any Federal health 
information privacy legislation. And finally, I want to discuss 
the enforcement issue which may seem to go beyond preemption; 
but as you will see, I believe actually gets to the heart of 
whether or not Congress ought to adopt a floor in this area or 
completely preempt the States.
    Mr. Chairman, members of the committee, the NAIC have 
recognized that you must act in this area. As required by 
HIPAA, you have to have privacy legislation by August 21 or we 
have regulations from health and human services. In addition to 
this, the European Union passed Directive 9446-EC which is a 
privacy directive that requires companies exchanging 
information with member companies to meet strict privacy 
standards. Commerce is now involved in negotiating those 
standards.
    We have reviewed all of the legislation currently before 
Congress--and while we would prefer to see Congress enact a law 
that leaves all current State law in place, none of the bills 
offered gives us this choice. Given this, the members of NAIC 
would prefer to see a Federal floor rather than a total 
preemption in the area.
    State law in this area has not developed evenly. As far as 
we know, no State has enacted one health information privacy 
law that covers all aspects of health privacy. Rather a State 
enacts a privacy provision when dealing with school records, 
another for hospital records, a third for public health, et 
cetera, et cetera, et cetera. Completely preempting all State 
privacy laws may preempt many of these laws that are not 
covered by the new Federal standard leaving millions of 
consumers with few protections under State or Federal law.
    Second, health information privacy covers a wide range of 
subjects, from mental health and HIV to substance abuse and 
battered spouses. Again preempting all State law could have the 
unintended consequences of leaving millions of consumers with 
fewer protections, not more.
    Third, if the States are completely preempted in this area, 
they will not be able to respond to changes in technology or 
changes in the way information is used in the future. We feel 
the States, as your comments a little earlier reflected, react 
much quicker to what is going on than Congress does in regards 
to medical information.
    As I mentioned in my written statement, a Federal 
preemption of State privacy laws would invalidate certain laws 
in my home State of Montana, but Federal preemption in my State 
goes even further. Montana's constitution contains an explicit 
right of privacy for the residents of our State. A total 
Federal preemption would conflict with the State constitutional 
guarantee of privacy.
    Montanans across the board believe that medical records 
belong to the individuals whose records they are, not to some 
corporation. We know how the supremacy clause works, but we as 
Montanans have a strong belief that that is our belief.
    Finally, Mr. Chairman, States should not be preempted 
because of the enforcement issue. While the Federal bills all 
include criminal sanctions for those who knowingly and 
intentionally disclose this information, it is unlikely many 
prosecutions will take place. States have a much bigger hammer. 
Insurers and other persons such as hospitals and providers are 
licensed by the States. This forces these weakened and--hold 
these licenses and make sure that these rights are protected by 
threatening to take them away.
    A last point about enforcement is that the State 
departments of insurance offer consumers a place to go with 
their complaints. Right now in Montana, I receive an average of 
45,000 calls a year with complaints against insurers and 
securities firms in my State. I have a population of 800,000. I 
am the responsible entity to deal with those complaints. Should 
the Federal law pass, whom do my 800,000 people call? 
Department of Labor in Kansas City? Department of Health and 
Human Services in Denver? States already have an enforcement 
operating plan, and we think it should stay in place.
    With that, I would be glad to answer any questions you 
might have. We urge you to recognize the impact of this 
legislation on Federal and State laws as you debate the issue. 
Mr. Chairman, we look forward to working with the subcommittee, 
the committee, and the Congress in resolving these laws.
    [The prepared statement of Mark O'Keefe follows:]
Prepared Statement of Mark O'Keefe, Commissioner of Insurance, State of 
      Montana on Behalf of the National Association of Insurance 
                             Commissioners
                            i. introduction
    Good morning, Mr. Chairman and members of the Subcommittee. My name 
is Mark O'Keefe. I am the elected Insurance Commissioner for the state 
of Montana. I am testifying this morning on behalf of the National 
Association of Insurance Commissioners' (NAIC) (EX) Special Committee 
on Health Insurance. I would like to thank you for providing the NAIC 
with the opportunity to testify today about the preemption issue 
surrounding the health information privacy legislation currently before 
Congress.
    The NAIC, founded in 1871, is the organization of the chief 
insurance regulators from the 50 states, the District of Columbia, and 
four of the U.S. territories. The NAIC's objective is to serve the 
public by assisting state insurance regulators in fulfilling their 
regulatory responsibilities. Protection of consumers is the fundamental 
purpose of insurance regulation.
    The NAIC Special Committee on Health Insurance (``Special 
Committee'') is comprised of 45 state insurance regulators. The Special 
Committee was established as a forum to discuss federal proposals 
related to health insurance and to provide technical assistance to 
Congress and the Administration on a nonpartisan basis.
    My testimony today will focus on three aspects of the preemption 
issue raised by the current federal legislation. First, I will discuss 
the states' recognition of the desire for a minimum standard to protect 
the privacy of health information. Second, I will give some examples of 
what the states have done to ensure that health information is kept 
confidential, and discuss the concerns we have about the preemption 
language in the proposed federal legislation and how Congress can 
develop a minimum standard without eliminating existing state 
protections. Third, I will address the need for Congress to clarify the 
scope of any federal health information privacy legislation and to 
develop a way for states to measure their laws against any federal 
standard for compliance.
       ii. recognizing the desire for a federal minimum standard
    As required by the Health Insurance Portability and Accountability 
Act of 1996 (HIPAA), Congress must enact privacy legislation by August 
21, 1999. Should Congress fail to act, HIPAA requires the Secretary of 
Health and Human Services to promulgate regulations by February 2000. 
In addition to this statutory deadline, we recognize that Congress 
faces pressure to enact national legislation protecting the privacy of 
health information because the European Union issued a privacy 
directive that became effective in October 1998.
    The states, acting through the NAIC, understand the desire for 
minimum standards to protect the privacy of health information. A 
minimum standard in this area is considered necessary given that health 
information is transmitted across state and national boundaries. The 
transmission of health information, as opposed to the delivery of 
health care services, is not a local activity. This was one of our main 
reasons for developing a model on this issue--The Health Information 
Privacy Model Act (attached).
    The NAIC adopted the Health Information Privacy Model Act in 
September 1998.1 This model addresses many of the same 
issues that the federal legislation does, such as: (1) providing an 
individual the right to access and to amend the individual's protected 
health information; (2) requiring an entity to obtain an authorization 
from the individual to collect, use or disclose information; and (3) 
establishing exceptions to the authorization requirement. Our model was 
developed to assist the states in drafting uniform standards for 
ensuring the privacy of health information.2 However, 
because our jurisdiction is limited to insurance, and health 
information privacy encompasses more issues than insurance and more 
entities than insurers, we understand the desire for broader federal 
legislation.3
---------------------------------------------------------------------------
    \1\ This model was developed with state regulators, representatives 
of the insurance and managed care industries, and representatives from 
the provider and consumer communities. The NAIC model reflects the 
excellent work that has been done by a number of states on this 
difficult topic. The NAIC recognized the need to update the provisions 
of its existing ``NAIC Insurance Information and Privacy Protection 
Model Act,'' which was adopted by the NAIC in 1980, to reflect the 
rapidly evolving marketplace for health care and health insurance and 
the dramatic changes that have occurred over the past 19 years in 
information technology.
    \2\ The NAIC model requires carriers to establish procedures for 
the treatment of all health information, whether or not it is protected 
health information. The model then establishes additional rules for 
protected health information. In contrast, the federal bills require 
that named entities establish and maintain safeguards to protect the 
confidentiality of protected health information, which is more limited. 
The NAIC believes that Congress should establish procedures to assure 
the accuracy and integrity of all health information, not just 
protected health information.
    \3\ The most obvious difference between the NAIC model and the 
federal bills is in the scope of the entities to which the respective 
proposals would apply. The NAIC model applies to all insurance 
carriers. The federal bills are much broader and apply to health care 
providers, health plans, public health authorities, health oversight 
agencies, health researchers, health or life insurers, employers, 
schools, universities, law enforcement officials, and agents. Different 
sections of the federal bills apply to different combinations of these 
named entities. However, we are concerned that the federal bills only 
apply to health and life insurers and not to all insurers.
    With respect to insurers, we recommend the approach of the NAIC 
model, which applies to all insurance carriers and is not limited to 
health and life insurers. The NAIC had an extensive public discussion 
about whether the NAIC model should apply only to health insurance 
carriers, or instead, to all carriers. Health and life insurance 
carriers are not the only types of carriers that use health information 
to transact their business. Health information is often essential to 
property and casualty insurers in settling workers' compensation claims 
and automobile claims involving personal injury, for example. 
Reinsurers also use protected health information to write reinsurance. 
The NAIC concluded that it was illogical to apply one set of rules to 
health insurance carriers but different rules, or no rules, to other 
carriers that were using the same type of information. Consumers 
deserve the same protection with respect to their health information, 
regardless of the entity using it. Nor is it equitable to subject life 
and health insurance carriers to more stringent rules than those 
applied to other insurers. Our model applies to all insurance carriers 
and establishes uniform rules to the greatest extent possible.
