On March 3, 2025, the U.S. Department of Health and Human Services (“HHS”) announced a new policy to reverse course on certain public notice and comment procedures. This marks a significant change to a process in place for over a half century. Following the issuance of a policy statement on February 28, 2025, HHS rescinded its historical “policy on Public Participation in Rule Making,” colloquially known as the “Richardson Waiver.”
The Richardson Waiver required HHS to undertake public participation in rulemaking even where the Administrative Procedure Act (“APA”) technically permitted HHS to refuse public notice and comment. Importantly, the rescission of the Richardson Waiver here applies to “matter(s) relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.”
The language concerning “loans, grants, benefits, or contracts” has a number of stakeholders in the healthcare and life sciences industries on edge. This alert clarifies which portions of the federal infrastructure this recission will affect, and what next steps are.
Key Takeaways
- The Richardson Waiver applied only to section 553(a)(2) of the federal APA, which concerns “matter(s) relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.”
- Medicare is least likely to be affected.
- Rulemaking procedures for the Medicare program is unlikely to be affected by this new policy, as the authorizing Medicare statute includes rulemaking and other requirements independent from the APA. See 42 U.S.C. § 1395hh.
- Discretionary/competitive grants through the National Institutes of Health (“NIH”) are most likely to be affected.
- Research grants for medical and scientific research affecting academic medical centers and from NIH.
- Grants for community health centers and rural health programs through the Health Resources and Services Administration (“HRSA”)
- Mental health and substance abuse grants through the Substance Abuse and Mental Health Services Administration (“SAMHSA”)
- Head Start and Early Head Start
- Block grants
- HHS activities somewhat likely to be affected include:
- Medicaid eligibility requirements
- Some policies affecting federal contractors and procurement
- IMPORTANT: The opportunity to challenge HHS policies implemented with or without notice and comment rulemaking remains undisturbed. The standard of review under the APA’s “arbitrary and capricious” standard also remains undisturbed. See 5 U.S.C. § 706.
Background
Congress enacted the federal APA in 1946. For context, In the years leading up to the APA’s passage, Franklin D. Roosevelt had established several new federal agencies as part of the New Deal. Concerned about the relative power these new federal agencies possessed, Congress established guardrails. These guardrails became enshrined in the APA, leading U.S. Senator Pat McCarran to describe the APA as “a bill of rights for the hundreds of thousands of Americans whose affairs are controlled or regulated by [federal agencies].”
Over the ensuing decades, some federal agencies adopted the terms of the APA by reference. In other cases, federal agencies incorporated the terms of the APA into their own authorizing statutes. In all cases, the principles of the APA generally established two fundamental operational duties: agency transparency with public input, and agency oversight and accountability to the federal courts.
Section 553 of the APA contains several provisions that set forth the manner by which federal agencies must undertake certain procedural efforts in order to provide the public with notice of a forthcoming rule and an opportunity to comment on a forthcoming rule, before the agency makes that rule final. Known colloquially as notice-and-comment rulemaking, this form of rulemaking has been a mainstay in regulated industries for decades.
Section 553 also contains provisions that set forth circumstances for which federal agencies need not undertake this notice-and-comment rulemaking process. See, e.g., 5 U.S.C. § 553(b)(B) (the “good cause exemption”). One of those explicit exemptions, at issue now, concerns “matter(s) relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.” § 553(a)(2). Put simply, the original text of the APA explicitly permits the agency to forego notice and comment rulemaking for “matter(s) relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.”
On January 28, 1971, HHS (then known as the Department of Health, Education, and Welfare (“HEW”)), issued a statement effectively overriding the agency’s permission to forego notice and comment rulemaking under Section 553(a)(2). Dubbed the “Richardson Waiver” after Elliot Richardson, Secretary of HEW, at the time, this statement read:
The public benefit from such participation should outweigh any administrative inconvenience or delay which may result from use of the APA procedures in the five exempt categories. Effective immediately, all agencies and offices of the Department which issue rules and regulations relating to public property, loans, grants, benefits, or contracts are directed to utilize the public participation procedures of the APA, 5 U.S.C. 553.
36 Fed. Reg. 2532 (Feb. 5, 1971). Thus, the Richardson Waiver was born and has remained in place for over a half-century.
What to Expect
Under the leadership of HHS Secretary Robert F. Kennedy, Jr., and with guidance from the Department of Government Efficiency (“DOGE”), HHS has signaled its interest in taking a more aggressive approach to implementing policies, unfettered by historical norms, and with a rigid mandate for speed and efficiency. While eliminating the agency’s administrative costs associated with rulemaking for “matter(s) relating to agency management or personnel or to public property, loans, grants, benefits, or contracts,” the scope of federal funding mechanisms affected by these changes is broad and may result in dramatic changes for academic medical centers, research institutions, and even certain healthcare provider types that rely heavily on federal grants. Rescinding the Richardson Waiver may also limit the public’s ability to comment on key policy changes in the Medicaid program, which could include work requirements and more.
Critically, the exact way that HHS decides to apply these changes remains to be seen. If HHS takes a liberal approach to “loans, grants, benefits, or contracts,” the agency incurs litigation risk under the APA. If HHS takes a more conservative approach to “loans, grants, benefits, or contracts,” the litigation risk lessens accordingly. In any event, this rescission will not determine funding outcomes, but rather, determine the process by which HHS may reach an outcome. Stakeholders should remain focused on the speed of these processes that take place, consult with expert counsel, and be prepared to respond rapidly as necessary.
