CRE’s Petition to OMB – April 17, 2001
Executive Summary

HHS’s Legal Violations in Connection with the Final Rule on Electronic Transactions Standards ("ETS Final Rule") Under the Paperwork Reduction Act:

HHS violated the legal requirement that it provide complete and adequate estimates of the burdens/costs of the information collection requirements on all of the categories of "respondents." HHS has failed to provide cost data for all of the categories of respondents and for all of the different types of burden within each category.

HHS violated the legal requirement, in both the Health Insurance Portability and Accountability Act ("HIPAA") and the Paperwork Reduction Act ("PRA"), that electronic technologies be used to reduce regulatory burdens. Instead, by imposing outdated "batch mode" technologies, HHS is impeding the use of cost-saving Internet and other state-of-the-art technologies.

HHS violated the legal requirement that its regulation have "practical utility" for a number of reasons, including that the ETS Final Rule in some instances prohibits data users from accessing needed data, so that health care transactions will be delayed. Yet in other instances HHS is requiring the data provider to transmit literally hundreds of data points when the user needs only three or four.

HHS violated the legal requirement that it provide adequate staff allocations and agency funding so that HHS can effectively manage the new requirements it is imposing on the entire health care industry. Yet the CRE Petition demonstrates that HHS has not allocated sufficient staffing or funding to assist "covered entities," such as hospitals, state Medicaid agencies and physicians, in attaining compliance.

Virtually all of the legal requirements in the ETS Final Rule are "information collections under the Paperwork Reduction Act. As such, they are unenforceable unless HHS submits a "clearance package" to OMB demonstrating that HHS has met all of the PRA’s substantive and procedural requirements. HHS has failed to submit a clearance package to OMB. The two-year compliance deadline in the Final Rule began to run in October of 2000. Yet as of April 17, 2001, the requirements are unenforceable under the PRA. HHS is requiring the entire health care industry to spend literally billions of dollars to comply with a regulation that is not even legally enforceable at the present time. By the time HHS does submit a clearance package to OMB, half of the compliance deadline will have already expired.

Under HIPAA, HHS was supposed to promulgate a set of "Administrative Simplification" regulations (including ETS, unique provider identifiers, claims attachment requirements, etc.) together as an integrated body of regulatory requirements. Instead, HHS is taking a "piecemeal" or "staggered" approach by requiring full compliance with the ETS regulation before the other regulations have even been issued. This will double the costs of compliance to the health care industry, which will in turn deflect funds away from providing health care services to consumers.

HHS’s Failure to Address Concerns Raised by State Governments:

HHS has ignored the pleas of the National Governors Association and state Medicaid officials, who have testified that the ETS Final Rule contains unreasonable compliance deadlines and that the substantive regulations would "hamper [the] ability to process claims" due to the fact that HHS has eliminated many health codes without replacing them.

The ETS Final Rule is actually incomplete, because HHS has announced that it intends to incorporate additional requirements for each of the 50 states at some time in the future. This means that covered entities will have to overhaul their entire information systems now, only to be told later that another overhaul will be required when HHS announces the state modifications.

OMB’s Authority and Obligation to Correct HHS’s Violations:

OMB has a statutory duty under the PRA to ensure that "sponsoring agencies" such as HHS comply with the PRA.

OMB has broad authority to modify an agency’s initial "information collection request" to correct problems such as those identified in the CRE Petition.

Specific Relief Sought by CRE:

OMB should require HHS to submit a complete clearance package, including statutorily mandated justifications, certifications and analyses;

OMB should refrain from deciding whether to issue a control number for information collections in the ETS Final Rule until HHS has complied with its obligations under the Paperwork Reduction Act;

OMB should refrain from reviewing the ETS clearance package until HHS has issued the other Administrative Simplification regulations, as required by HIPAA, so that OMB can assess the impact that the other Administrative Simplification components will have on whether the ETS requirements will ultimately comply with the PRA;

OMB should require HHS to prepare complete and accurate burden estimates;

OMB should extend the initial compliance deadline to 24 months from the later of the following dates: (i) date on which HHS issues the other required regulations for the Administrative Simplification program (not including privacy or unique personal identifier); (ii) date on which OMB has granted control numbers for all of the Administrative Simplification regulations (not including privacy or unique personal identifier); (iii) date on which HHS has made modifications to the ETS requirements to address the needs of state governments and programs such as Medicaid; (iv) date on which HHS has made modifications to the ETS regulation to address conflicting requirements of the Department of Labor’s final rule governing Claims Procedures under ERISA; and (v) date on which HHS completes a negotiated rulemaking to correct gaps and implementation problems in the ETS requirements.