---------------------------------------------------------------------------
    Recognizing all of the above factors, along with the fact that all 
of the health information privacy bills currently before Congress 
preempt state law in one fashion or another, the members of the NAIC 
have concluded that the privacy of health information is one of the few 
areas where it may be appropriate for the federal government to set a 
minimum standard. However, it should be noted that up until this point 
there has been no federal standard in place. Rather, states have been 
the protector of consumers in this area. Any federal legislation must 
recognize this fact and make allowances for it.
                            iii. preemption
A. Existing State Laws
    As this Subcommittee is well aware, the drafting of legislation to 
establish standards that protect the privacy rights of individuals with 
respect to highly personal health information is a very difficult task. 
Like you, the members of the NAIC sought to write standards into the 
NAIC Model that would not cripple the flow of useful information, that 
would not impose prohibitive costs on entities affected by the 
legislation, and that would not prove impossible to implement in a 
world that is rapidly changing from paper to electronic records. At the 
same time, the members of the NAIC recognized the need to assure 
consumers that their health information is used only for the legitimate 
purposes for which it was obtained, and that this information is not 
disclosed without the consumer's consent or knowledge for purposes that 
may harm or offend the individual.
    When developing protections for health information, Congress must 
recognize the impact of any federal privacy legislation on existing 
federal and state laws. Although we cannot fully address the impact on 
federal law, we do know that many state laws touch on protected health 
information and appear in many locations within the states' statutes 
and regulations. These laws do not neatly fit into a federal bill's 
list of exceptions. For example, privacy laws can be found in the 
insurance code, probate code, and the code of civil procedure. Numerous 
privacy laws relating to health information are also contained in the 
states' public health laws, which address such topics as child 
immunization, laboratory testing, and the licensure of health 
professionals. Other potential areas involve workers compensation laws, 
automobile insurance laws, and laws regulating state agencies and 
institutions. In addition, many state privacy laws only address health 
programs or health-related information that are unique to a particular 
state.
    Let me give you some examples of the existing state laws that 
protect health information.
    Montana--Under Montana's laws governing health maintenance 
organizations, any data or information pertaining to the diagnosis, 
treatment, or health of an enrollee or applicant obtained from the 
enrollee, applicant or a provider by a health maintenance organization 
must be held in confidence and may not be disclosed to any person, 
except upon express consent of the enrollee or applicant, pursuant to 
statute or court order for the production of evidence or discovery, in 
the event of a claim or litigation between the enrollee or applicant 
and the health maintenance organization where in the data or 
information is pertinent, or to the extent necessary to carry out the 
purposes of this chapter. (Mont. Code Ann. Sec. 33-31-113). The 
provisions of the state law would presumably be preempted by a total 
preemption approach and would not be saved under any current exception 
in the federal bills. The state law prohibits disclosure except in a 
few limited cases, mostly pertaining to litigation, whereas the federal 
legislation would allow health maintenance organizations (health plans) 
to disclose this protected information without authorization under many 
more instances.
    In addition, Montana just enacted a comprehensive medical records 
privacy bill targeted at insurers. This new law was modeled after the 
NAIC Health Information Privacy Model Act, and it builds upon Montana's 
Insurance Information and Privacy Protection Act (Mont. Code Ann. 
Sec. 33-19-101 et seq.).4 The efforts and careful 
consideration of the state legislature to adopt privacy legislation 
would be lost, if the federal privacy legislation preempts all state 
laws relating to confidentiality of health information.
---------------------------------------------------------------------------
    \4\ Montana's Insurance Information and Privacy Protection Act is 
very similar to Virginia's law (see next section for more discussion).
---------------------------------------------------------------------------
    Virginia--Virginia has already enacted a privacy protection law for 
insurance information. (Va. Code Ann. Sec. 38.2-600 et seq.). This law 
applies to insurance institutions, agents and insurance-support 
organizations, and it protects insurance information, including health 
information, that is collected, received or maintained in connection 
with insurance transactions that pertain to individuals who are 
residents of the state or who engage in insurance transactions with 
applicants, individuals or policyholders who are residents of the 
state. It also applies to insurance transactions involving policies, 
contracts or certificates of insurance delivered, issued for delivery, 
or renewed in the state. This law applies to life, accident and 
sickness (health), and property and casualty insurance, and therefore 
to issuers of these products. The state law prohibits the disclosure of 
personal or privileged information about an individual, with some 
exceptions. This state law would be preempted under a federal bill that 
used a total preemption approach. Arguably any health information held 
by life or health insurers may still be protected under the federal 
legislation; however, health information held by property and casualty 
insurers, which is currently protected under this state law, would 
become unprotected under the current federal legislation. Without the 
opportunity for the state to implement its own laws to address these 
types of insurers, the health information they hold would be vulnerable 
to potential misuse or disclosure by those who hold it. In addition, if 
the federal standard were to fall short of the Virginia law in some 
way, the level of protection for information held by life and health 
insurers would be diminished.
    Michigan--Michigan's Public Health Code mandates confidentiality of 
HIV testing and requires written, informed consent (Mich. Comp. Laws. 
Sec. 333.5114, 333.5133). A physician or the physician's agent shall 
not order an HIV test for the purpose of diagnosing HIV infection 
without first receiving the written, informed consent of the test 
subject. Written, informed consent must contain at a minimum all of the 
following: (1) an explanation of the test, including the purpose of the 
test, the potential uses and limitations of the test, and the meaning 
of the test results; (2) an explanation of the rights of the test 
subject, including the right to withdraw consent prior to the 
administration of the test, the right to confidentiality of the test 
and the results, and the right to participate in the test on an 
anonymous basis; and (3) the persons or class of persons to who the 
test results may be disclosed. In addition, an individual who undergoes 
an HIV test at a department-approved testing site may request that the 
HIV test be performed on an anonymous basis. Staff shall administer the 
HIV test anonymously and shall obtain consent to the test using a coded 
system that does not link the individual's identity with the request 
for the HIV test or the results. The Michigan law states that consent 
is not required for an HIV test performed for the purpose of research, 
if the test is performed in such a manner that the identity of the test 
subject is not revealed to the researcher and the test results are not 
made known to the test subject. This state law risks being preempted by 
the federal legislation depending on the preemption approach and the 
exceptions. If state public health laws are exempt from federal law, 
this state law could be left in place depending on how the federal 
legislation classifies public health laws. If state public health laws 
are not excepted, this state law would arguably be preempted by federal 
legislation that uses a total preemption approach, but the protection 
the state law offers would not be replaced with a federal equivalent. 
Some of the federal bills would allow the identity of the individual to 
be disclosed without the individual's consent under the public health 
or research provisions.
    Massachusetts--Under Massachusetts' education statutes, provisions 
are established for the testing, treatment and care of persons 
susceptible to genetically-linked diseases. (Mass. Ann. Laws ch.76, 
Sec. 15B). The law requires the Department of Public Health to furnish 
necessary laboratory and testing facilities for a voluntary screening 
program for sickle cell anemia or for the sickle cell trait and for 
such genetically-linked diseases as may be determined by the 
Commissioner of Public Health. Records maintained as part of any 
screening program must be kept confidential and will not be accessible 
to anyone other than the Commissioner of Public Health or to the local 
health department which is conducting the screening program, except by 
permission of the parents or guardian of any child or adolescent who 
has been screened. Information on the results of any particular 
screening program shall be limited to notification of the parent or 
guardian of the result if the person screened is under the age of 18 or 
to the person himself if he is over the age of 18. The results may be 
used otherwise only for collective statistical purposes. Again, this 
state program may be preempted by a federal privacy law because it does 
not fall under the federal bills' preemption exceptions. Under the 
federal bills this health information would be at risk of disclosure 
without authorization under the public health or research provisions.
    Florida--Florida's Civil Rights law requires confidentiality and 
informed consent for genetic testing. (Fla. Stat. Ann. Sec. 760.40). 
The law provides that except for purposes of criminal prosecution, 
determining paternity, or acquiring specimens from persons convicted of 
certain offenses, DNA analysis may be performed only with the informed 
consent of the person to be tested, and the results of such DNA 
analysis, whether held by a public or private entity, are the exclusive 
property of the person tested, are confidential, and may not be 
disclosed without the consent of the person tested. This law arguably 
would be preempted by a total preemption approach that uses the 
``related to'' standard. Civil rights laws and genetic testing laws do 
not fall within any of the federal bills' exceptions, so presumably DNA 
tests would be governed by the provisions of federal bills. However, 
the federal legislation would arguably allow DNA test results and the 
identity of the individual to be disclosed without the individual's 
authorization under some of the federal bills' provisions, including 
the research provisions.
