Charlotte Twight
Friday, Aug. 9, 2002

The uncomfortable truth is that in formulating the final medical privacy rule, government officials employed the same tactics that they used in engineering passage of Medicare in 1965 and HIPAA in 1996 (Twight 1997, 1998). Lawmakers again relied on government manipulation of political transaction costs — strategies whose chief effect has been to raise the costs to ordinary citizens of resisting measures that increase the size and scope of government (Twight 1994).

Among the forms of this behavior used in passing Medicare and HIPAA and later in formulating the medical privacy rule are misrepresentation, the tying of unpopular measures to popular ones, and incrementalism.

In the most recent case, the misrepresentation has been breathtaking. HHS described the purpose of the medical privacy rule as follows:

(1) To protect and enhance the rights of consumers by providing them access to their health information and controlling the inappropriate use of that information;

(2) to improve the quality of health care in the U.S. by restoring trust in the health care system ... ; and

(3) to improve the efficiency and effectiveness of health care delivery by creating a national framework for health privacy protection. (U.S. Dept. of HHS OPE 2000, 82463)

Of these stated purposes, the only one accomplished by this rule is to give patients specific (though qualified) rights of access to their own medical records and the opportunity to request correction of errors in those records (U.S. Dept. of HHS OPE 2000, 82823–26, §§164.524, 164.526).

As for "controlling the inappropriate use of that information,” "creating a national framework for health privacy protection,” and "restoring trust in the health care system,” the only way these regulations might restore such trust is if government officials make sure that people do not understand the rule’s actual content.

Deliberate Obfuscation

HHS officials have tried to do so. They have described the new rule as "likely the largest single federal initiative to protect privacy,” emphasizing patient consent and control over disclosure of medical records (U.S. Dept. of HHS OPE 2000, 82468).

Who would oppose such seemingly beneficent objectives? Of course, that is the point: disguising the rule’s actual content by asserting its devotion to medical privacy significantly raised the transaction costs to ordinary Americans of understanding the regulation and of taking political action to oppose the anti-privacy measures embedded in it.

Misrepresentation saturates the very vocabulary of the rule. Consider HHS’s use of the phrase protected health information in provisions that allow covered entities to disclose patients’ medical records without their permission. That phrase recurs throughout the provision that lists the 12 major situations in which covered entities "may use or disclose protected health information without the written consent or authorization of the individual” (U.S. Dept. of HHS OPE 2000, 82813, §164.512).

For example: "A covered entity may disclose protected health information for the public health activities and purposes described in this paragraph to . . . [a] public health authority . . . ; [a] covered entity may disclose protected health information to a health oversight agency for oversight activities authorized by law” ( U.S. Dept. of HHS OPE 2000, 82813–14, my emphasis).

By defining protected health information as "individually identifiable health information” and then consistently using the former phrase, HHS reinforced an impression that personal medical information truly is "protected” health information under the rule, even as that information was stripped of protection in the normal sense of the word through provisions authorizing its disclosure without patients’ permission.

Feds’ Version of ‘Peace of Mind’

More broadly, HHS asserted to the public that "until now, virtually no federal rules existed to protect the privacy of health information” and that the final rule "establishes, for the first time, a set of basic national privacy standards and fair information practices that provides all Americans with a basic level of protection and peace of mind that is essential to their full participation in their care” (U.S. Dept. of HHS OPE 2000, 82464, my emphasis).

A nice touch, that: peace of mind.

A Spoonful of Sugar Helps the Medicine Go Down

Beyond the misrepresentation, as with the earlier HIPAA and Medicare legislation, here, too, the federal government tied unpopular measures to popular ones, presenting the whole as a package deal.

Linking popular measures, such as patients’ rights to examine and correct their own medical records, with less popular ones, such as disclosure of patients’ medical records without their permission, again raised the political transaction costs of opposing a measure that increased the federal government’s power.

Next: the bleak outlook for privacy.

This article is adapted with permission of the publisher from the article "Health and Human Services 'Privacy' Standards: The Coming Destruction of Medical Privacy," by Charlotte Twight, in The Independent Review: A Journal of Political Economy (Spring 2002, vol. VI, no. 4, p. 485-511). © Copyright 2002, The Independent Institute, 100 Swan Way, Oakland, Calif. 94621-1428; http://www.independent.org.

Charlotte Twight is a professor of economics at Boise State University.

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