FC: Cato's Tom Miller testifies on genetic privacy: Avoid hasty laws

[Declan McCullagh <declan () well com>]

---

Date: Wed, 11 Sep 2002 13:00:24 -0400
From: "Tom Miller" <tmiller () cato org>
Subject: Genetic Privacy --- House Judiciary subc. on the Constitution, 
Sept. 12, 10 a.m.
Cc: <declan () well com>

Declan:


I'm not sure if your privacy and technology coverage extends over to the 
issue of "genetic privacy," but that's what I'm scheduled to testify about 
at a House Judiciary subcommittee on the Constitution hearing (10 a.m., 
2237 RHOB).  I've attached my indequate and incomplete written testimony.



Tom Miller




Testimony of

Tom Miller

Director of Health Policy Studies

Cato Institute


Before the

House Judiciary Subcommittee on the Constitution

on

Genetic Privacy

September 12, 2002
                                                                

Good morning, Mr. Chairman and Members of the Subcommittee.  My name is Tom 
Miller.  I am director of health policy studies at the Cato Institute.  It 
is a pleasure to appear before you today to examine privacy concerns raised 
by the possible collection and use of genetic information by employers and 
insurers.
	I say "possible" because there is little, if any, evidence that health 
insurers are using or likely to use presymptomatic genetic information in 
their medical underwriting.  Evidence that employers try to obtain, let 
alone use, such information generally is limited to isolated 
anecdotes.  One survey of human resources managers revealed that limited 
evidence of genetic testing actually reflected misunderstanding of what 
truly is genetic information, as opposed to routine blood tests or testing 
for the presence of a disease (rather than a genetic susceptibility to it).
	However, this topic usually is built on assumptions about the future and 
what some observers believe private insurers and employers might do in the 
event that genetic testing and genetic information eventually became more 
accurate and precise in revealing an individual's prospects for future 
disease, incapacity, and unusually high health care claims costs.
	As Yogi Berra once said, or probably should have if he did not, 
"Predicting the future is hard, because it hasn't happened 
yet."  Nevertheless, let's proceed by beginning with what we do know about 
how private insurance markets and labor markets operate.
 	It's reasonable to assume that more accurate, comprehensive, and 
inexpensive genetic testing will arrive one day; the question is more one 
of the pace at which this will take place.  When combined with reliable 
evidence from epidemiology about the probability and magnitude of various 
maladies, the continuing genetic revolution promises to improve 
dramatically our ability to detect disease at an early stage, and treat it 
more effectively or even prevent it.  Better, and earlier, knowledge about 
genetic predisposition to illness might help individuals take preventive 
measures to reduce the consequences of disease or even eliminate its 
onset.  Enhanced use of more predictive genetic information may assist 
individuals in making lifestyle plans and choices.  It also holds great 
promise in fine-tuning health care treatment, such as through more narrowly 
targeted "designer" drugs and gene therapy interventions.
 	But the offsetting concern encompassed in the catchall desire to protect 
"genetic privacy" is that one's personal genetic information might be 
disclosed to others without one's consent and then used to one's personal 
detriment.
	Without question, any information that can be used may also be used 
badly.  But a host of policy complications and administrative complexities 
arise if one attempts to craft a unique brand of legal protection against 
the disclosure of personally identifiable genetic information in the name 
of "genetic privacy."
	First of all, any possible constitutional protections for genetic privacy 
would be limited to apply only against government action.  The Fourth 
Amendment right of privacy (the right to be free from "unreasonable 
searches and seizures") and the more narrow right to "informational 
privacy" recognized in Whalen v. Roe do not apply to the private sector.
	Moreover, the more accurate way to frame the issue of whether statutory 
law should prohibit or limit disclosure and use of genetic information by 
private parties is in terms of genetic "nondiscrimination" rather than 
genetic privacy.  It also would narrow the legislative and regulatory focus 
to consider whether and how to protect consumers from harmful use of 
genetic information, rather than whether and how to maximize consumers' 
legal control over that information per se.
	But even erecting legal barriers against discrimination based on genetic 
information would strain the limits of genetic exceptionalism, defy precise 
definition, pose serious threats to the functioning of private insurance 
and labor markets, and overlook more effective alternative remedies.
    	There is no clear line that separates genetic data from other kinds 
of personal health information.  Attempts to define "genetic" diseases must 
sort through a fuzzy mix of compulsive, addictive, and patterned behaviors, 
as well as characteristics like intelligence, aggressiveness, and obesity 
that have both genetic and environmental roots.
 Moreover, the sources of legally protected genetic information might be 
obtained from many current and commonly accepted medical practices that do 
not involve explicit "tests" of one's genetic material.  For example, 
personal medical histories, family medical histories, routine physical 
exams, and blood pressure tests all might convey predictive health 
information that could be linked to genetic factors.
	In efforts to protect against genetic discrimination, how should 
policymakers deal with the "predictability" of medical conditions that are 