    Ohio--Under Ohio law, information collected by the Ohio Health Care 
Data Center must be kept confidential, and may only be released in 
aggregate statistical form. (Ohio Rev. Code Ann. Sec. 3729.46(B)). The 
Director of Health, employees of the Department of Health including 
employees of the data center, and any person or governmental entity 
under contract with the director shall keep confidential any 
information collected that identifies an individual, including 
information pertaining to medical history, genetic information, and 
medical or psychological diagnosis, prognosis, and treatment. Theses 
persons and entities shall not release such information without the 
individual's consent, except in summary or statistical form with the 
prior written permission of the Director or as necessary for the 
Director to perform his duties. This state law would be preempted by a 
federal privacy law that totally preempted state law or did not include 
this type of law as an exception to federal preemption. The state law 
only allows release of information in summary form without 
identification of the individual, but this same information risks being 
released as personally identifiable information under the federal 
legislation. The federal legislation would end up unprotecting this 
information that is currently protected under state law.
    These examples should not be construed as a definitive legal 
analysis of the relationship between these state laws and the federal 
bills. The comments are not based on an extensive review of all 
relevant state laws that might affect the ultimate conclusion about the 
interaction of the federal bills and the states' laws. However, the 
range of state laws relating to protected health information, and the 
diversity of their purposes and of the entities that they affect, are 
critical factors for assessing the impact of any federal preemption 
language.
    Because state laws relating to health information and privacy are 
located in so many different places within each states' legal code, the 
length of time and complexity involved in compiling a list of these 
laws make it a nearly impossible task. Moreover, there is no federal or 
state agency or other organization that has a complete compendium of 
state laws that could be preempted by federal privacy legislation. 
Without clear information about the laws that may be impacted by 
legislation, preemption must be approached with caution.
B. The Best Approach to Developing a Federal Standard
    An argument will be made that the only solution to this collection 
of state privacy laws is a total preemption of state law. However, this 
``solution'' is a deceptively easy response to the various state 
privacy laws and will most certainly result in adverse, unintended 
consequences. The language ``any State law that relates to matters 
covered by this Act'' could preempt literally hundreds of state laws 
that affect protected health information.5 Many state laws 
that are seemingly unrelated to health information on their face affect 
health information privacy and could be eliminated by a total 
preemption approach without any equivalent federal protection. Health 
information or health-related information that is currently protected 
will end up unprotected, and states will not be able to remedy the 
problem or ``re-protect'' the information. We offer this perspective 
not to ``protect our turf,'' but rather as a caution against unintended 
consequences to the consumer. Because of the number and scope of the 
laws involved, our concerns are not limited to insurance law. We do not 
want Congress to reduce or eliminate any protections already in place. 
Preemption of state law is not a workable solution.
---------------------------------------------------------------------------
    \5\ This language is very similar to the preemption language 
contained in the Employee Retirement Income Security Act of 1974 
(ERISA), which states: ``[T]he provisions of this title--shall 
supersede any and all State laws insofar as they may now or hereafter 
relate to any employee benefit plan . . . (emphasis added). As this 
Committee is well aware, twenty-five years of litigation and numerous 
Supreme Court decisions have yet to clarify the scope of the ERISA 
preemption language. We would respectfully suggest that a ``relate to'' 
standard is not a good standard to adopt in federal legislation 
regulating the use of health information. Total preemption language 
will unintentionally erase important state laws but not provide 
equivalent federal protections. This is the unfortunate situation that 
has occurred as the result of the preemption language contained in 
ERISA.
---------------------------------------------------------------------------
    We believe the best approach would be to set a federal standard 
that does not preempt state laws that have been protecting health 
information for so many years. Up until now, there has been no federal 
standard in place, and the states have been protecting consumers. We 
understand the desire to establish a federal floor in this area, but it 
is not appropriate to preempt stronger state laws or preempt state laws 
that are outside the scope of the federal privacy legislation. As 
discussed earlier, the states have enacted privacy protections for 
their citizens in a variety of areas. These citizens should not lose 
stronger protections for their health information or lose protections 
granted by the states in areas not contemplated by the federal 
legislation.
    In addition, we believe that states should be allowed to enact 
stronger privacy protections in the future in response to innovation in 
technology and changes in the use of health information. We believe the 
best approach would balance the desire for uniformity with the 
recognition of the states' ability to respond quickly and to provide 
additional protections to their citizens. States can quickly identify 
the impact of any federal privacy law or any changes in technology or 
in the use of health information and can efficiently remedy any adverse 
situation. We urge Congress not to take a ``broad-brush'' approach to 
preemption that would unintentionally take away protections at the 
state level, eliminate the states' ability to remedy unintended 
consequences that result from federal privacy legislation, or prevent 
states from responding in the future.
    Since Congress is certain to set some type of federal standard, we 
offer the following language as a suggestion of how federal privacy 
legislation may be drafted. This language sets a federal minimum 
standard that leaves in place existing state laws that are at least as 
protective as the federal legislation and allows states to enact 
stronger laws in the future.
        Nothing in this Act shall be construed as preempting, 
        superseding, or repealing, explicitly or implicitly, any 
        provision of State law or regulation currently in effect or 
        enacted in the future that establishes, implements, or 
        continues in effect any standard or requirement relating to the 
        privacy of protected health information, if such state laws or 
        regulations provide protections for the rights of individuals 
        to the privacy of, and access to, their health information that 
        are at least as protective of the privacy of protected health 
        information as those protections provided for under this Act. 
        Any state laws or regulations governing the privacy of health 
        information or health-related information that are not 
        contemplated by this Act, not addressed by this Act, or which 
        do not directly conflict with this Act, shall not be preempted. 
        Federal law shall not occupy the field of privacy protection. 
        The appropriate federal authority shall promulgate regulations 
        whereby states can measure their laws and regulations against 
        the federal standard.
We believe this language recognizes the desire for a federal standard 
while respecting what the states have already done.
                      iv. scope of the legislation
    In addition to adopting an approach that recognizes the privacy 
protections already enacted by the states and that allows states the 
flexibility to enact stronger privacy laws in the future, we urge 
Congress to draft legislation that specifically outlines the areas that 
Congress intends to address. Congress needs to be very specific about 
the scope of any federal privacy legislation. This is of particular 
concern since the current privacy legislation is silent on many issues 
affecting federal and state law. The scope should not be left ambiguous 
or left to the courts to decide. We believe it would be better for the 
protection of consumers' health information if Congress would specify 
what is addressed by the federal legislation as opposed to attempting 
to list all of the state laws that are exempt from the federal 
legislation.
    All of the current federal bills contain specific exceptions to the 
federal preemption language for certain state laws.6 
Reviewing all of the bills, these exceptions include state laws that: 
(1) provide for the reporting of vital statistics such as birth or 
death information; (2) require the reporting of abuse or neglect 
information about any individual; (3) regulate the disclosure or 
reporting of information concerning an individual's mental health; (4) 
relate to public or mental health and prevent or otherwise restrict 
disclosure of information otherwise permissible under the federal 
legislation; (5) govern a minor's rights to access protected health 
information or health care services; (6) relate to the disclosure of 
protected health information or any other information about a minor to 
a parent or guardian of such minor; (7) authorize the collecting, 
analysis, or dissemination of information from an entity for the 
purpose of developing use, cost effectiveness, performance, or quality 
data; and (8) concern a privilege of a witness or person in state 
court.
---------------------------------------------------------------------------
    \6\ As of Friday, May 21, 1999, the Chairman's Mark of S. 578 in 
the Senate Committee on Health, Education, Labor and Pensions (HELP) 
contained the following exceptions to the federal preemption language 
for certain state laws that: (1) relate to use and disclosure of 
information pertaining to mental health and pertaining to public health 
consistent with Section 207 to the extent that such state law prevents 
or restricts the use and disclosure for protected health information 
otherwise permissible under this Act; (2) relate to the disclosure of 
protected health information or any other information about a minor to 
a parent or guardian of such minor; or (3) concern a privilege of a 
witness or person in state court.
---------------------------------------------------------------------------
    Although each of the exceptions is appropriate and the list 
represents a good start at enumerating the specific categories of state 
laws that should not be preempted, these specific exceptions to the 
preemption language do not alleviate our concerns. There are other 
state laws that do not fit into any of the explicitcategories and that 
would therefore be preempted by the broad scope of the general 
preemption language. In addition, not all of these specified exceptions 
are included in each of the bills. We mention this to underscore the 
critical importance of clearly defining the scope of what the federal 
legislation is addressing and the applicability of any specific privacy 
standard or exception. We believe it wiser and easier to define what 
types of health information and what state laws are within the scope of 
the federal legislation, rather than what types of health information 
and what state laws are outside of the scope of the federal 
legislation.
    In addition, we urge Congress to outline a way in the federal 
privacy legislation for the states to measure their laws against any 
federal standard and to provide options for states to meet those 
requirements. In HIPAA, Congress gave the states three options in 
meeting the requirements of that legislation. Similar guidelines are 
needed in the privacy legislation. States need to be able to judge 
whether their state laws are stronger than the federal law in order to 
determine whether they need to take further action to revise their 
laws.
