Privacy & HIPAA
HIPAA Background

The Health Insurance Portability and Accountability Act (HIPAA) was enacted by Congress in 1996 (Public Law 104-91) to reform the health care system in the United States. The “administrative simplification” provisions of the law are intended to improve the administrative efficiency and effectiveness of the health care system. One of the efficiency measures requires that certain enumerated transactions electronically transmitted by covered entities (health insurers, health care clearinghouses and health care providers that engage in electronic transactions) be conducted using national, uniform standards.

Regulations promulgated by the Department (45 CFR part 162) establish the standards for eight electronic transactions and for code sets. Under the enabling legislation, the Secretary is required to select code sets that have been developed by private and public entities or establish new code sets for such data elements without a pre-existing code set. Under the Final Rule, the following existing code sets were adopted: the International Classification of Diseases, 9th Edition (ICD-9), the Current Procedural Terminology, 4th Edition (CPT-4), the Code on Dental Procedures and Nomenclature (CDT), the Centers for Medicare and Medicaid Services’ Common Procedure Coding System (HCPCS), and the National Drug Codes. These national, uniform procedure codes will be used by covered entities to bill for the delivery of all health care services. Covered entities that engage in the standard transactions are required by law to utilize the national standards and code sets on or before October 16, 2002, unless an Administrative Simplification Compliance Act (ASCA) compliance plan is submitted, in which case the implementation deadline is extended by one year to October 16, 2002. Small plans must be in compliance on, or before, October 16, 2002.

Prior to the regulations, substance abuse and mental health procedure codes were largely, but not exclusively, developed locally and reflected the uniqueness of local health care delivery. The information provided through the local coding systems were used not only for billing purposes, but also for volume of service, outcome and other types of data. With the implementation of the HIPAA standards, all covered entities are obligated to integrate the new uniform codes into their information technology systems. Localities will need to collaborate to determine how to achieve this fundamental system change in such a way as to avoid or minimize the loss of important utilization data.

The National Association of State Mental Health Directors, Inc. (NASMHPD) and the National Association of State Alcohol and Drug Abuse Directors (NASADAD), Inc. have taken the lead in consulting with public and private partners in the behavioral health industry to determine a set of national codes that will identify the range of treatment services needed for high quality care across the Nation. These two groups collaborate at the local, State and Federal level to review existing code sets, identify gaps, and submit a more complete procedure and modifier code set to the Center for Medicare and Medicaid Services’ (CMS) HCPCS Committee. The first recommendation was submitted in March of 2001 and the second recommendation was submitted in February of 2002.