Standards for Privacy of Individually Identifiable Health Information

C. Costs to the Federal Government

The modifications adopted in this Rule will result in small savings to the Federal government relative to the costs that would have occurred under the Privacy Rule. Although there will be some increase in costs for the new requirements for obtaining acknowledgment for receipt of the notice, these costs are at least partially offset by the savings in the elimination of the consent. As discussed above, to the extent concerns are accurate that the costs for the consent provisions are much higher than estimated, the cost savings associated with the retraction of these provisions would, therefore, be significantly higher. The Department does not believe the Federal government engages in significant marketing as defined in the Privacy Rule. The Federal government will have business associates under the Privacy Rule, and, therefore, the sample language proposed in this rulemaking will be of benefit to Federal departments and agencies. The Department has not estimated the Federal government's portion of the $35 million savings it estimated for this change. Similarly, the Federal government, which conducts and sponsors a significant amount of research that is subject to IRBs, will realize some savings as a result of the research modifications in this rulemaking. The Department does not have sufficient information, however, to estimate the Federal government's portion of the total $146 million savings with respect to research modifications.

D. Costs to State and Local Government

The modifications also may affect the costs to State and local governments. However, these effects likely will be small. As with the Federal government, State and local governments will have any costs of the additional notice requirement offset by the savings realized by the elimination of the consent requirement. As discussed above, to the extent concerns are accurate that the costs for the consent provisions are much higher than estimated, the cost savings associated with the retraction of these provisions would, therefore, be significantly higher. State and local governments could realize savings from the sample language for business associates and the changes in research, but the savings are likely to be small. The Department does not have sufficient information to estimate the State and local government's share of the net savings from the modifications.

E. Benefits

The benefits of various provisions of these modifications will be b privacy protections for individuals coupled with increased access to quality health care, and ease of compliance with privacy protections by covered entities. The changes will have the benefit of eliminating obstacles that could interfere with patient access to timely and high quality health care. The modifications will also improve quality health care by removing obstacles that may have interfered with research activities that form the basis of advancements in medical technology and provide greater understanding of disease. It is extremely difficult to quantify the benefits of enhanced privacy of medical records and elimination of obstacles to research and quality activities. This section provides examples of the qualitative benefits of these Privacy Rule modifications.

1. Strengthened Notice, Flexible Consent

The new requirement that a covered entity make a good faith attempt to obtain written acknowledgment of the notice of privacy practices will increase privacy protections to patients. The strengthened notice requirement will focus individuals on uses and disclosures of their health information, and assure that individuals have the opportunity to discuss privacy concerns with the health care providers with whom they have direct treatment relationships. Awareness of privacy practices should provide patients with a greater degree of comfort in discussing sensitive personal information with their doctors. The strengthened notice standard was adopted in tandem with changes to make consent more flexible. The changes to the consent requirement have the benefit of removing significant barriers to health care. In many circumstances, the consent requirement would have resulted in delayed treatment and, in other circumstances, would have required patients to be greatly inconvenienced at a time when they needed care, by forcing additional trips simply to sign consent forms. These modifications have the benefit of removing barriers to access to health care that would have resulted from the consent requirement while preserving important privacy protections in the notice standard.

2. Research

Research is key to the continued availability of high quality health care. The modifications remove potential barriers to research. For example, the modifications streamline the criteria to be used by IRBs or Privacy Boards in approving a waiver of individual authorization for research that could not otherwise be done and ensure the criteria are compatible with similar waiver determinations under the Common Rule. Thus, administrative burdens on IRBs and Privacy Boards are eased, without diminishing the health information privacy and confidentiality standards for research. In addition, the research transition provisions have been modified to ensure that the Privacy Rule does not interfere with ongoing or future research for which an individual has granted permission to use his information. By permitting this research to continue, these modifications make sure that vast research resources continue to be usable for important research that result in development of new medical technology and increased quality of health care.

3. Sharing Information for Quality Activities and Public Health

Health plans and health care providers play a valuable role in assessing the quality of health care and improving health care outcomes. The modifications ensure access to health information needed by covered entities and others involved in quality activities. The increased sharing of information will help to limit medical error rates and to determine appropriate, high quality treatment for specific conditions by encouraging these issues to be studied and allowing benchmarking against similar entities. The modifications, in creating a limited data set, also encourages private entities to continue studies and research in support of public health activities. These activities help reduce the spread and occurrence of diseases.

4. Availability of Information About Treatment Alternatives

Understanding treatment alternatives is an important factor in increasing an individual's involvement in his or her own treatment and making informed health care decisions. By streamlining the marketing requirements, the modifications make it easier for a covered entity to understand that they may share valuable information about treatment alternatives with their patients or enrollees, and the conditions for doing so. These modifications make sure that covered entities will be permitted to continue to share important treatment alternative information that gives patients knowledge about newer, less expensive, and/or more appropriate health care options.

F. Alternatives

In July 2001, the Department clarified the Privacy Rule in guidance, where feasible, to resolve some of the issues raised by commenters. Issues that could not adequately be addressed through guidance because of the need for a regulatory change are addressed in this rulemaking. The Department examined a number of alternatives to these modifications. One alternative was to not make any changes to the Privacy Rule, but this option was rejected for the reasons explained throughout the preamble. The Department also considered various alternatives to specific provisions in the development of this final Rule. These alternatives are generally discussed above, where appropriate.