Congress Wants to Reform Agency Rulemaking: Refinements or Tectonic Shifts?

Congress is currently considering two bills that would dramatically alter the ways in which all federal agencies develop and publish rules. If enacted, both would create significant new obligations for agencies such as CMS and the FDA, expand the scope of judicial review of rules, and would increase the potential for political influence over the rulemaking process. Both bills passed the House on party-line votes, and are under consideration by the Senate.

The first bill, H.R. 5, would overhaul multiple phases of the federal rulemaking process. These proposed changes would make the rulemaking process significantly longer and more complex for agencies, and includes provisions that could prevent some rules from ever taking effect. The key provisions of the bill are summarized below:

• Prior to publishing any rule (1) with an expected annual impact of $100 million or more, (2) that may reduce employment, or (3) that involves a novel legal or policy issue, an agency would have to publish an advance notice that it intends to publish a proposed notice of rulemaking, and must solicit comments on the notice. A proposed rule could only be published after this new additional process is complete.
• Whenever an agency publishes a proposed rule for public comment in any of the categories described above, it would have to explain the basis for the rule, the data it relied on, and would have to explain the alternatives to the rule and justify why they were not adopted. In addition to the current public comment period, once a proposed rule was published an interested party could then request a hearing to contest the quality of the information relied on by the agency. Any resolution of this new step would slow down the rulemaking process further.
• In all cases where a rule is expected to have an annual impact of at least $1 billion annually, the agency would now be required to conduct a public hearing limited to fact issues. This would add to the time and cost of publishing a new or revised rule.
• When a final rule is published, the agency would be required to explain in the preamble to that rule why the rule will have the lowest possible cost unless it involves public health, safety, or welfare.
• All agencies would be required to publish all documents considered by an agency prior to publishing the rule.  This would eliminate the deliberative process privilege that has been in place for decades, which is intended to promote the exchange of views within an agency, and may have a chilling effect on agency deliberation. In many cases, a final rule could not take effect until all of the information relied on by the agency had been made available electronically for at least six months unless the agency or the President claims an exception.
• Recipients of federal funds would be prohibited from advocating for or against the rule, or appealing to the public to either support or oppose the rule.
• Guidance documents issued by agencies, including manuals, circulars, and other subregulatory publications would no longer have any legal effect and could not be relied on by the agency for any actions. The bill does not explain how many important parts of federal programs, such as the administration of grants or cost accounting for hospitals in the Medicare program would be handled. These and other programs rely heavily on the detailed information found only in agency manuals and guidance. Without these guidelines, health care providers, suppliers, manufacturers, and researchers among others would find it increasingly difficult to comply with federal laws.

The bill would also make drastic changes in the scope of any judicial review of published agency rules. The bill would overturn the Supreme Court's landmark Chevron decision, which established the principle that when an agency is charged with administering a statute and interprets ambiguous statutory language in a regulation, courts will defer to the agency's permissible interpretation of the law. In its place, the bill would authorize courts to review all questions of law involving a regulation without giving weight to the agency's experience or expertise. Courts would be empowered to impose their own constructions of the law on an agency, upending decades of precedents. This has the potential to increase federal courts' dockets and place those courts in the position of reviewing technical information without all of the resources available to conduct a review. In addition, by allowing courts to decide cases without relying on the agency's rationale, this increases the potential for inconsistent decisions and confusion among regulated entities such as health care providers, suppliers, and manufacturers seeking to comply with federal laws.

The second bill, H.R. 26, focuses more on expanding Congress's control over the rulemaking process once an agency has completed the public notice and comment procedure under current law. It also expands the legislative veto over rules, which currently is authorized only when Congress disapproves of a rule and requires the President's concurrence.

Under the bill, agencies would be required to report all new rules to Congress, and must identify all "major rules" as determined by the Office of Management and Budget that (1) will have an annual impact of $100M or more, (2) increases costs or prices, or (3) will have a significant impact on competition, employment, investment, or foreign trade. The report to Congress must also contain an analysis of the projected number or jobs that would be gained or lost as result of the rule. All major rules with the exception of those necessary for an emergency, enforcement of criminal laws, or to implement a trade agreement would not go into effect unless both houses of Congress approve the rule by a joint resolution within 70 legislative days after the agency submits its report. There is only one chance to obtain approval of a major rule during a session of Congress; if the joint resolution is not approved, or if no action is taken, the bill would bar Congress from considering a second resolution on the same rule during the same two-year session of Congress. This would allow Congress to override an agency and force the agency to begin the rulemaking anew, if at all. Congress would retain the authority to disapprove all other rules by a joint resolution. The bill also allows for judicial review of Congress's actions only to review whether or not it followed the procedure in the statute; the merits of any action would be unreviewable.

In addition to expanding control over prospective rules, the bill would also add a sunset provision for existing rules. All agencies would be required to review current rules at least once every ten years and report to Congress; if Congress then failed to enact a joint resolution to retain the rules, they would be nullified.

Although the bills passed the House, it will be much harder for the Senate to pass them as well. Under Senate rules, 60 votes are required to end debate and bring the bills to a vote. Since the Republicans only hold 52 seats, they would need additional votes from Democrats in order for the bills to pass.