House Drops Medical Privacy Provision

The House backed away from a controversial medical privacy provision Friday that it had included in a bill to overhaul regulation of the financial services industry.

By 241 to 132, the House voted to drop the provision, unrelated to the rest of the bill, after medical privacy experts said that it could allow insurance companies, credit card agencies and banks to examine an individual’s medical records without the individual’s knowledge or permission.

The measure had been sharply criticized by an array of medical groups, including the American Medical Assn. and the American Psychiatric Assn., as well as privacy advocates. The Clinton administration opposed the provision.

The measure’s author, Rep. Greg Ganske (R-Iowa), himself a doctor, voted to have it dropped when a House-Senate conference committee melds the bill passed by the House with a similar Senate-passed bill, which does not mention medical privacy.

It is rare to see such a swift reversal on legislation. Despite defending its intent, both Ganske and Rep. James A. Leach (R-Iowa), chairman of the House Banking and Financial Services Committee, supported dropping the provision, and their clout won over the majority of the House.

“This is a very important bill, and I don’t think the bill should rise or fall on this issue,” Ganske said. “There’s been a lot of miscommunication and misunderstanding about the medical privacy provisions here . . . [and] we’ll be working on this in other venues.”

The measure the House voted on Friday is a nonbinding instruction to lawmakers who will sit on the conference committee.

The overall legislation is designed to break down the barriers between various sectors of the financial services industry, such as banks and insurers, allowing them to compete in each other’s lines of business. The bill includes a number of provisions that for the first time would give consumers some financial privacy protections.

Those provisions include requiring financial institutions to disclose their privacy policy to consumers, allowing consumers to choose not to have their confidential financial information sold to unaffiliated third parties and prohibiting disclosure of consumer account numbers to telemarketers.

The problem Ganske was trying to remedy was that removal of the barriers between the branches of the financial industry would leave no firewalls to prevent medical information, for example, from being given by an insurance company to other financial institutions.

Thus, a bank could learn from an affiliated insurance company that a person seeking a loan had cancer. The bank might then deny the loan or demand that the individual pay high interest rates.

The measure inserted in the bill had one clause requiring that an individual give permission to have information released, but it also had other provisions that would have had the effect of overriding the consent clause.

“The way it was drafted, it had loopholes that were so huge that people’s records could be given out without them knowing about it--let alone consenting,” said Rep. Henry A. Waxman (D-Los Angeles).

Leach, who supported the move to take the privacy provision out of the overall bill, underscored that there are no medical privacy protections left in the bill--a move he said was ill-advised.

Privacy advocates agree that there is a need for protection of consumers’ medical information in the financial services industry but said that they would work to have it included in the comprehensive medical confidentiality bills that Congress expects to debate in the fall.