                             v. conclusion
    Establishing standards to protect the collection, use, and 
disclosure of health information is a very important undertaking. The 
growth of managed care, the increasing use of electronic information, 
and the advances in medical science and communications technology have 
dramatically increased both the availability and the importance of 
health information. The efficient exchange of health information will 
save thousands of lives. The information is critical for measuring and 
analyzing the quality and cost effectiveness of the health care 
provided to consumers. Consumer benefits from advances in health 
information are vast. However, HowHowever, the potential for misuse of 
this information is also vast. The information itself has become a 
valuable product that can be sold for significant amounts of money, and 
the consequences of unauthorized disclosure of health information can 
be potentially damaging to individuals' lives. The opportunities to 
exploit available health information will grow in number and value as 
technology and medical science advance.
    As Members of Congress address this critical topic, we would urge 
you to recognize the importance of existing state law addressing the 
use of health information in many contexts. Congress should be aware of 
the complexity of implementing federal standards without inadvertently 
displacing important provisions of state law. We urge Congress not to 
take a ``broad-brush'' approach to preemption that would 
unintentionally take away protections at the state level, eliminate 
states' ability to remedy unintended consequences that result from 
federal privacy legislation, or prevent states from responding to 
future changes in technology or changes in the use of health 
information. The scope of the preemption is a critical issue, and if 
not carefully constructed it could lead to unintended consequences. We 
urge you to recognize the impact of any privacy legislation on federal 
and state laws as you debate this issue. The members of the NAIC would 
be happy to work with the Members of Congress in this area. Thank you.

    Mr. Burr. We thank you, Mr. O'Keefe.
    The Chair would recognize Ms. Meyer for her opening 
statement.

                   STATEMENT OF ROBERTA MEYER

    Ms. Meyer. Mr. Chairman, Congressman Brown, my name is 
Robbie Meyer.
    I represent the American Council of Life Insurance. The 
ACLI is a national trade association that represents about 493 
companies which sell life insurance, disability income 
insurance, and long-term care insurance. We appreciate being 
given the opportunity to appear before you today.
    The very nature of life insurance, disability income 
insurance, and long-term care insurance involves personal and 
confidential relationships. The ACLI is here today because 
these insurers use health information for essential business 
purposes. Life, disability income, and long-term care insurers 
must use health information to evaluate consumers' applications 
for insurance coverage and to process their claims for 
benefits.
    The legislation to be considered by the subcommittee will 
govern how life, disability income, and long-term care insurers 
obtain, use and disclose health information. As a result, the 
actions of this subcommittee will impact fundamental and 
essential functions of our business. We are strongly committed 
to the principal that individuals have a legitimate interest in 
seeing that their personal information is properly collected 
and handled and that insurers have an obligation to insure 
individuals of the confidentiality of that information.
    Medical information and a life, disability income, or long 
term care insurance file may be used for certain business 
purposes. It is used to underwrite applications for coverage. 
It is used to process claims. It is used in connection with 
reinsurance. And it is used, as stated by the previous witness, 
by State insurance departments on many occasions.
    I would like to take this opportunity now to address just a 
couple of key concerns in some of the pending pieces of medical 
record confidentiality legislation. First, authorization and 
revocation. Every year America's life, disability income, and 
long-term care insurers enter into literally millions of 
contracts with American consumers. Insurers, as I said before, 
use health information in connection with those contracts to 
evaluate consumers' applications for coverage and also to 
process their claims. These contracts can be in effect 
literally for decades and often are.
    Currently, we only access medical information with an 
individual's authorization. In other words, we only get 
information if they say that it is okay for us to get it. The 
current pieces of legislation that are under consideration now 
would not only require that authorization deal with our ability 
to get information but would also govern our ability to use it 
and then to redisclose it as necessary in the ordinary course 
of business.
    In order to prevent this legislation from inadvertently 
interfering with the industry's ability to perform essential 
yet ordinary business functions and--very importantly--to 
fulfill our contractual obligations to consumers. Life, long-
term care, and disability income insurers need to be able to 
obtain a single authorization for disclosures of medical 
information only in connection with the ordinary course of 
business. And we need to have these authorizations remain valid 
for the lifetime of the contract so that we can fulfill our 
contractual obligations to our customers.
    Other concerns we have with some of the pending pieces of 
legislation deal with the right to self-pay, damages, and 
preemption of course. Some of the bills would grant an 
individual to self-pay for certain treatment and then give them 
the right to prohibit or limit disclosure of information 
relating to that information.
    We are very concerned that that would create a situation 
where there are conflicting authorizations and the health care 
providers, doctors and hospitals wouldn't be sure which rule 
will govern the authorization that the individual originally 
gave the insurer or the direction from the individual to hold 
back that information.
    We are very concerned about any piece of legislation that 
would provide for punitive damages. And then, finally, as 
stated in our written statement and as I previously stated, we 
feel very strongly that American consumers have an absolute 
legitimate expectation that their health information will be 
kept confidential.
    A Federal Statute that outlines broadly preemptive 
standards, specific standards and which provide remedies for 
breach of those standards, we believe will respond to the 
American public's concern about the confidentiality of their 
health information. We believe that setting a national uniform 
standard for health information is obviously fundamental to 
this debate.
    Consumers would know what the rules were that would govern 
their health information regardless of where they lived. And 
insurance companies doing business across the country, as many 
of our member companies do, would be able to adhere to a 
uniformed standard, hopefully, be able to pass the economies of 
that uniform standard on to their customers. And we believe 
that this would very much facilitate insurers' ability to 
continue to provide financial security to American consumers.
    One of the previous witnesses indicated a concern about the 
fact that people were scared of what was going to happen with 
respect to the confidentiality of their medical information and 
that they were concerned that if their medical information was 
out, that it would cause their insurance policies either to be 
canceled or for their rates to go up. I did want to respond to 
that since I had a few minutes.
    The fact of the matter is that life, disability income, and 
long-term care insurers cannot cancel their policies and they 
cannot raise their rates because of the health of an 
individual. Disability income and long-term care rates can be 
raised, on certain occasions, for a group of insuredes but 
never because of the health of an individual.
    With that, thank you very much. I would be glad to answer 
any questions.
    [The prepared statement of Roberta Meyer follows:]
 Prepared Statement of Roberta Meyer, Senior Counsel, American Council 
                           of Life Insurance
                              introduction
    Chairman Bilirakis, Congressman Brown, and members of the 
subcommittee, I am Roberta Meyer, Senior Counsel at the American 
Council of Life Insurance (ACLI). I am pleased to discuss, and offer 
our assistance, as you craft legislation governing the confidentiality 
of medical record information. The ACLI is a national trade association 
with 493 member life insurance companies representing approximately 77 
percent of the life, 81 percent of the disability income, and 88 
percent of the long term care insurance in force in the United States. 
The fundamental purpose of life, disability income and long term care 
insurance is to provide financial security for individuals and 
families.

 Life insurance financially protects beneficiaries in the event 
        of a person's death. Proceeds from a life insurance policy may 
        help a surviving spouse pay a mortgage or send children to 
        daycare or college.
 Disability income insurance replaces lost income when a person 
        is unable to work due to injury or illness.
 Long term care insurance helps protect individuals and 
        families from the financial hardships associated with the costs 
        of services required for continuing care, for example, when 
        someone suffers a catastrophic or disabling illness.
    Every year America's life, disability income and long term care 
insurers engage in millions of contracts. Those contracts are the 
promises we keep to our policyholders.
    The very nature of the life, disability income and long term care 
insurance businesses involves personal and confidential relationships. 
The ACLI is here today because life, disability income, and long term 
care insurers use health information for business purposes. We are well 
aware of the unique position of responsibility we have regarding an 
individual's personal medical information. We are strongly committed to 
the principle that individuals have a legitimate interest in the proper 
collection and handling of their health information and that insurers 
have an obligation to assure individuals of the confidentiality of that 
information. As an industry, life, disability income, and long term 
care insurers have a long history of dealing with highly sensitive 
personal information in a professionally appropriate manner. We are 
proud of our record as custodians of this information.
                               background
    When a consumer begins the search for a life, disability income, or 
long term care insurance product, he or she usually begins by meeting 
with an insurer's sales representative. An individual may respond to an 
advertisement or the sales representative may initiate contact through 
a referral. Sales representatives usually meet with potential clients 
in their homes or at their place of employment. This is where the 
relationship between the insurer and the individual typically begins.
    During this initial meeting, the sales representative will discuss 
with the individual their family's financial security needs. If the 
consumer decides to apply for an individually underwritten life, 
disability income, or long term care insurance policy, the sales 
representative will complete an application.
