On October 9, 2019, President Trump issued an Executive Order aimed to curb agencies, such as CMS, from using informal guidance documents as de facto rules that have the binding effect of law. In a press conference accompanying the Executive Order signing, President Trump called the order necessary to “stop regulators from imposing secret rules.” The Executive Order, which adds momentum to June’s Supreme Court decision in Azar v. Allina Health Services, has clear implications for many Medicare “statements of policy” that are found in CMS manuals, but have never been subject to notice and comment rulemaking.
Executive Order 13891, entitled “Promoting the Rule of Law Through Improved Agency Guidance Documents” restates a familiar principle of administrative law. Departments and agencies in the executive branch may adopt regulations that impose legally binding requirements even though Congress is vested with the legislative power. The Administrative Procedure Act (APA) generally requires agencies to engage in notice-and-comment rulemaking to provide public notice of proposed “legislative,” or “substantive,” regulations, allowing regulated parties an opportunity to comment. Agencies are then expected to consider and respond to significant comments before publishing final regulations in the Federal Register. Agencies may also clarify existing obligations through non-binding guidance documents, which the APA exempts from notice-and-comment requirements.
The Executive Order notes, however, “agencies have sometimes used this [clarification] authority inappropriately in attempts to regulate the public without following the rulemaking procedures of the APA.” It also notes that “[e]ven when accompanied by a disclaimer that it is non-binding, a guidance document issued by an agency may carry the implicit threat of enforcement action if the regulated public does not comply.” The Executive Order, therefore, sets forth certain requirements that agencies (other than independent agencies) will have to following moving forward.
The Executive Order requires agencies to develop procedural regulations that govern the issuance of guidance documents; those regulations would require the agency to provide notice and an opportunity for comment, and to publish a response to comments, for “significant” guidance documents. The Executive Order also requires each agency to establish or maintain on its website a “single, searchable, indexed database that contains or links to all guidance documents in effect from such agency or component.” The website is required to “note that guidance documents lack the force and effect of law, except as authorized by law or as incorporated into a contract.” Additionally, each agency will be required to review its guidance documents and rescind any guidance documents that it determines are no longer in effect.
For guidance documents issued in the future, the Executive Order requires each document to clearly state that it does not bind the public, except as authorized by law or as incorporated into a contract. The Executive Order requires procedures for the public to petition the withdrawal or modification of a guidance document. Significantly, the Executive Order also requires a 30-day period of public notice before the issuance of a final guidance document. In the context of the Medicare Act, the Supreme Court’s decision in Allina already limited the circumstances in which CMS can avoid the notice-and-comment process before issuing rules affecting reimbursement. The new Executive Order provides additional safeguards for providers on this score.
The Executive Order is available here.
