Over 40% of federal health insurance contractors and state Medicaid agencies reported experiencing a privacy breach involving personal health information in the past two years, according to a Government Accounting Office (GAO) report released on Tuesday.

The contractors and agencies collectively have access to medical data covering more than 100 million Americans, the report says.

"That's a shocking finding," says Beth Givens, director of Privacy Rights Clearinghouse, a non-profit consumer advocacy group. "It's not only the number of breaches but the sensitivity of the information breached."

The GAO report, "Domestic and Offshore Outsourcing of Personal Information in Medicare, Medicaid, and TRICARE," examines the role that private firms, federal agencies, and state Medicaid agencies play in administering three of the nation's largest public health insurance programs—Medicare, Medicaid, and the Department of Defense's TRICARE program.

Beyond noting the pervasiveness of privacy breaches, the report finds that the outsourcing of services involving personal health information is also common. Over 90% of Medicare contractors and state Medicaid agencies and 63% of TRICARE contractors reported some domestic outsourcing in 2005, typically involving anywhere from 3 to 20 U.S. vendors.

While relatively few organizations sent personal health information offshore—33 Medicare Advantage contractors, 2 Medicare fee-for-service (FFS) contractors, and 1 Medicaid agency said their domestic vendors had transferred personal health information offshore—the GAO believes the extent of offshore outsourcing may be underestimated "because many of the federal contractors and agencies did not know whether their domestic vendors transferred personal health information to other locations or vendors."

Givens says the report indicates that there's not enough security for healthcare records. "These findings certainly don't inspire much confidence that sensitive personal information is being adequately protected," she says.

The GAO recommends that the privacy breach notification requirements that currently apply to TRICARE and Medicare FFS contractors should be extended to other Medicare contractors that deal with personal health information and to state Medicaid agencies.