    Many of the application questions concern nonmedical information, 
such as age, occupation, income, net worth, other insurance and 
beneficiary designations. Other questions focus on the proposed 
insured's health, including current medical condition and past 
illnesses, injuries and medical treatments. The sales representative 
also will ask the applicant to provide the name of each physician or 
practitioner consulted in connection with any ailment within a 
specified period of time (typically five years). Other questions will 
concern past use of alcohol and drugs, smoking habits and information 
about family history.
    The sales representative usually asks the questions and records the 
proposed insured's responses. After the individual has reviewed the 
responses to be sure they are accurate and complete, he or she will 
sign the application. In certain cases, the applicant and the proposed 
insured may not be the same individual. This occurs when, for example, 
a parent (applicant) applies for coverage on a minor child (proposed 
insured) or when spouses apply for coverage on each other. In such 
cases, the application for coverage will likely be signed both by the 
applicant and proposed insured.
    Up to this point in the process, the information the insurance 
company receives about the proposed insured's health status is directly 
from the individual. Depending on the age and medical history of the 
proposed insured, and the amount of insurance applied for, the 
insurance company may require medical record information. When the 
sales representative takes the consumer's application for insurance, he 
or she also will ask the individual to sign a consent form authorizing 
the insurance company to verify and supplement the information 
regarding the proposed insured's medical history, and to obtain 
additional information if it is needed to evaluate the application. 
This additional information generally is held by the proposed insured's 
attending physician(s) or hospitals. If it appears that the insurance 
company will need this information for the underwriting process, the 
insurance company will send to the physician or hospital the signed 
authorization. The insurer will reimburse the provider or hospital for 
the administrative expenses in locating and sending a copy of the 
information to the insurer.
    The medical information that insurance companies typically request 
of applicants include routine measurements, such as height and weight, 
blood pressure, and cholesterol level. The insurer may also seek an 
evaluation of blood, urine or oral fluid specimens for underwriting 
purposes, including tobacco or drug use and HIV infection. Medical 
tests are done only with the proposed insured's consent. These tests 
are usually done by a licensed paramedic who typically is employed by a 
paramedical company. In limited cases, the tests will be performed by a 
physician in connection with a medical examination requested by the 
insurer. In either case the applicant will generally be asked to sign 
another authorization that will contain information concerning HIV and 
other information relevant to the blood fluid analysis, depending on 
the state in which the applicant resides and individual laboratory 
practices. The physician or licensed paramedic may report urinalysis 
results, record blood pressure and pulse readings, and record comments 
regarding the proposed insured's condition, including the circulatory, 
respiratory and nervous systems as well as abdomen, ears, eyes, skin, 
etc.
    The price someone pays for insurance is based on gender, age, the 
state of health and perhaps job or hobby. Life, disability income, and 
long term care insurers gather this information about applicants during 
the underwriting process. Based on this information, a life insurance 
company groups individuals into pools in order to share the financial 
risks presented by dying prematurely, becoming disabled or needing long 
term care. This system of classifying insurance applicants by level of 
risk is called risk classification. It enables insurers to group 
together people with similar characteristics and calculate a premium 
based on that group's level of risk. Those with similar risks pay the 
same premiums. For example, nonsmokers usually pay less for insurance 
than smokers. On the other hand, if you have a chronic illness your 
premium may be higher.
    Some individuals are concerned that their medical record 
information will be ``used against them'' to deny or cancel coverage, 
or to increase premiums. In fact, underwriting and the process of risk 
classification, based in large part on medical record information, have 
made life, disability income and long term care insurance widely 
available and affordable: 95 percent of individuals who apply for life 
insurance are issued policies and 91 percent obtain it at standard or 
better rates. Furthermore, once a life, disability income, or long term 
care policy is issued, it cannot be canceled for any reason except for 
nonpayment of premiums.
    Premiums cannot be raised because an individual files a life, 
disability income, or long term care insurance claim, or because an 
individual becomes ill. However, if an individual suffers from a 
serious medical problem at the time a life insurance policy was issued, 
the premium could be reduced when the insured individual's health 
improves. Although some disability income or long term care insurance 
premiums can go up, this would never happen on an individual basis 
because of information contained in a medical record. If there is a 
price increase, it has to be on a whole block of policies, usually for 
economic reasons to ensure that premiums collected are adequate to pay 
claims.
    Once an insurer has an individual's health information, that 
insurer will limit who sees it. When the underwriting and risk 
classification processes are complete and the policy has been issued, 
the medical information in a life, disability income, or long term care 
insurance file may be accessed and reviewed under certain 
circumstances. For example, information could be used:

 To process claims for benefits. This information allows 
        insurers to fulfill their contractual obligations to 
        policyholders and pay death, disability income, and long term 
        care benefits. In 1997, more than $ 26.2 billion was paid to 
        beneficiaries under individual life insurance policies.
 By insurance regulatory authorities as part of an examination, 
        or by law enforcement authorities following appropriate legal 
        process who suspect illegal activity, such as murder for 
        insurance.
 If the insurance company is reinsuring a block of business and 
        the reinsurer wishes to review the seller's underwriting 
        practices.
 If the insured applies for additional coverage or seeks to 
        reinstate or change the policy.
                     the medical information bureau
    The Medical Information Bureau (MIB) is a not-for-profit 
association of life insurers. Its purpose is to reduce the cost of 
insurance by helping insurers detect (and deter) attempts by insurance 
applicants to conceal or misrepresent facts. As part of the application 
process, consumers receive a written notice which describes MIB and its 
functions. Furthermore, member companies will only request information 
regarding an individual applicant from MIB after the applicant has 
signed an authorization.
    MIB member companies report to the bureau brief, coded summaries of 
relevant information obtained during underwriting of individuals 
applying for life, disability income, or long term care insurance. 
Conditions most commonly reported include height and weight, blood 
pressure, EKG readings and x-rays if these facts are commonly 
considered significant to health and longevity. Certain nonlexical 
information, such as that relating to hazardous activities or adverse 
driving records, may also be reported, provided such information is 
confirmed by the applicant or official records. Out of every 100 
applications, only 15-20% result in a coded report sent to MIB. 
Information relating to amounts of insurance issued, underwriting and 
claims decisions may not be reported to MIB.
    When a consumer applies to an MIB member company for individual 
life, disability income, or long term care insurance coverage, the 
company may ask MIB whether its records contain information on this 
person. Again, member insurers may have access to MIB information only 
after receiving the proposed insured's authorization. Coded reports 
from MIB to insurers have two basic functions. The first function is to 
serve as an alert to detect attempts by applicants to omit or 
misrepresent facts. The second function is to deter applicants from 
omitting or misrepresenting significant facts. If an MIB report on the 
proposed insured does exist, the insurer who receives it will compare 
the MIB report with information provided by the applicant. If the brief 
codes in the MIB report are not consistent with other information, the 
insurer must seek other information about the applicant. Insurers may 
not decline an application or charge more for coverage based solely on 
MIB reports.
    Before accessing MIB records, an insurer must give the individual a 
notice containing specified information, including procedures for 
accessing and correcting information in accordance with the federal 
Fair Credit Reporting Act. Disclosures to individuals or corrections to 
information are usually done within 30 days.
    The MIB computer system used by member companies for the 
transmission of this coded information is exceptionally user unfriendly 
to the terminals in its network. MIB uses state of the art technology 
to verify that MIB reports are properly requested and transmitted. For 
example, each member terminal has a unique code that identifies that 
terminal when an inquiry is sent to MIB. The MIB computer will 
disconnect from the terminal if the identification code is not 
recognized. In addition, the MIB computer disconnects even after it 
receives an inquiry presenting the proper identification code. The MIB 
computer will then dial the company back, using another special code, 
to establish communication. All access to MIB is documented.
    MIB recognizes that people who are subjects of reports and public 
representatives must be satisfied that the MIB system meets legitimate 
expectations of confidentiality. MIB staff is required to maintain 
confidentiality under a specified set of procedures, including, among 
other things: educating all MIB staff as to the expectations of 
confidentiality; strictly limiting access to the MIB code book and 
access to the computer room to authorized personnel; and protecting the 
computer center 24 hours a day with security guards and electronic 
systems which control access and provide surveillance.
    Only authorized personnel at member companies may have access to 
MIB report information. Reports are not released to nonmember companies 
or to credit or consumer reporting agencies. MIB member companies must 
make an annual agreement and pledge to protect confidentiality. The 
agreement is signed by the president and physician medical director of 
the member company. Member companies must conduct an annual self-audit 
to determine whether their procedures have protected the 
confidentiality of MIB record information. These results must be 
reported to the MIB. Member companies must also permit MIB to conduct 
periodic audits of their confidentiality and underwriting procedures.
                       the industry's commitment
    Life, disability income, and long term care insurers have a long 
history of dealing with highly sensitive personal information, 
including medical information, in a professional and appropriate 
manner. Last year, the ACLI Board of Directors adopted a series of 
Confidentiality of Medical Information Principles of Support. They are 
attached for your review. The life insurance industry is proud of its 
record of protecting the confidentiality of this information. 
