A considerable portion of every health care dollar is spent on administrative overhead. In health care, this overhead includes many tasks, such as:
Today these processes involve numerous paper forms and telephone calls, non-standard electronic commerce, and many delays in communicating information among different locations. This situation creates difficulties and costs for health care providers, health plans, and consumers alike.
The burden of these costs affects everyone involved in the health care system. For example:
To address these problems, the health care industry has worked to develop standards to improve the way in which transactions are exchanged and processed electronically. However, economic pressures have prevented competing parties from adopting a uniform set of such standards. At the request of the industry and with bipartisan support, Congress enacted the Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The industry has estimated that full implementation of these provisions could save up to $9 billion per year by reducing administrative overhead, without reducing the amount or quality of health care services. In fact, such savings raise the possibility of helping to improve the quality of health care by freeing up resources now devoted to paperwork and administration.
The purpose of this report is to describe the status of implementation of the administrative simplification provisions of HIPAA during their first year. Congress gave the NCVHS the role of advising HHS on the adoption of standards, monitoring implementation of Administrative Simplification, and reporting annually on its progress. During this first year, the Committee has monitored the process of standards adoption, as carried out by the Government and its advisory bodies. In the future, we will report on the rate of implementation and the growth of electronic data interchange (EDI) in the health care industry.
The Committee is pleased to report that the process of implementation to this point has been extremely open, collaborative, and productive. We believe that the success of the process to date bodes well for the ultimate success of the implementation of these standards.
Although this report was requested by the Congress, it is directed at the industry and the public as well. In this report, we discuss first the requirements of the statute, including the implementation timetable required by the law, and the expanded responsibilities of the National Committee on Vital and Health Statistics (NCVHS). Then, we outline the implementation process, which involved the Department of Health and Human Services, other Federal agencies, the NCVHS, the industry, and the public health and research communities. The report includes the NCVHS’ recommendations for each of the required standards and the progress to date on the development of the regulations required to adopt the standards. Following this discussion is a section in which the NCVHS highlights a few issues that deserve particular attention by HHS and by the Congress. Finally, the report concludes with a discussion of implementation issues and how the NCVHS intends to monitor implementation in the future.
The Administrative Simplification provisions, Title II, Subtitle F, of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) require the Secretary of Health and Human Services (HHS) to adopt standards for the electronic transmission of administrative and financial health care transactions, including data elements and code sets for those transactions; for unique health identifiers for health care providers, health plans, employers, and individuals for use in the health care system; and for security standards to protect individually identifiable health information. The law also requires the Secretary to submit recommendations for Federal health privacy legislation to the Congress within one year. Additionally, these provisions gave special responsibilities to the NCVHS to advise the Secretary on privacy and on the adoption of standards and to submit to Congress an annual report on the status of the Administrative Simplification effort.
The purposes of these provisions are to improve the Medicare and Medicaid programs in particular and the efficiency and effectiveness of the health care system in general by encouraging the use of electronic methods for transmission of health information through the establishment of standards and requirements for covered electronic transmissions.
The standards required under the law include:
Under the law, the Secretary may also establish standards for other financial and administrative transactions that she determines to be appropriate and that are consistent with the goals of improving the operation of the health care system and reducing administrative costs. This provision permitted designation of coordination of benefits as one of the standard transactions being adopted.
The standards will apply to all health plans, health care clearinghouses, and health care providers that transmit health information in electronic form. Health plans are required to accept standard transactions submitted electronically by health care providers, and health plans cannot delay or otherwise adversely affect such transactions. Health plans and health care providers may submit or receive transactions directly or indirectly through the use of health care clearinghouses.
In addition to the requirement for security standards, the statute also requires the Secretary to submit to Congress detailed recommendations on standards with respect to the privacy of individually identifiable health information. These recommendations were delivered to the Congress on September 11, 1997.
The statute, which was enacted on August 21, 1996, specifies an aggressive implementation schedule:
The NCVHS and the Department have worked diligently to meet the schedule required by the statute. As noted above, the Secretary's recommendations for Federal privacy legislation have been delivered to the Congress. Notices of Proposed Rule Making for the transactions, code sets, identifiers, and security standards are being prepared, and a public, open process for dealing with the controversial unique health identifier for individuals has been decided upon. However, because of the extensive and unprecedented level of industry consultation and the number of issues that need to be resolved before final standards are selected, the requirement to publish the final rules for the first set of standards by February 21, 1998 will not be met. Publication of the proposed rules is expected by the end of February. It is anticipated that the required standards will be published in final form in the Spring of 1998.
The statute significantly expanded the responsibilities of the NCVHS. In selecting standards for adoption, the Secretary is required to rely on the recommendations of the NCVHS. Subtitle F also requires the NCVHS to report to the Secretary, within 4 years of the passage of HIPAA, with recommendations and legislative proposals for the adoption of uniform data standards for patient medical record information and the electronic exchange of such information. Finally, Subtitle F requires the NCVHS to submit to Congress an annual report on the status of the Administrative Simplification effort.
Specifically, the requirement for the annual report states:
“SEC. 263 (7) Not later than 1 year after the date of enactment of the Health Insurance Portability and Accountability Act of 1996, and annually thereafter, the Committee shall submit to the Congress, and make public, a report regarding the implementation of Part C of title XI of the Social Security Act. Such report shall address the following subjects, to the extent that the Committee determines appropriate:
“(A) The extent to which persons required to comply with part C of title XI of the Social Security Act are cooperating in implementing the standards adopted under such part.
“(B) The extent to which such entities are meeting the security standards adopted under such part and the types of penalties assessed for noncompliance with such standards.
“(C) Whether the Federal and State Governments are receiving information of sufficient quality to meet their responsibilities under such part.
“(D) Any problems that exist with respect to implementation of such part.
“(E) The extent to which timetables under such part are being met.”
Since the first standards are not scheduled for adoption until 1998 with implementation two years thereafter, this first annual report focuses on the activities of the Federal Government, industry, and the NCVHS during the past year to identify, select, and publish the required standards. Subsequent annual reports will focus on implementation issues.