influenced by multiple genes that work in conjunction with environmental 
factors?   Or with genetic predispositions that only increase the risk, 
rather than establish the certainty, of developing a disease?  Or with 
genetic conditions that increase one's probability of experiencing both 
adverse and beneficial outcomes?  Should legal prohibitions apply only to 
uses of genetic information that disadvantage the protected party?
   	Overly broad legal claims to genetic privacy and genetic 
nondiscrimination often may serve as a subterfuge for more fundamental 
opposition to various kinds of private health insurance underwriting based 
on individual health risk or to voluntary disclosure of sensitive health 
information to one's employer.  As Richard Epstein observes, modern uses of 
privacy may be used to override freedom of contracts and even "act as a 
handmaiden to fraud."    One's right to privacy should not include the 
right to misrepresent oneself to the rest of the world, particularly in the 
case of making statements to one's health insurer or employer that one 
knows to be false, material to the listener, and relied on to the 
listener's detriment.  For example, individual insurance consumers who know 
or suspect their genetic risk factors should not be able to engage in 
unilateral strategic behavior to choose the timing, scope, and/or duration 
of the insurance coverage they purchase.
A broad prohibition on any disclosure of genetic information would prevent 
good health risks from obtaining positive genetic information on their 
behalf and then voluntarily disclosing it to potential health 
insurers.  Yet efforts to separate the treatment of predictive genetic 
information into prohibitive negative categories and permitted positive 
categories would defy administrative consistency and predictability.  They 
would essentially lead to a regulatory regime of "Can't ask, may tell, may 
lie" in which truth is discouraged and lies are protected, promoted and 
necessary.
	At this point of the discussion of genetic privacy and genetic 
discrimination, many private health insurance industry representatives 
begin to retreat behind the current wall of federal and state legislation 
that already prohibits or limits most forms of genetic discrimination, 
particularly in the employer-sponsored group insurance market.  For 
example, the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) prohibits discrimination against individual workers who are members 
of an employer group plan  either on the basis of their current health 
status or on the basis of their predisposition to a particular disease 
based on genetic information.  They cannot be denied access to group health 
plan benefits or be required to pay higher premiums due to their individual 
health status.  And, after they have satisfied HIPAA's preexisting 
condition limitations once, they then may move to another employer's group 
health plan without facing new limitations on coverage due to additional 
information about their health status.  Genetic information also is treated 
as protected personal health information under HIPAA's health privacy 
regulations.
	However, HIPAA does not govern the use of genetic information in the 
individual health insurance market, which generally has more operating 
freedom in the underwriting process under the insurance rules of most 
states.  Health insurers are more likely to oppose explicit prohibitions on 
use of genetic information in the individual market and to point out that 
tighter restrictions on underwriting and pricing in such a smaller and 
often transitory market are more likely to reduce rather expand available 
coverage there.
	But even medical underwriting in the individual market tends to focus on 
medical costs that are likely to occur within the first few years after a 
policy is purchased, and more expensive genetic screening tests to predict 
much longer range health risks would not be worthwhile to insurers, even if 
legally permitted.   Yet insurance industry representatives generally will 
caution against outright bans on genetic testing in the individual market, 
essentially arguing, "We don't use it, we don't plan to use it, but don't 
prohibit us from using what we don't need to use."  One might ask, why?
	For one reason, first consider that, apart from HIPAA's legal prohibition 
on medical underwriting of individuals within employer group health plans, 
the common practice of insurers is to rely on experience rating for all but 
the smallest employer-sponsored groups.  The expense and administrative 
burden of more intensive underwriting simply outweighs the practical value 
of whatever limited and imprecise information about health risk that an 
insurer might obtain.  Insurers also have no incentive to turn away 
apparently healthy customers, or even somewhat less healthy ones (as long 
as rating flexibility permits some adjustments), based merely on possible 
long-term genetic risks that remain hard to measure.
However, it does remain possible that, as genetic testing and genetic 
information becomes more predictive much further down the road, and as 
private insurance coverage becomes more customized (such as through defined 
contribution plans and consumer-driven health care options), more private 
insurers eventually will face greater pressure either to sort high risks 
into high-premium and restricted coverage risk classifications or to 
increase premiums and restrict coverage further across the board.  If 
individual customers become better armed with personal genetic information 
and can engage in behavior that increases the previously predictable range 
of insured claims, insurers will want to use, and they will need to use, 
such information to correlate more accurately those genetic characteristics 