Individuals have a legitimate interest in the proper collection and use 
of medical information about them, and insurers must continue to handle 
such information in a confidential manner.
    The ACLI policy position regarding the importance of protecting 
personally identifiable medical record information is reflected in our 
long-standing support of the National Association of Insurance 
Commissioners (NAIC) Insurance Information and Privacy Protection Model 
Act (NAIC Model Act). The NAIC Model Act was carefully drafted and 
tailored to the special information practices involved in the insurance 
context. The ACLI believes this model strikes a proper balance between 
the legitimate expectations of consumers concerning the treatment of 
information that insurers obtain about them, and the need of insurers 
to use information responsibly for underwriting and claims 
administration.
    The NAIC Model Act governs insurers' practices in relation to all 
types of information, including medical information. The Act provides 
consumers with numerous rights and protections in addition to 
safeguards regarding the confidentiality of medical information. Among 
other things, it requires provision of a notice of information 
practices, outlines the content of disclosure authorization forms, 
imposes limitations and conditions on the disclosure of information and 
provides a process by which individuals can access, correct, and amend 
information about them. The NAIC Model Act also outlines remedies for 
individuals harmed by disclosures made in violation of the Act. Many, 
if not most, ACLI member companies doing business in at least one state 
which has enacted the NAIC Model Act adhere to its requirements in all 
states in which they do business.
                         legislative proposals
    Several legislative proposals have been introduced during the 106th 
Congress. We would like to address key issues of concern to the life 
insurance industry for your consideration as these proposals move 
forward.
Preemption
    As stated previously, we strongly believe that individuals have a 
legitimate expectation that their health information will be kept 
confidential. A federal statute that outlines a broadly preemptive set 
of specific standards to protect this information, and remedies for 
breach of those standards, will respond to the American public's 
concern about the confidentiality of their health information. Setting 
a national, uniform standard for health information, is fundamental to 
this debate. Consumers would know that they are protected by the same, 
strong health information privacy law, regardless of their address. 
Also, life insurance, disability income and long term care companies 
engaged in business across the country would have a single standard to 
facilitate the industry's ability to provide financial security to 
individuals and their families.
Authorization and Revocation
    Every year America's life, disability income, and long term care 
insurers enter into insurance contracts with millions of American 
consumers. These insurers must utilize health information to evaluate 
those consumers' applications for coverage and to process their claims 
for benefits. These contracts can be in effect for decades. In order to 
prevent federal legislation from inadvertently interfering with the 
industry's ability to engage in essential, ordinary business functions 
and to fulfill its contractual obligations, life, disability income and 
long term care insurers must be able to obtain a single authorization 
for disclosures of information in connection with the ordinary course 
of insurance business. Such authorizations should not be subject to 
revocation and should remain valid as long as necessary for the insurer 
to meet its obligations during the application process and during the 
lifetime of the policy. Some have suggested that if an individual can 
revoke his authorization, then the life, disability income or long term 
care insurance company should have the opportunity to cancel that 
policy. We urge you to reject this assumption. We cannot cancel our 
policies. If an individual revokes an authorization, provided in 
connection with a life, disability income or long term care insurance 
policy for which he has paid premiums for thirty years, and the insurer 
cancels the policy, the individual almost certainly will have trouble 
replacing that policy--and at what price? If an individual is unhappy 
with any business practice of the insurer, he always has the right to 
cancel his policy--he can stop paying premiums.
Right to Self Pay and Scope of Disclosures
    In an effort to enhance the confidentiality of some health 
information, some legislative proposals would grant individuals a right 
to self pay for treatment they receive and then limit or prohibit the 
disclosure of health information related to that episode. We are 
concerned that such provisions could produce conflicting 
authorizations. For example, assume an individual applies for a life 
insurance policy and signs an authorization for the disclosure of 
health information. Pursuant to that authorization, the insurer 
requests information from a health care provider, however, that health 
care provider had received previous instructions from that individual 
not to release certain information under a ``self pay'' arrangement. 
Which rule applies? The ACLI believes that all health information 
deserves careful, confidential treatment, and that all health 
information should be treated uniformly.
    Language in various bills restricting the ``scope of disclosure'' 
to the ``minimum amount necessary'' is fraught with potential problems. 
Not only is the legal meaning of ``minimum amount necessary'' unclear, 
but the entire philosophy behind this legislation is that individuals 
should have more control over health information about them. The 
authorization is the core of the debate. The authorization will govern 
the scope of a disclosure. Furthermore, we are troubled by some 
proposals that would have a health care provider determining exactly 
what is the ``minimum amount necessary''. A third party would not be in 
a position to know what information is needed by the entity requesting 
the information. For example, in the life insurance context, 
underwriters and medical personnel of the insurer know what information 
they need to perform risk classification. A provider might not forward 
information, necessary to the risk classification process, which in his 
opinion was not necessary.
Damages and Enforcement
    As a state regulated industry, we believe that enforcement of 
federal confidentiality standards applicable to life, disability 
income, and long term care insurers should be handled at the state 
level by state insurance commissioners, oversight authorities familiar 
with the life, disability income, and long term care insurance 
industries, and their uses of health information. It would be counter 
productive to create an expensive and unnecessary bureaucracy that 
would duplicate elaborate and effective systems which already exist in 
the states.
    Bills that have been introduced in this Congress provide for an 
array of remedies for breaches of health information confidentiality 
standards. The bills include civil and criminal penalties, and some 
include a private cause of action. The ACLI strongly objects to 
punitive damages being provided in a statute. These damages are 
excessive. The possibility of enormous and unjustified punitive damages 
is an issue of grave concern to the industry.
Definitions
    As with any piece of legislation, the definitions found in medical 
record confidentiality bills is critical. These words will serve as the 
foundation and the framework for the new law. At one point during the 
drafting process in the Senate prior to the Health, Education, Pensions 
and Labor Committee's markup of the Health Care Personal Information 
Nondisclosure Act, life insurance benefits were grouped in with health 
plan benefits and ``health plan'' was said to include a life insurer. 
The ACLI encourages this committee to recognize the distinction between 
lines of insurance, and to maintain those distinctions in the text of 
the bill. For example, a life insurer is not a health plan; it can be 
treated as a health plan for purposes of various provisions of the 
bill, but, again, life insurance is not a health plan.
Applicability
    As you know, the entities that would be governed by any federal 
legislation on health information confidentiality currently obtain, use 
and redisclose this information. It would be unworkable, and in many 
instances impossible, to meet the requirements of these bills for 
information already in the possession of insurers. Accordingly, we 
strongly urge that a specific section be added to the bill to clarify 
that the application of these standards is prospective in nature--
applicable to health information collected, used and disclosed after 
the date of enactment.
Other Issues
    We would like to work with the committee to ensure that other 
issues, unique to the life insurance industry and its customers, are 
addressed as this legislation moves forward. For example, the law 
enforcement provisions of some proposals may unintentionally prohibit a 
life insurer from turning over information to law enforcement 
authorities where the insurer suspects a murder was committed for the 
life insurance benefits. Also, beneficiaries must be able to release 
health information to a life insurer so that they can receive the 
policy benefits. We welcome the opportunity to work with you, Mr. 
Chairman and other members of the Subcommittee on these and other 
important issues as this legislation moves forward.
                               conclusion
    Again, Mr. Chairman, the 493 member companies of the ACLI are 
strongly committed to the principle that individuals have a legitimate 
interest in the proper collection and handling of their health 
information and that insurers have an obligation to assure individuals 
of the confidentiality of that information. As an industry, life, 
disability income, and long term care insurers have a long history of 
dealing with highly sensitive personal information in a professionally 
appropriate manner. We are proud of our record as custodians of this 
information.
    We welcome the opportunity to assist you in crafting strong 
legislation to protect the confidentiality of health information and to 
allow life, disability income, and long term care insurers to continue 
to serve its millions of customers.
    I will be happy to answer any questions.
                 Confidentiality of Medical Information
                         principles of support
    Life, disability income, and long-term care insurers have a long 
history of dealing with highly sensitive personal information, 
including medical information, in a professional and appropriate 
manner. The life insurance industry is proud of its record of 
protecting the confidentiality of this information. The industry is 
committed to the principles that individuals have a legitimate interest 
in the proper collection and use of individually identifiable medical 
information about them and that insurers must continue to handle such 
information in a confidential manner.
1. Medical information to be collected from third parties for 
        underwriting life, disability income and long-term care 
        insurance coverages should be collected only with the 
        authorization of the individual.
2. In general, any redisclosure of medical information to third parties 
        should only be made with the authorization of the individual.
3. Any redisclosure of medical information made without the 
        individual's authorization should only be made in limited 
        circumstances, such as when required by law in legal 
        proceedings.
4. Upon request, individuals should be entitled to learn of any 
        redisclosures of medical information pertaining to them which 
        may have been made to third parties.
