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What Does The End Of Chevron Deference Mean For Healthcare?

In an expected move, the Supreme Court ruled that the so-called 1984 Chevron deference under the nations’ regulatory system is no more. It has now thrown the Supreme Court precedent out. It is a technically complex ruling that has major implications for policymaking throughout government. Chevron was not a precedent just for healthcare agencies but applied to every executive department and agency out there – defense, environment, health, commerce, consumer protection and more.

The decision split along rather pure ideological grounds, with six more conservative justices lining up against three more liberal ones. The Chevron doctrine said that courts must give deference to reasonable interpretations of regulations issued by regulatory agencies that may be in part based on laws that are ambiguous. In essence, regulators had reasonably wide discretion to interpret what these ambiguous parts of a law meant and if so, how a law might be implemented.

Proponents think that Chevron deference is a necessary power of regulatory agencies. They say its elimination will lead to a Wild West of court decisions in the future, with courts in various regions having different approaches to interpreting laws and how laws should be carried out. They argued that agencies are the policy and regulatory experts and the discretion was best held by agencies.

Most proponents, too, support Chevron because it has allowed agencies to be activist policymakers and push the limits of certain laws. What might not be able to be passed by Congress actually gets through regulations under Chevron. Democratic administrations are known to like Chevron because it promotes activist agendas.

Opponents argued that Chevron backfired and created an administrative state that is far-reaching and one that went well beyond the Supreme Court’s original intent. They say that regulations went well beyond legislative intent. Opponents believed that Chevron led to policy changes, sometimes big, when administrations change. This upset the regulatory landscape for stakeholders, who could not rely on regulations issued by one administration when investing in their businesses.

What will all this mean?

One important point is that most regulations overturned in the courts in the past many years really have little to do with Chevron. Most of the court actions overturn portions or all of regulations tied to the fact that agencies often blatantly ignore legislative intent, overstep regulatory authority, or ignore their very own regulations and the Administrative Procedures Act (APA) when promulgating regulations.

But what it will do is create far more challenges to regulations moving forward since the rule no longer requries courts to defer to regulatory agencies in interpreting ambiguous provisions of laws. The majority in the Supreme Court decision made the case that the role of the courts is to interpret such matters and it should not be left up to regulatory agencies. It said that the role of interpreting laws was improperly delegated from the courts to regulatory agencies.

Regulations will have to meet a much higher bar. While judges had to defer to agencies short of clear direction from Congress, now the courts will scrutinize such regulations. Court reviews will take significant time. Even more regulations will now be struck in whole or part and enacting regulations generally will take far more time – more time for initial promulgation, court study and decisions, and likely second, third and more rounds of amended regulations.

More broadly, the elimination of Chevron has huge implications on policymaking in general. Policymaking will become far more incremental than activist. Wide-ranging regulations in all walks of life will be the exception and not the rule. Regulatory agencies will have to approach complex policies over a series of years and regulations, sometimes even waiting for Congress to weigh in more than once on matters.

 It is important to note that Chevron has already been chipped away at. In previous rulings, the Supreme Court issued guidance related to what is or is not ambiguous. The court ruled in 2022 that regulators must have clear congressional authorization before acting on “major questions.” Lower courts have been moving in the “no Chevron” direction in rulings over the past few years.

The high court made it clear that its ruling was not meant to overturn prior regulations that relied on Chevron. But there is no doubt in my mind that many previous rulings will in fact be litigated again.

Where do I stand?

To be honest – I am not totally sure.

As someone who served in government, I tend to think that:

  • Executive branches should and must have discretion in how they implement laws. Lawmakers are notoriously sloppy on how they enact laws. They simply do not give enough details. Are lawmakers and their aides now to prescribe meticulous regulatory details or at least give sufficient direction for promulgating regulations? I would argue lawmakers are not the experts, either. As well, Legislative branches at both the state and federal level tend to defer things to the executive branch.
  • I do not doubt the agencies have the experts. Will judges suddenly become experts on everything – including emerging technologies such as AI (something Justice Kagan raised in a dissent)? I have seen plenty of cases in my service in government where judges just clearly got it wrong because they were not experts and did not understand details or nuances. Judges are not supermen or superwomen just because they went to law school.
  • Sometimes incrementalism in policy grinds important issues to a halt. Will that become the reality of policymaking across the board now with cautious regulators, active special interests, and increased court scrutiny?
  • This will empower special interests, who will seize on the expanded ability to sue on regulations to delay impacts to themselves.
  • Will courts get overwhelmed sorting out all the issues and conflicting rulings? Will the Supreme Court have to weigh in on all the conflicting decisions at lower levels? The chief justice argued in his opinion that this is in fact the reality today even with Chevron. I am not sure he understands the magnitude of the impact.

