The Honorable Donna E. Shalala, Ph.D.
U.S. Department of Health and Human Services
200 Independence Avenue S.W.
Washington, D.C. 20201

Dear Secretary Shalala:

I am pleased to forward you a copy of our Third Annual Report to Congress on the Implementation of the Administrative Simplification Provisions of the Health Insurance Portability and Accountability Act (HIPAA). The report covers the period January – December, 1999 and was developed by the National Committee on Vital and Health Statistics (NCVHS) in compliance with Section 263, Subtitle F of Public Law 104-191. The NCVHS is the public advisory committee to the U.S. Department of Health and Human Services on health data, privacy, and health information policy

The Administrative Simplification provisions of HIPAA require the U.S. Department of Health and Human Services (HHS) to adopt standards to support electronic interchange for administrative and financial health care transactions. These standards are to include data elements and code sets for those transactions; security standards to protect individually identifiable health information, and unique health identifiers for health care providers, health plans, employers, and individuals for use in the health care system. Within 24 months of their adoption, the standards will be required for use by health plans, providers and clearinghouses. Small plans will have another 12 months to comply. The law also includes provisions that outline a process leading to standards for protecting the privacy of health information. In addition, the statute gives expanded responsibilities to the NCVHS, including advising HHS on health information privacy and on the adoption of health data standards.

During the past year, as a result of your leadership, there were significant developments related to HIPAA standards for protecting the privacy of individually identifiable health information. Because the HIPAA deadline for Congressional action on health information privacy passed without the enactment of a law, HHS issued a proposed rule as required by HIPAA on standards for privacy of individually identifiable health information. While the NCVHS supports and applauds HHS for developing the privacy NPRM, we continue to believe that the best way to assure health information privacy in the U.S. is through a comprehensive and balanced federal law. Accordingly, the NCVHS again urges the Congress to enact a comprehensive federal health information privacy law this year.

Progress also continued this past year in the adoption of the transactions, security and identifier standards required by HIPAA. To date, after extensive consultation with the industry and other interested and affected parties, HHS has published Notices of Proposed Rulemaking for four of the initial standards required by HIPAA, with the first issued in 1998. Issuance of the final rules for these standards is expected in 2000. While progress is evident, because of the complexity of the standards almost two years now have passed since the NPRM stage without the issuance of a final rule.

Consequently, the NCVHS detects a growing industry concern about a loss of momentum. Further delay in issuing final rules for standards raises the possibility that industry resources committed to implementing the HIPAA standards may be diverted to other priorities. Moreover, delays in implementation translate into the loss of economic benefits from Administrative Simplification. Accordingly, the NCVHS reaffirms the importance of the Administrative Simplification initiative and urges you to expedite the publication of the final rules.

In the process of adopting health data standards, HHS has worked closely with the NCVHS, the industry, and the research and public health communities, and the process has been extremely open, collaborative, and productive. The success of the process to date bodes well for the ultimate implementation of these standards. Subsequent annual reports will describe progress on later stages of standards adoption and implementation.

We hope that you will find this third annual report informative and look forward to continued progress on these important issues for the nation’s health system. We are committed to dramatic improvements in health information systems that will enhance the quality of health care, lower costs, and facilitate access to care in the U.S.



John R. Lumpkin, M.D.