Supreme Court decision to limit federal agencies’ power could have far-reaching implications for health policy

The U.S. Supreme Court has once again overturned long-standing precedent, this time getting rid of a 40-year-old decision-making standard that required federal courts to defer to reasonable agency decisions when federal law is silent or unclear. It “Chevron “deference” standard has already fallen by the wayside, heralding a new era in which courts will not be required to accept agency expertise in their review of challenged regulations. While the details of the principles that define administrative law often attract little attention, this decision, like the decision that overturned Roe v. Wadewill have profound implications for healthcare. This brief discusses the decision and assesses what lies ahead.

What the court said

As explained in the KFF summary Upcoming SCOTUS Case Could Diminish Impact of Regulation on Key Patient and Consumer ProtectionsThe Supreme Court has taken up two cases to examine the issue of whether Chevron deference should be reversed or modified. Two cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, decided together, address federal regulations affecting the fishing industry, but the decision will shape how courts will consider legal challenges to all regulations that interpret matters on which federal law is ambiguous or silent, including health care.

In a 6-3 majority decision, with Justice Roberts representing the majority, the Court held that Chevron respect should never be used to bring down Chevron decision. The court presented the following main points:

• Courts must exercise independent judgment to determine the meaning of federal statutes. They may not defer to agency regulations simply because the issue is not clear in the statute. According to the majority opinion Chevron The decision contradicts the Administrative Procedure Act (APA), which reflected the previous practice that “courts shall decide questions of law by exercising their own judgment.” The APA is a 1946 law that sets the parameters for how the agency operates.
• On the issue of deferring to agency expertise to resolve a problem, the Court stated that “…agencies have no special authority to resolve statutory ambiguities. The courts do.” While courts may “defer” to agency regulations and expertise and expect them to inform them on technical issues, “Congress expects the courts to address technical questions of the statute.”
• Although federal courts must generally follow prior Supreme Court decisions (a legal concept called old decisions), the majority opinion found that the 1984 Chevron decision was flawed and “impractical” because there could be different interpretations of what makes the statute ambiguous. As a result, the Court concluded that “there is no reason to wait helplessly for Congress to correct our error.”
• The opinion indicated that it did not apply to previous cases in which reliance was placed on Chevron uphold the agency’s actions because these decisions are still subject to “statutory provisions” old decisions“and may still be maintained even if the standard of respect has changed.

Of note is Justice Kagan’s 33-page dissent (joined by Justices Sotomayor and Jackson) finding that, contrary to the majority, the APA contains no reference to how courts should review agency regulations—with or without regard to agency decisions—when courts exercise their authority to interpret the law. It also rebukes the majority for distorting the application of the review method (Chevron (respect) which is the “cornerstone of administrative law” and “undermines every known principle old decisions,” for no particularly compelling reason “other than thinking it was wrong.” He questions the majority’s conclusion that the decision will have no impact on prior cases that have upheld agency rules based on Chevron deference, questioning why courts should defer to those earlier decisions when this Court does not defer to precedent in this case. It provides that some existing federal laws have never been challenged under Chevron before will now be questioned. One quote from Justice Kagan’s dissenting opinion best sums up her opinion:

“In one fell swoop, the majority today arrogates to itself exclusive authority over every open issue—no matter how expert-based or politically charged—including the meaning of regulatory law. As if it didn’t have enough on its plate, the majority is turning itself into the administrative czar of the country.”

Implications for health policy

Criticism of the authority of administrative agencies has been a consistent theme in commentary by some organizations concerned about overregulation of industry. Some have encouraged changes to “abolish the administrative state,” with particular attention to the U.S. Department of Health and Human Services — the agency that holds most of the administrative authority over Medicare, Medicaid, the Affordable Care Act and other health laws and that houses key public health organizations such as the Centers for Disease Control and Prevention and the National Institutes of Health.

This decision will likely make it harder for executive agencies to implement laws passed by Congress. As explained in a previous KFF brief, while final agency rules will still have the force of law, there will be greater incentive to challenge those rules in court, which will now not have to give any weight to agency decisions and expertise when the laws are unclear. More regulations will be struck down, creating a real barrier to implementing key health care protections, such as Medicare prescription drug affordability, Medicaid eligibility rules, infectious disease control and public safety standards, and consumer protections for individuals insured under private employer-sponsored plans.

The natural outcome will be less regulation by agencies. No law passed by Congress can contain all the possible nuances needed to implement the law. Limiting regulators’ ability to fill these gaps could have implications for protecting health care consumers and patients. Technical requirements for how plans and providers bill and code services for patients, for example, are important to implementing new health care standards, from free preventive care to protection against surprise bills. Without rules to fill the technical gaps, it will be harder to implement the requirements to fulfill Congress’s intent.

The executive branch won’t necessarily be the only place where implications will arise. Congress will have to be more specific in its regulations, making it harder to reach consensus on many issues. This can be a particular problem when the issue being addressed in the regulations is itself a black box—such as prescription drug pricing and the role of pharmacy benefit managers—where Congress itself and the public may not have access to reliable information on a highly technical topic.

Those seeking access to the judicial branch may encounter barriers as lower federal courts become more congested or overwhelmed by administrative activity. In addition, the decision-making itself will require judges to have greater technical and scientific knowledge, which could lengthen the time it takes to resolve disputes.

What will happen now

The decision does not immediately change any specific health care policy, but over time all health care stakeholders will see the impact of reduced notice-and-comment provisions in areas where federal law is silent or unclear. Some argue that the rulemaking process has already been “captured” by industry in some areas, so that industry players can influence regulation to their advantage. This will have an impact on these stakeholders because they may no longer have an easy way to have their concerns heard and addressed. The decision could also complicate reforms designed to help health care consumers navigate an increasingly complex and unaffordable health care system, especially as agencies extend their regulatory authority beyond the details contained in the statute.

The decision does not affect the agency’s ability to enforce health care regulations using existing tools, including auditing, data collection, and administrative proceedings, where available. This could mean shifting agency resources from developing and defending regulations to text-based enforcement actions or a renewed focus on helping consumers recognize and take action on conduct that violates federal law. It could mean more informal guidance from the agency on best practices to inform consumers and monitor stakeholder actions rather than courting industry and setting new standards. Whether these actions are taken, however, will depend largely on the President’s priorities.

Congress will continue to have the ability to delegate through legislation to administrative agencies the task of developing regulations in specific areas. Chevron deference does not imply this scenario. However, regulations resulting from this delegation may still be reviewed by courts without deference to the agency or may be subject to constitutional challenges alleging that Congress lacks the authority to delegate (the nondelegation doctrine). The “principal questions doctrine” is another legal framework that courts have increasingly used in recent years to invalidate agency regulations.

In the face of unlikely action by Congress to restore Chevron Out of respect for those in similar situations, the Supreme Court in a single decision transferred many policy decisions from agency technical experts to federal judges, a move that will have health policy implications that will be felt for years to come.