At the same time, I know firsthand about how:

  • An administrative state can become unaccountable and seize policymaking power from not only the legislature but the executive branch itself. There is good reason to think that is indeed what happened since Chevron became the rule back in 1984. Agencies, principally under Democratic administrations, used Chevron to enact sweeping and broad policy changes, sometimes by relying on underlying statutes.
  • Regulators should not be policymakers per se, but implement policy set by our elected leaders. Too many regulators view themselves as more important than lawmakers. There is no question that agency bureaucrats at the federal and state levels often have activist agendas.
  • The decision could actually give stakeholders impacted by federal agency regulations a fighting chance now. As an example, most stakeholders lack the resources or sophistication to fight back on unfair regulations issued by agencies and cleared due to the Chevron deference today. In the future, courts could stand as advocates of the stakeholders and strike down regulations that are too far-reaching, onerous, and beyond what laws intend.

In a nutshell, I wonder if the Supreme Court’s ruling was a bit too far-reaching and unwieldy. While it had already reined in Chevron, could it have attacked additional concerns a little more incrementally, targeting the remaining egregious examples of overstepping Chevron deference?

What will happen on healthcare?

In general, less healthcare policymaking will result as Congress (the law-making body), the agencies (the implementing body) and courts (the interpretative body) will all need to adjust and likely go far more slowly. It will take much longer to implement regulations successfully. And such regulations will be less activist, less far-reaching, and more incremental.

Healthcare agencies will be heavily impacted with regulatory delays and potential court actions due to the complexity of regulations and the money at stake for providers, plans, drug makers, and more.

Some speculate that healthcare agencies now will rely on subregulatory processes, non-binding guidance, and enforcement actions. But this has its own risks too. Indeed, after losing numerous court cases on several issues over the years, the Centers for Medicare and Medicaid Services (CMS) limited their use of some of these processes because they were vulnerable in court.

What will happen in agencies proper?

Perhaps the biggest impacts may be seen at the Food and Drug Administration (FDA). Regulatory efforts, especially those impacted by emerging technologies and new scientific evidence, could be stalled as courts sort out challenges. Drug approvals might also be challenged.

We will likely see even more challenges to Department of Health and Human Services (HHS) and CMS regulations. Healthcare parties will challenge the myriad financial and policy regulations issued even more so. This could be the case with rate-setting as well.

Expect to see far less activist regulations on Medicaid, Medicare, Exchanges, and more.

What will happen to healthcare stakeholders?

Providers may see more harm than benefit given how reliant they are on regulations, including rate-setting. But radical changes, such as staffing mandates as some are battling now, may be less likely.

Health plans and pharmacy benefits managers may benefit as efforts to enact radical changes are less likely. Rates need annual notices but not necessarily regulatory changes.

Drug makers likely will be hurt by a slowdown in the FDA regulatory process, but could benefit from the back-burnering of things like expanded drug price negotiations.

Sources and additional reading:

https://www.fiercehealthcare.com/regulatory/supreme-court-overrules-chevron-deference-dealing-blow-federal-healthcare-agencies

https://www.healthcaredive.com/news/scotus-overturns-chevron-doctrine-healthcare/720219

https://www.modernhealthcare.com/government/supreme-court-chevron-ruling-federal-regulation

https://www.washingtonpost.com/politics/2024/06/28/supreme-court-chevron-federal-agency-authority

https://insidehealthpolicy.com/daily-news/cms-fda-face-weakened-authority-following-scotus-chevron-decision

https://insidehealthpolicy.com/inside-drug-pricing-daily-news/chevron-ruling-could-chill-fda-s-public-health-efforts-stem-ai-ldt

https://www.modernhealthcare.com/policy/chevron-deference-ruling-healthcare-regulation-hhs-cms

https://www.kff.org/private-insurance/issue-brief/supreme-court-decision-limiting-the-authority-of-federal-agencies-could-have-far-reaching-impacts-for-health-policy/

kffhealthnews.org/news/article/supreme-court-chevron-deference-doctrine-health-care-policy-shockwaves/

#chevrondeference #regulations #hhs #cms #healthcare #healthcarereform #supremecourt

— Marc S. Ryan

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