5. All permissible redisclosures should contain only such medical 
        information as was authorized by the individual to be disclosed 
        or which was otherwise permitted or required by law to be 
        disclosed. Similarly, the recipient of the medical information 
        should generally be prohibited from making further 
        redisclosures without the authorization of the individual.
6. Upon request, individuals should be entitled to have access and 
        correction rights regarding medical information collected about 
        them from third parties in connection with any application they 
        make for life, disability income or long-term care insurance 
        coverage.
7. Individuals should be entitled to receive, upon request, a notice 
        which describes the insurer's medical information 
        confidentiality practices.
8. Insurance companies providing life, disability income and long-term 
        care coverages should document their medical information 
        confidentiality policies and adopt internal operating 
        procedures to restrict access to medical information to only 
        those who are aware of these internal policies and who have a 
        legitimate business reason to have access to such information.
9. If an insurer improperly discloses medical information about an 
        individual, it could be subject to a civil action for actual 
        damages in a court of law.
10. Any federal legislation to implement the foregoing principles 
        should preempt all other state requirements.

    Mr. Burr. We thank you, Ms. Meyer. I think you had a little 
extra time. I think our clock is--I can assure all of you that 
we do understand the severity of what we are charged to do. I 
think I can only speak for this committee. I think we will try 
to do our best at it.
    We certainly appreciate, especially you, Mr. O'Keefe and 
Ms. Meyer, for coming to this hearing room versus the one 
downstairs because I am sure you are just as concerned with 
what is coming out of the banking bill as it relates to 
insurance.
    Let me recognize myself for 5 minutes and turn to the good 
doctor over here and just ask you, how would the flow of 
electronic claims at Envoy be affected or in any other 
companies for that fact, if you had to comply with 50 different 
sets of regulatory bodies out there?
    Mr. Zubeldia. Because of the complexity of those potential 
differences, some of the claims would have to go on paper. Some 
of the eligibility inquiries could not be handled 
electronically. It would have to be handled by telephone.
    A few years ago, we had an experience with one of the 
States that required that their Medicaid claims be signed, and 
that was a State requirement way back from when they instituted 
the Medicaid program. They never considered the possibility of 
having an electronic signature, and in that State all the 
Medicaid claims were going on paper.
    We could revert back to a scenario like that in which maybe 
mental health claims would have to go on paper or cancer claims 
or any claim with a diagnosis that could suggest cancer or 
mental health or certain diagnosis groups would have to go on 
paper because of the impossibility of handling electronically 
without the patient's consent.
    And we believe that handling these transactions on paper 
exposes them to a much greater risk than electronic 
transactions which are for the majority, maybe 80 percent or 
more, adjudicated without a human hand or anybody seeing them. 
They are adjudicated by a machine. So by moving to a paper 
flow, we are not gaining anything, and we are getting into a 
high risk area.
    Mr. Burr. Let me go to you, Ms. Koyanagi. You referenced in 
your statement that there were certain groups that could be 
identified where privacy is a very key issue, and I think we 
probably all know the meat of that list. And I think you sort 
of answered the question of preemption much like Dr. Hamburg 
did. I call it a modified preemption, but I am not yet 
convinced nor do I have a firm opinion one way or the other.
    I am not yet convinced you can do that. Under a modified 
preemption, though, let's assume that we could come up and we 
could craft something that the balance was there. Aren't you 
still concerned that you have got these 50 individual pieces of 
patchwork that still won't accomplish the confidence level for 
certain groups to feel comfortable with the privacy laws?
    Ms. Koyanagi. Well, I think I would like to say two or 
three things about that. The first is if you enact a Federal 
floor, hopefully, that provides a level of confidence. If your 
floor is so low that it doesn't, then I think you, hopefully, 
will revisit it. The confidence across the country can come if 
there is some significant privacy protection in the Federal 
floor.
    Second, I think one could always come up with a lot of 
hypotheticals about what 50 States might do. It is important to 
see, I think, what they really do with the enactment of a 
Federal bill that would put in place a set of privacy 
protections that will probably be stronger than most of what 
the States have already so that, in fact, you are likely to see 
as, I said earlier, very few provisions in very few States that 
go beyond the Federal statute.
    Right now the companies deal with 50 State laws, and they 
are managing to do it. I doubt that too many States will go 
back and revisit whether the records should be on paper or not. 
Maybe they will. But there is nothing to prevent the Federal 
Government giving them the opportunity to show that, in fact, 
they can behave very responsibly and, in fact, deal with their 
local situations without creating chaos. If you don't like what 
they have done, you can come back in a year or 2 and preempt, 
not close the door.
    Mr. Burr. Given that the States--you referred to the States 
having moved because of the lack of any Federal statute. Given 
that the States have moved and understanding that this is 
really a response to the technological advances that exist, is 
there any confidence that you have that current State statutes 
are more apt to change to reflect the technological changes?
    One of the concerns that I have is when the Federal 
Government sets a floor or preempts, and I think yours is a 
floor that is much closer to the ceiling than possibly where I 
envision one, but that becomes a target that is hard to move 
because it has to go back through this legislative process up 
here. What is your level of confidence that States, as they see 
this advance in technology in the absence of a Federal 
initiative that preempts, would adjust their State statutes to 
reflect the change in technologies?
    Is there any belief in your part that that would happen?
    Ms. Koyanagi. I think it is slowly happening, and I think 
you would see, as usual with the States, that some would move 
more rapidly than the others and some may never act.
    You would get different reactions in different places, but 
I think with the publication of certain proposed model State 
statutes on privacy, we will begin to see if the Federal 
Government does not act, that the States will step in.
    Mr. Burr. Is there any reason for us to err on the side of 
the floor being slightly lower than slightly higher as we try 
to find that balance?
    Ms. Koyanagi. I would go back to my first point which is 
the protection of patients needs to be a major priority here 
and patient confidence in the health care system.
    I don't think most people have a clue really how their 
information gets out to how many people it gets out. Think of 
places such as rural areas where everyone knows everyone, and 
it is rather easy to find out this kind of information. All 
kinds of consequences can come from that and will come from 
that. And we will get stories in the papers like we had 
recently where a drug company sent records to--a pharmaceutical 
drugstore sent records to a company.
    Mr. Burr. I think we actually entered into the record a 
clarification by the Washington Post that that did not happen, 
that the drug--the pharmacy had contractual agreement that the 
mailhouse could not and did not distribute to the 
pharmaceutical company the name of those patients.
    I would tell you that my concern--initial concern on the 
rule side is exactly the opposite, the difficulty with 
accessing the people. Montana might be a great example. The 
people don't live exactly that close together and certainly one 
of the problems that we have in rural North Carolina with the 
delivery of health care is identifying the individuals that 
need it. It is not with this overwhelming flow of them coming 
in or with a shared access of information. It is with the 
inability to disseminate the information. It is not personal 
records, though.
    With the ranking member's indulgence, let me just ask Ms. 
Meyer one question, if I could. Your testimony said, and I 
quote, setting a national uniform standard for health 
information is fundamental to this debate. That along with what 
you said verbally is supportive of a preemption of State law; 
am I correct?
    Ms. Meyer. Yes, it is.
    Mr. Burr. Thank you.
    The Chair would recognize the ranking member.
    Mr. Brown. Thank you, Mr. Chairman.
    Mr. O'Keefe, welcome. If you were--if we here were not 
successful in passing privacy legislation, could you tell us 
what U.S. interests might be hurt by the EU regulation that you 
showed?
    Mr. O'Keefe. Mr. Chairman, Congressman, you know, I feared 
you might ask that, and I was thankful when it came up a little 
bit earlier.
    I will answer to the best of my knowledge, but the first 
time I saw this was yesterday. It is my understanding that 
should commerce fail to negotiate a set of agreements on 
privacy with the European Union, then any company doing 
business in the insurance industry, for instance, in the 
medical research areas, in pharmaceuticals, could--their 
product could be at risk or their cooperation with European 
companies could be at risk because of the protection of the 
Europeans involved in either the research, the insurance 
products, and/or the medical treatment would not be protected.
    Now, I am not sure and I am sure that staff at NAIC could 
research that more fully and provide you with that information.
    Mr. Brown. I would like that. Certainly none of us is able 
to predict, but would there be a trade action, WTO trade action 
filed against--by the EU against us, against the United States, 
or would the U.S. file a trade action in front of the WTO and 
perhaps on--against the EU on what that would do to the 
American biotech or pharmaceutical industries? If you would--if 
NAIC could research that----
    Mr. O'Keefe. We will supply that. As I told staff this 
morning, the only thing Montanans know about Europe are the 
agreements having to do with wheat. So we will make sure that 
staff gets that to you immediately.
    Mr. Brown. Thank you. Speaking of the NAIC, tell us, you 
mentioned more sort of from Montana's viewpoint and Montana's 
constitution about confidentiality. Talk through, if you would, 
why it is important for NAIC to have a floor understanding. Ms. 
Meyer representing the trade association for insurance took the 
opposite position.
