On June 28, 2024, the Supreme Court rejected the doctrine of Chevron deference in the closely watched case of Loper Bright Enterprises v. Raimondo. In a 6-3 decision, the Court held that Chevron’s rule that courts must defer to federal agencies’ interpretation of ambiguous statutes gave the executive branch interpretive authority that properly belonged with the courts. Moreover, the Court concluded that Chevron deference was inconsistent with the Administrative Procedure Act (APA), holding that the APA requires courts to exercise independent judgment when deciding legal issues in the review of agency action. Loper will have significant and immediate implications for the U.S. Department of Health and Human Services (HHS), the federal agency charged with the administration of the federal health care programs, including Medicare and Medicaid.
Chevron Background
Since 1984, the “Chevron doctrine” had served as the bedrock of many regulatory actions by the U.S. Department of Health and Human Services (HHS) and other federal agencies. Under the doctrine, courts followed a two-step process to evaluate an agency’s interpretation of a statute the agency was charged with implementing. In step one, a court was to determine whether Congress clearly addressed the question at issue; if it did, then the court was to apply the plain language of the statute, and no deference was warranted. If, however, the statute was silent or ambiguous with respect to the question at issue, the court proceeded to step two, where it deferred to the agency’s statutory interpretation so long as that interpretation was a “reasonable” one.
Under Chevron, HHS and other agencies had significant flexibility to set policy where Congress left a gap or failed to speak clearly when enacting legislation—a frequent occurrence in the complex and byzantine world of federal healthcare legislation. Although the Supreme Court had not, for its part, relied on Chevron since 2016, lower courts invoked it frequently to defer to agency interpretations of ambiguous statutes. Loper Bright ends that era.
More on Loper
Loper involved two New England fishing companies appealing the D.C. Circuit’s ruling that applied Chevron deference to uphold the National Marine Fisheries Service’s interpretation of the Federal Magnuson-Stevens Act as requiring fishermen to pay for the use of compliance monitors on certain fishing boats, even though the federal law is silent on who must pay. Petitioners used the case as a vehicle to present a broader challenge to Chevron, arguing that the doctrine has led to excessive deference to federal agencies, resulting in overregulation, the abdication of judicial responsibility to interpret statutes, and the unwarranted imposition of regulatory enforcement costs.
The Loper majority firmly rejected Chevron and held that the APA requires courts to exercise their independent judgment in deciding legal questions that arise in reviewing agency action. As the majority held, “courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
Importantly, however, Loper noted that deference may still be afforded agencies in certain instances. First, the Court observed that the APA expressly mandates a deferential standard of review for agency policy-making and fact-finding. Second, Loper explained that some statutes are best read to “delegate … discretionary authority to an agency,” in which case a court’s role is to merely ensure the agency “engaged in ‘reasoned decision-making’” within that authority. Lastly, Loper reaffirmed that an agency’s “expertise” remains “one of the factors” that may make an agency’s interpretation persuasive.
Implication for Agencies
The decision to overturn Chevron will likely have significant implications for several agencies, including the U.S. Department of Health and Human Services (HHS), FDA, HHS Office of Civil Rights (OCR) and CMS. These agencies issue guidance every year and oversee highly technical and scientific areas of the law. Consequently, there will likely be an increase in legal challenges against these agencies’ regulations as they are issued. Although Loper stated that it “does not call into question prior cases that relied on the Chevron framework,” litigants may use Loper in the future to challenge unfavorable decisions. This could create uncertainty for healthcare professionals trying to comply with regulations under challenge. Areas that may come under immediate legal scrutiny include Medicare drug price negotiations under the Inflation Reduction Act, the FDA’s new rule on laboratory developed tests, and CMS’ Medicare and Medicaid minimum staffing standards for long-term care facilities.
Federal circuit courts will likely face increased division on more issues as judges substitute their judgment for that of the agencies regarding statutory interpretation. Notably, the majority opinion emphasizes that courts should not defer to an agency’s interpretation of its own power. It states, “[t]he Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
As discussed earlier, also noteworthy is the Court’s discussion on the importance of giving weight to well-considered agency interpretations that have remained consistent over time. This implies that regulatory interpretations that fluctuate with changes in partisan control of the presidency or that introduce novel changes to long-standing rules should not be given much deference by the courts. Recent examples include the application of the antidiscrimination provisions of Section 1157 of the Affordable Care Act to gender care, the interpretation of the Emergency Medical Treatment and Active Labor Act (EMTALA) to mandate emergency abortion services in states that ban the procedure, the FDA’s post-Dobbs changes to the regulation of mifepristone, and recent changes to health privacy regulations regarding the turnover of abortion records to law enforcement agencies.