with future costs and premiums.  Otherwise, low-risk customers increasingly 
will exit voluntary private insurance markets and the overall supply of 
coverage will contract.
A good bit of this speculation about the future and the so-called "end of 
insurance" reflects the likely time lag we will experience in making an 
uneven transition from the first round of genetic information and 
biomedical research that is better able to detect and diagnose genetic 
problems than later rounds of scientific discovery will be able to cure or 
mitigate.  As Roberta Berry has observed, we should more carefully weigh 
the consequences of regulatory interventions that essentially are aimed at 
assuring that genetically high-risk individuals are able to obtain bargain 
premiums from and transfer their losses to a private pool of lower risk 
insurance customers or their employers.
Prohibiting use of predictive genetic information also rather 
"indiscriminately" provides a hidden subsidy to any individual who might be 
discriminated against for genetic risk reasons, regardless of their 
financial circumstances or particular needs.  Yet we generally do not 
provide similar subsidies for other forms of "bad luck" in life's genetic 
lottery, such as less desirable levels of traits like intelligence, 
aggressiveness, or physical appearance that have at least some genetic 
roots.  It would also seem odd if regulatory treatment were to become 
relatively more tolerant of adverse treatment of symptomatic individuals 
than for asymptomatic individuals who merely possess genetic risk factors.
 Broad federal regulatory prohibition against genetic discrimination in 
health insurance may shut off valuable flows of information and suppress 
financial incentives that could encourage individuals to make better 
decisions about the insurance coverage they buy, the investments they make 
in other health-promoting activities, and the behaviors in which they engage.
Not very far below the surface of claims that genetic discrimination in 
health insurance should be prohibited is the larger issue of whether risk 
classification based on health status is permissible within at least some 
private sector portions of our mixed system of voluntary private insurance 
and publicly financed health programs.  Employer group health plans 
straddle the fence by moving risk classification to the firm, as opposed to 
individual, level.  But private insurers still need to be able to predict 
the approximate level of health claims they are likely to pay if they are 
to set their premiums high enough to stay in business, yet assure lower 
risk customers that the coverage offered to them is worth the price charged.
    As enhanced availability and use of more predictive genetic 
information strains the fault lines of our private health insurance system, 
we first should consider other market-based, private-sector mechanisms, or 
at least more explicit and overt public subsidies, as alternatives to 
expanded regulatory cross subsidies.  Public policy might encourage the 
development of better voluntary pooling mechanisms outside of the 
employer-employee relationship.  It could facilitate long-term health 
insurance contracts that offer guaranteed renewability options or other 
time-consistent insurance incentives such as second-tier savings components 
that would remain subject to illness-state-contingent "severance payments" 
for early departure from a particular insurance pool.  Or consumers might 
consider purchasing "genetic test insurance" to insure themselves against 
any as-yet unknown risks before they took particular genetic tests.  More 
conventional approaches might include expansion of high-risk health 
insurance pools and greater incentives for charitable contributions to 
nonprofit intermediaries that organize and deliver safety net health care.
  I will touch more briefly on the issue of genetic information and 
genetic discrimination in employment settings (although the above health 
insurance issues also would come into play for employers that sponsor 
self-insured health plans).   In general, I concur with Richard Epstein's 
view that employers should be able to seek whatever information they might 
find relevant to their employee's job performance.  Prospective and current 
employees, of course, may refuse to supply information that is 
requested.  One might imagine some extreme circumstances that could 
necessitate the intervention of public authorities to do more than enforce 
employment contracts and prevent fraudulent misrepresentations, but that 
should be the narrow exception rather than the broad rule.  Irrational 
prejudice and discrimination in labor markets may overwhelm economic logic 
on some occasions, but market forces also will impose significant costs on 
employers who persistently exclude productive workers who might happen to 
possess genetic risk factors.  If employers are faced with prohibitions 
against using valuable genetic information, they are most likely to resort 
to other legal and second-best (or third-best) substitutes for forbidden 
information.  Employers might restructure compensation packages to adjust 
for higher health benefits costs, substitute part-time labor and 
independent contractors for full-time jobs, rely more on capital 
investments or offshore operations, or hire younger and presumably 
healthier workers.
If regulatory policy insists that employers should remain blind to the 
known costs of employing certain types of individuals, those employers will 
resort to coping mechanisms to cut their losses but leave us all a bit 
poorer and less efficient.
   Rather than rely on greater regulation of information flows simply 
because they are labeled "genetic," we should restore and renew our 
commitment to competitive markets, private property rights, and private 
contracts.




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