    Mr. O'Keefe. Well, Mr. Chairman, Congressman Brown, I think 
that one thing that is interesting about NAIC is that we 
realize the diversity amongst the 50 States and the different 
needs in each State and in each marketplace and the way the 
States historically have responded to that.
    One of our major concerns is that there are States like 
Montana where--and it is my understanding that we are the only 
State in the last 8 months to pass a comprehensive privacy of 
medical records act aimed at the insurance industry during our 
State legislature, and we have been very, very aggressive about 
that.
    Last fall a model act was passed by NAIC in September, and 
each State is considering that. We think that a floor is 
necessary because anything less than a floor, you run the risk 
of taking away protections from citizens that are already in 
place. And we think that is a dangerous thing to do.
    In Montana or Minnesota, the protections may be very high 
while in other States they may be very low. I think your goal 
is to have a minimum standard that protects the individual's 
medical records. I don't think your goal is to take protections 
away from individuals that work in the current system. And in 
Montana, for instance, while our level is very high, the bill 
that I led through the legislature was signed off on by 
consumers, by medical researchers, by insurers, and by 
regulators, so we were able to do it in a way where all of 
those needs were met.
    A floor should do that; and if any State sees the need to 
get additional protections, they should have the right.
    Mr. Brown. Could I have an additional couple of minutes? 
Thank you.
    Thank you, Mr. O'Keefe. Ms. Koyanagi, your testimony, 
written and oral and others, have indicated that mental health 
patients are, putting it mildly, not especially comfortable 
with existing privacy protections.
    Discuss with the subcommittee, if you would, how these 
protections or lack of protections affect consumers in their 
decisions to seek mental health care?
    Ms. Koyanagi. There have been studies of that. If you want 
it, I can provide something for the record. The behaviors that 
I was describing in terms of the California poll, which was 
taken of all consumers, are very prevalent in terms of people 
seeking mental health care. A lot of times people will not come 
in for treatment. The consequences of the stigma around mental 
illness, concern that that information may get back to their 
employer, people have lost their mortgages, people have lost 
their jobs, people have lost their insurance as a result of 
mental health utilization becoming known. Those may not be 
legal behaviors but they do occur. So they are just very, very 
scared of that and so they don't seek treatment, they delay 
treatment or they don't provide all the information. They go to 
someone who hasn't done their physical health care so there is 
no coordination of care because they are trying to keep the 
mental health care very private. So it has all kinds of 
consequences and that has been studied.
    Mr. Brown. And they are worried about what they actually 
say to their mental health professional also.
    Ms. Koyanagi. Absolutely.
    Mr. Brown. There is physical health--it is their physician 
of their physical health, their mental health counselor, 
physician provider, and it is just a question of many--you 
assert many people do not even seek any kind of care because of 
fears of privacy.
    Ms. Koyanagi. Right. Those who can afford it may private 
pay, but for many of us that would not be feasible.
    Mr. Brown. That is all I have, Mr. Chairman. Thank you.
    Mr. Burr. Let me take this opportunity just to thank these 
witnesses and to suggest to you if it seems like sometimes we 
ask questions from both ends of the issue, we do. We are 
desperately trying to figure this out.
    I would also comment that I think I have heard floor 
defined as about eight different things today and all of them 
are right. And we realize that. And part of this process is to 
make sure that as we go through that, we can, with confidence, 
say to that mental health patient or to that AIDS patient or to 
any patient out there, your records are secure; and to the 
health care providers that we have done something that has not 
driven health care to a point where nobody can afford it; and 
to the pharmaceutical companies that our great efforts at 
actual cures for terminal illness can continue and continue 
with the optimism and prosperity that we have seen; and that 
for all who need access to medical records with the approval of 
patients that that is available.
    Clearly we understand we have a very difficult job, but I 
don't think that this committee will pass on this 
responsibility.
    I want to thank you one last time. This hearing is 
adjourned.
    [Whereupon, at 2:35 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

              Department of Health & Human Services
        Office of the Assistant Secretary for Planning and 
                                                 Evaluation
                                             Washington, D.C. 20201
Ms. Karen Folk
Committee on Commerce
564 Ford House Office Building
Washington, D.C. 20515
    Dear Ms. Folk, enclosed are the responses to the questions for the 
record from the May 27 hearing on Medical Records Confidentiality. I 
apologize for the delay in providing this information.
    Please contact me if you have any further questions.
            Sincerely,
                                  Margaret A. Hamburg, M.D.
                    Assistant Secretary for Planning and Evaluation
                   question from rep. john d. dingell
    Question 1. Could you elaborate on the enforcement provisions in 
the Secretary's recommendations and explain why they should be included 
in any privacy legislation? In particular, could you explain what you 
mean by a private right of action and why it is important to give 
individuals recourse for violations of their privacy protections?
    Answer: We need to send the message that protecting the 
confidentiality of medical information is vitally important, and that 
people who violate that confidence will be held accountable. There 
should be punishment for those who misuse personal health information 
and redress for people who are harmed by its misuse.
    Federal legislation should include criminal felony penalties for 
obtaining health information under false pretenses, and for knowingly 
obtaining or using health information in violation of federal 
nondisclosure requirements. Penalties should be higher when violations 
are for monetary gain. Legislation should also provide for the 
assessment of civil money penalties against any entity that 
demonstrates a pattern or practice of unauthorized disclosures.
    In addition, any individual whose rights under a federal privacy 
law have been violated should be permitted to bring an action for 
damages and equitable relief. It is critical that federal legislation 
provide individuals with the ability to seek redress. We have seen the 
standards set in some legislation set so high that it would effectively 
bar an individual's ability to bring a suit. We are willing to work 
with you to ensure that it is set at an appropriate level.
                  ouestions from rep. henry a. waxman
    Question 1. Do you believe that strong federal protections relating 
to individually identifiable health information would increase 
uniformity among state laws? Please explain the rationale for your 
position on this matter.
    Answer: If the Federal legislation is strong enough, then the 
States may not feel the need to enact stronger laws. We can go a long 
way to creating uniformity by enacting legislation with a strong 
federal floor. For example, we have had this experience since the 
passage of HIPAA--States are allowed to pass laws that extend beyond 
the Federal floor of HIPAA, but they generally have not done so.
    Question 2. Do you think it is a wise policy to ensure that states 
have the flexibility to enact heightened privacy protections for health 
information to address issues that may be of particular concern to 
states? Please explain the rationale for your position on this matter.
    Answer: The Administration's general view is that federal statutes 
which establish new health protections for individuals should set a 
floor upon which states can build to address their unique 
circumstances. A federal privacy law should create a minimum standard, 
a minimum assurance of privacy on which the public can rely. But, it is 
important to preserve State options to respond to new medical privacy 
challenges. The federal government cannot anticipate future needs and 
developments in the health care industry, nor can we effectively 
respond to the unique demands of some State systems. Therefore, it is 
critical that we enact strong federal protections and at the same time, 
preserve State options and flexibility for the future.
    Question 3. Do you believe that the review process for health 
research disclosures set forth in the recommendations is practicable? 
Please explain your rationale for this position.
    Answer: Today, the Common Rule and FDA's Human Subject Regulations 
protect participants in most research studies that are funded or 
regulated by the federal government. We recommend that similar 
protections be extended to all research using individually identifiable 
health information, not just federal research. It is our position that 
there should always be some type of review mechanism for researchers 
who wish to use medical records without obtaining a patient's prior 
authorization, regardless of their funding source. Such a review 
mechanism should operate under principles like those in the Common 
Rule, and must have some accountability.
    Based on our experience with the Common Rule and IRBs, we believe 
that this type of review process is workable for privately-funded 
research. NIH and other federal agencies follow requirements similar to 
those outlined in the recommendations, and there is no lack of people 
looking for federal funding for their research. A review process should 
increase people's confidence that the privacy of their information will 
be protected, and increase their willingness to participate.
    Question 4. Why do you believe that it is important to ensure 
privacy protections for health information?
    Answer: The existing legal structure does not effectively control 
information about individuals' health. Federal legislation, 
establishing a basic national standard of confidentiality, is necessary 
to provide rights for patients and define responsibilities for record 
keepers.
    There are certainly numerous examples of serious violations of the 
privacy of our medical records. We have heard about an HMO that allowed 
every single clinical employee to tap into patients' computer records 
and see detailed notes from psychotherapy sessions, about a medical 
student who copied and sold health records to medical malpractice 
attorneys, and a newspaper that published information about a 
congressional candidate's attempted suicide. The new owner of a used 
computer that originally belonged to a pharmacy found detailed patient 
records still on the hard drive.
    But the more important point is that the ways we use and share 
medical information are changing. Today, almost 75 percent of our 
citizens say they are at least somewhat concerned that computerized 
medical records will have a negative effect on their privacy. If we 
don't act now, public distrust could deepen--and ultimately stop 
citizens from disclosing vital information to their doctors, getting 
needed treatment or seeking genetic testing. Such distrust, if left 
unchecked, can undermine progress in our entire health care system.