Supreme Court Decision Limiting the Authority of Federal Agencies Could Have Far-Reaching Impacts for Health Policy

The U.S. Supreme Court has again overturned longstanding precedent, this time getting rid of a 40-year- old standard for decision making that required federal courts to defer to reasonable agency decisions where federal law is silent or unclear. This "Chevron deference" standard is now gone, ushering in a new era where courts will not have to accept agency expertise in their review of challenged regulations. While the details of the rules that define administrative law often garner little attention, this decision, like the decision that overturned Roe v. Wade, will have profound effects for health care. This issue brief examines the decision and assesses what is ahead.

What the Court Said

As explained in the KFF brief Upcoming SCOTUS Case Could Weaken the Impact of Regulation on Key Patient and Consumer Protection, the Supreme Court took up two cases to review the question of whether Chevron deference should be overruled or changed. The two cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, decided jointly, relate to federal regulations affecting the fishing industry, but the decision will shape how courts review legal challenges to all regulations that interpret issues where a federal law is ambiguous or silent, including health care.

In a 6-3 decision, with Justice Roberts writing for the majority, the Court concluded that Chevron deference should never have been used to begin with, overturning the Chevron decision. The Court made the following major points:

• Courts must use independent judgment to determine the meaning of federal statutes. It cannot defer to agency regulation just because the issue is not clear in a statute. According to the majority opinion the Chevron decision runs counter to the Administrative Procedure Act (APA) which incorporated prior practice that "courts decide legal questions by applying their own judgement." The APA is a 1946 law that sets parameters for how agencies function.
   
• On the question of deferring to agency expertise to resolve an issue, the Court said that "…agencies have no special competence in resolving statutory ambiguities. Courts do." While courts can "respect" agency regulation and expertise and look to it to inform them on technical issues, "Congress expects courts to handle technical statutory questions."
   
• While federal courts must generally follow prior Supreme Court decisions (a legal concept called stare decisis), the majority opinion said that the 1984 Chevron decision is flawed and "unworkable," because there can be different interpretations of what makes a statute ambiguous. As a result, the Court concludes that there is not "any reason to wait helplessly for Congress to correct our mistake."
   
• The opinion notes that it does not implicate prior cases that relied on Chevron to uphold agency actions because those decisions are still subject to "statutory stare decisis" and can still be upheld even though the deference standard has changed.

Of note is a 33-page dissent by Justice Kagan (joined by Justices Sotomayor and Jackson) stating that, contrary to the majority, the APA includes no reference to how courts should review agency regulations—with or without deference to agency decisions—when courts use their authority to interpret the law. In addition, she rebukes the majority for disrupting use of a method of review (Chevron deference) that is the "cornerstone of administrative law" and "subverting every known principle of stare decisis," with no particularly significant reason "above and beyond thinking it wrong." She questions the majority’s conclusion that the decision will not implicate prior cases that have upheld agency regulations based on Chevron deference, questioning why courts would respect those prior decisions when this Court is not respecting precedent in this case. She predicts that some existing federal regulations never challenged under Chevron before will now be challenged. One quote from Justice Kagan’s dissent best sums up her opinion:

"In one fell swoop, the majority today gives itself exclusive power over every open issue—no matter how expertise-driven or policy-laden—involving the meaning of regulatory law. As if it did not have enough on its plate, the majority turns itself into the country’s administrative czar."

Implications for Health Policy

Criticism of the authority of administrative agencies has been an ongoing theme of commentary from some organizations concerned with overregulation of industry. Some have encouraged changes to "dismantle the administrative state," with a particular focus on the U.S. Department of Health and Human Services—the agency with most of the administrative authority over Medicare, Medicaid, the Affordable Care Act and other health statutes, and that houses key public health organizations such as the Centers for Disease Control and Prevention and the National Institutes of Health.

The decision will likely impede the ability of executive agencies to implement laws passed by Congress. As explained in the previous KFF brief, while agency final rules will still have the force of law, there will be more of an incentive to challenge these rules in a court that now will not have to give any weight to agency decisions and expertise where statutes are not clear. More regulations will be overturned, placing a real barrier on implementing key health care protections such as prescription drug affordability in Medicare, eligibility rules for Medicaid beneficiaries, infectious disease control and public safety standards, as well as consumer protections for those in self-insured private employer-sponsored plans.

A natural result will mean less agency regulation. No law passed by Congress can include every possible nuance needed to implement the law. Limitation on the ability of regulators to fill in those gaps could result in impacts to health care consumer and patient protections. Technical requirements for how plans and providers bill and code for patient service, for example, are important in executing new health care standards, from free preventive care to surprise billing protections. Without regulations to fill in technical gaps, it will be more difficult to operationalize requirements to carry out the intent of Congress.

The executive branch will not necessarily be the only place where there are implications. Congress will be challenged to be more specific in its legislation, making it more difficult to reach consensus on a range of matters. This may be a particular concern where the issue being addressed in legislation is itself a black box—such as prescription drug pricing and the role of pharmacy benefit managers—where Congress itself and the public may lack access to reliable information about a highly technical subject.

Those seeking to access the judicial branch could see barriers as lower federal courts become more crowded or backlogged with administrative actions. Also, the decision-making itself will require more technical and scientific knowledge from judges, perhaps expanding the time it takes to resolve disputes.

What Happens Now

The decision does not immediately change any specific health care policy, but over time all health care stakeholders will see the impact of the reduced significance of notice-and-comment rulemaking in areas where federal law is silent or unclear. Some argue that the rulemaking process is already "captured" by industry in some areas, such that industry players can influence regulation to their advantage. This will affect these stakeholders as they may no longer have an easy avenue to get their concerns heard and addressed. The decision could also impede reforms meant to help health care consumers navigate an increasingly complex and unaffordable health system, particularly in cases where agencies stretch their regulatory authority beyond the specifics in a statute.

The decision does not affect agency ability to enforce health care statutes using existing tools including audit, data collection, and administrative agency proceedings where those are available. It could mean a shift in agency resources from drafting and defending regulations to enforcement actions based on the text of a statute or a renewed focus on helping consumers recognize and act on activity that violates federal law. This could mean more informal guidance from agencies on best practices to inform consumers and monitor stakeholder activity instead of courting industry and setting new standards. Whether these actions take place, however, will be largely dependent on the priorities of the President.

Congress will still have the ability to specifically delegate to administrative agencies in legislation the task of developing regulations in certain areas. Chevron deference does not implicate this scenario. However, regulations resulting from this delegation can still be reviewed by courts without deference to the agency or could be subject to constitutional challenges claiming that Congress does not have the authority to delegate (nondelegation doctrine). The "major questions doctrine" is another legal framework courts have increasingly applied in recent years to invalidate agency regulation.

Short of unlikely Congressional action to restore Chevron deference, the Supreme Court in a single decision has shifted many policy decisions from agency technical experts to federal judges, with implications for health policy that will reverberate for years to come.