Through its recent decision in Loper Bright Enterprises v. Raimondo, No. 22-451 (S. Ct. June 28, 2024), the US Supreme Court overturned the landmark decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
Impact on Healthcare Regulations
Federal agencies that oversee federal healthcare programs and have regulatory authority, such as the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services, issue a significant number of regulations on an annual basis that impact healthcare. With the reversal of Chevron, it is likely that there will be an increase in challenges to regulations brought by entities, such as providers, that are impacted by these regulations. In addition, the reversal of Chevron will certainly impact the recent case Ryan LLC v. Federal Trade Commission, challenging the Federal Trade Commission’s ban on noncompetes. In fact, it is likely that due to the elimination of the Chevron deference, the court in Ryan LLC will likely invalidate the non-compete ban.
What Was Chevron’s Impact?
When Congress passes a statute with words or phrases that are not clearly defined, administrative agencies are tasked with implementing and enforcing those statutes. For 40 years, based on the Supreme Court’s decision in Chevron, courts deferred to an agency’s reasonable interpretation of those ambiguous statutes rather than making their own interpretations.
In applying Chevron, courts have long used a two-step process. In step one, the court determined whether there was any ambiguity in the statute, because if the statute as written by Congress was clear, Chevron deference would not apply. If the statute was ambiguous, the court applied step two to evaluate the agency’s interpretation. If the agency’s interpretation was reasonable, the court would defer to it instead of determining its own interpretation. Even though cases like United States v. Mead Corp. and King v. Burwell sought to limit the scope of the Chevron deference, the long-standing test maintained a substantial legacy.
How often a case is cited does not necessarily correspond to its importance; however, here, it can offer insight into Chevron’s wide-reaching impact. For instance, Marbury v. Madison, which established judicial review, is cited in about 6,000 cases, including Loper. Chevron, decided 181 years after Marbury, is cited in more than 18,000 cases.
Without a doubt, the Chevron deference has impacted healthcare regulations. One of these cases, American Hospital Association v. Azar, 964 F.3d 1230 (D.C. Cir. 2020), provides an example of Chevron’s impact on the healthcare industry. HHS lowered the Medicare Part B reimbursement rate for the Outpatient Prospective Payment System for hospitals providing off-site services to match the rate of independent physician practices providing the same services. In defending its decision, HHS argued that the statutory provision allowing the department to develop methods to reduce increases in the volume of services provided HHS with the authority to lower the hospital rate. Applying Chevron deference, the District of Columbia Circuit Court of Appeals upheld HHS’s interpretation that the volume reduction provision allowed HHS to cut the rate. Had deference under Chevron not been given to HHS, the court would have been permitted to use independent judgment to interpret the volume-reducing statutory provision.
What Is Loper’s Impact?
Loper came from the National Marine Fisheries Service rule requiring Atlantic fisheries to hire observers on ships where the statute only specified other groups, such as Pacific fisheries, as being required to do so. Finding ambiguity in the statute, the lower courts applied Chevron in adopting the agency’s interpretation.
The Supreme Court has previously criticized Chevron, pointing out that while pre-Chevron courts included agency interpretations in determining statutory meaning, the weight given was variable and conclusions of law were not treated as binding on the courts. Moreover, the Supreme Court explained that Congress negated Chevron-level deference for questions of law by not providing for it in the Administrative Procedure Act (APA), which predates Chevron by decades. Section 706 of the APA states that “[t]o the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” The Supreme Court relied on this section in asserting that Chevron cannot stand because it cannot be reconciled with the APA.
The Supreme Court questioned Chevron’s workability and reliability. According to the Supreme Court, determining whether a statute is ambiguous is, well, ambiguous—one judge could see ambiguity everywhere while another might never see it. In addition, the Supreme Court held that the difficulty in setting bright-line rules for ambiguity and the changing requirements of Chevron weakened the workability of the doctrine, which reduced its reliability. Furthermore, agencies can change their interpretation, and as long as they do so within the bounds of Chevron, the courts would be bound to uphold their interpretations. By overruling Chevron, the Supreme Court vacated the circuit court judgments in the cases on appeal and remanded for further proceedings.
The Supreme Court concluded by instructing courts to use “their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.” Courts may not defer to agency interpretation of law because a statute is ambiguous, but when a statute delegates authority to an agency within constitutional limits, courts must respect the delegation while ensuring the agency acts within such delegation.
The effect of Loper will inevitably be seen in forthcoming cases affecting many industries, including healthcare.
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