Commentary

To Do Their Jobs, Drug Makers And Cost-Cutters Need Access To Our Health Data

By Solveig Singleton
Published by Bridge News, October 29, 1999
President Clinton has announced a “common sense” federal privacy policy for electronic health records, which he called “an unprecedented step toward putting Americans back in control of their own medical records.” But patients should be wary.

Consumers may find the administration’s privacy prescription something of a quack remedy, superficially easing fears of intrusions into medical records, while pushing the costs of health care higher.

In a nutshell, the proposed privacy policy assumes that the use of patient information for nonmedical purposes is disreputable.

For purposes like marketing, information such as who bought what drugs when and where would be permitted only after companies work through a tangle of red tape.

Except, of course, if the person asking to access the records is a law enforcement officer or an auditor looking for insurance or Medicare fraud.

In those circumstances, privacy principles go overboard fast.

The idea that patient information should be seen only by doctors has an emotional appeal. It’s grounded in the history of medical ethics, too.

But as always, there is another side to the story.

Why are insurance companies and auditors looking for access to our medical records? A major reason is soaring health-care costs.

Costs rise out of control not because of any market failure but because of the billions of dollars in subsidies that pour into the system from Medicare, Medicaid and other sources.

Patients have no reason to shop for the best price when much of the time someone else is footing the bill. So costs soar and fraud rises. Auditors demand access—and rightfully so. Soaring costs hurt all of us.

Free market reforms would restore our health-care system and help end the explosion in costs. Until such reforms are made, the auditors will not be sated.

Clinton’s medical privacy proposal is unsatisfying because it leaves medical records open to endless audits of treatment records.

The last thing patients need is to see more doctors fleeing solo practice rather than continuing to wrestle with thousands of pages of baffling billing rules in which a simple mistake can mean a fraud charge.

Yet the privacy proposal would bar insurance companies from referring to medical records in underwriting new patients. The effect is to favor opening records for pursuit of fraud after the fact, but restrict access to information that could prevent fraud in the first place.

Insurance buyers who are in good health are doomed to pay higher premiums to cover those who are not entirely frank about their medical history.

Another force behind companies’ hunger for more information comes from the business side of medicine. Emotion again drives the debate. How can consumers benefit by having their medical information used in marketing?

The answer is startling. “Fear of Persuasion” by American Enterprise Institute scholar Jack Calfee shows that consumers get enormous benefits in lower prices and higher quality when companies compete through advertising.

Stopping the information flow between drug companies and patients using their products means less competition between pharmaceutical products. The patient is left with only his or her doctor as an information source.

The administration’s proposed privacy policy would allow patient information to be used for marketing purposes only if the consumer allows it.

Many patients have a vague fear that a drug company’s using patient information to develop a product or reach a market poses some danger to them. They may choose not to opt in. The sad thing is, they may never know that such decisions contribute to higher prices and less choice.

Another irony of the administration’s policy is its implicit endorsement of the use of medical information in academic research. Patient information could be used for research under the supervision of an ethics board.

Why is academic research so favored but the business end of the same enterprise—learning about how to improve people’s health—disfavored?

It is the business side of medicine, after all, that translates the finding of researchers into medicines and treatments. It is the marketing side of business that delivers those treatments into the hands of actual, individual patients.

Could a simple-minded view that business is bad and science is good be lurking in the minds of these “privacy advocates?”

As long as the federal government is entangled in our health-care system, it is hard to argue against some kind of federal action on privacy.

But this need should not be the occasion to push health costs yet higher and to restrict competition. As sensitive as we are about our health-care records, it is time to look at the other side of the story.

Human beings rarely make better decisions when they are given less information. And our health-care system desperately needs some informed decisions.

Solveig Singleton is director of information studies at the Cato Institute and the coeditor of Regulators’ Revenge