On June 28, 2024, the United States Supreme Court issued its landmark decision in the combined cases of Loper Bright Enterprises, et al. v. Raimondo and Relentless, Inc. v. Department of Commerce, et al. (Loper). Both cases granted certiorari limited to the question of whether “Chevron deference” ought to be overruled or clarified. Chevron deference was the legal principle that, “[w]ith regard to judicial review of an agency’s construction of the statute which it administers, if Congress has not directly spoken to the precise question at issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Thus, for the 40 years preceding the Loper decision, under Chevron deference, courts granted federal agencies significant leeway and deference regarding their interpretations of ambiguous laws. A federal agency facing a legal challenge to its interpretation of an ambiguous statute was not required to establish that its interpretation was the best one; rather, the federal agency was merely required to establish that its interpretation was a permissible one. Overturning this precedent, the Loper court held that:
Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the [Administrative Procedure Act (APA)] requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.
This article will examine the basis for, and the health law implications of, the Loper decision overruling Chevron deference.
The basis for the six-justice majority opinion is Chevron deference’s irreconcilability with the APA. Section 706 of the APA states that, with respect to questions of law, “[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.” With respect to questions of policy and factfinding, however, the APA states that agency actions are entitled to deference as follows:
See §706(2)(A) (agency action to be set aside if “arbitrary, capricious, [or] an abuse of discretion”); §706(2)(E) (agency factfinding in formal proceedings to be set aside if “unsupported by substantial evidence).
Based on this distinction, the Court concluded that “Congress surely would have articulated a similarly deferential standard applicable to questions of law had it intended to depart from the settled pre-APA understanding that deciding such questions was ‘exclusively a judicial function.’”
The Court acknowledged scenarios where a statute may delegate discretionary authority to an agency (e.g., to give meaning to a statutory term, to enact rules to provide additional details of a statutory scheme, or to regulate within limits imposed by a statutory term or phrase—such as “appropriate” or “reasonable”). In such situations, the Court held that a reviewing court’s role is to “independently interpret the statute and effectuate the will of Congress subject to constitutional limits.”
The Court was unpersuaded by the argument (and discussion found in Loper’s dissent) that Chevron deference was justified because federal agencies have subject matter expertise with respect to the statutes they administer and interpret. Rather, the Court instead found that “interpretive issues arising in connection with a regulatory scheme often ‘may fall more naturally into a judge’s bailiwick” than an agency’s.”
Finally, the Court considered whether stare decisis (i.e., the doctrine governing adherence to judicial precedent) would justify the continuation of Chevron deference and concluded that it did not. The Court attempted to mitigate repercussions from this decision by stating that even though it was overturning Chevron, it was not “call[ing] into question prior cases that relied on the Chevron framework.”
While much is unknown, the potential implications of the Loper decision could prove to be monumental in health law, as most health law statutes are implemented via an array of regulations (as well as sub-regulatory guidance) from federal agencies, which are now more vulnerable to challenge. Some examples include the following:
Federal regulations addressing Medicare and Medicaid administration have significant breadth:
Together, the [Medicare and Medicaid] programs serve nearly half of the U.S. population, including Americans in every jurisdiction, of every income level, and with every kind of medical and care need. The programs must track emerging treatment practices, respond to changing circumstances at both national and local levels, and prevent fraud and waste… The Secretary and [The Centers for Medicare & Medicaid Services (CMS)] take seriously their duties in administering these critical programs. Over the past year alone, they have published, on average, a new Notice of Proposed Rulemaking approximately every two weeks. The covered topics span the spectrum…”
Without the benefit of Chevron deference, all such regulations implementing the Medicare and Medicaid programs are susceptible to legal challenges.
While statutes such as the Social Security Act generally outline criteria for Medicare and Medicaid coverage and reimbursement, more detailed conditions are set forth by way of regulations enacted by the Department of Health and Human Services (HHS). The regulations oftentimes include precise requirements:
Healthcare providers and suppliers that choose to disregard federal agencies’ interpretations of ambiguous laws do so at their peril, even if such interpretations are perceived to be overly detailed and technical. One tool in an appellant’s tool kit, should it be faced with a coverage or reimbursement denial, is to challenge the federal agency’s interpretation of an ambiguous statute. Although such challenges now have a greater likelihood of success (as Chevron deference will not apply to the federal agency’s interpretation), as a practical matter, under judicial review, a court very well may determine that an agency’s interpretation is not only permissible, but also the most accurate.
Fraud and abuse laws in healthcare include, for example, the False Claims Act, Anti-kickback Statute, Physician Self-Referral Law (i.e., Stark law), and the Civil Monetary Penalties Law. HHS historically has interpreted these statutes through detailed regulations (as well as through sub-regulatory guidance, such as Advisory Opinions). Because HHS will no longer be afforded Chevron deference with respect to its interpretations of these laws, it is reasonable to anticipate a decrease in attempted enforcement of civil and criminal penalties associated with these statutes, unless HHS is confident that its regulatory interpretations are not only permissible, but the most accurate.
The dissent in Loper also provided an example of a case implicating Chevron deference related to the FDA’s regulation of “biological products”:
Under the Public Health Service Act, the Food and Drug Administration (FDA) regulates “biological product[s],” including “protein[s].” 42 U.S.C. § 262(i)(1). When does an alpha amino acid polymer qualify as such a “protein”? Must it have a specific, defined sequence of amino acids? See Teva Pharmaceuticals USA, Inc. v. FDA, 514 F.Supp.3d 66, 79-80, 93-106 (D.C.C.2020).
In a post-Loper judicial environment, a court, and not the FDA, would determine when a substance qualifies as a “protein.” When challenging a federal agency’s scientific or technical interpretation of an ambiguous statute, it will be necessary for appellants to involve experts to establish the “best” interpretation.
One near-certain implication of Loper is regulatory uncertainty and an increase in litigation. The Court’s decision to overturn Chevron deference shifted the responsibility for interpretation of ambiguous statutes from federal agencies to the judiciary. Therefore, it is reasonable to anticipate an increase in litigation, as parties take advantage of perceived statutory uncertainties by initiating litigation to challenge federal agencies’ interpretations of ambiguous statutes. In addition to remaining knowledgeable of statutes, regulations, and existing sub-regulatory guidance, attorneys representing healthcare providers and suppliers must also ensure that they remain up to date on any case law that may serve as precedential authority to interpret an ambiguous statute. Further, in cases where healthcare attorneys are representing healthcare providers and suppliers as litigants, in addition to advocating the merits of a given matter, where implicated, it will be essential to advocate for the most accurate interpretation of an ambiguous statute.
