How Does the End of Chevron Deference Change the Relationship Between the Health Care Industry, Federal Regulators, and Congress?

Key Takeaways

• Federal courts are no longer required to defer to federal agencies’ reasonable regulatory interpretation of ambiguous federal statutes under the 1984 Chevron
• In this new Loper landscape, increased engagement at all points of the federal legislative and federal regulatory process is more important than ever, especially for those in the heavily regulated health care industry.

I. What Did the Supreme Court Do? What Changed with the Loper decision?

In a 6-3 decision authored by Chief Justice John Roberts, the Supreme Court overruled the longstanding Chevron doctrine—under which federal courts would defer to federal agencies’ interpretation of their own statutes if the underlying statute was ambiguous and the interpretation was reasonable. The Court determined that this Chevron deference was inconsistent with the Administrative Procedure Act’s (APA) tasking to federal courts the duty to interpret federal statutes. Although the Court overruled the original decision in Chevron, the Court went out of its way to state that it “does not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite the Court’s change in interpretive methodology.”

As stated in an amicus brief authored by prominent advocates, and as discussed at oral arguments, health care, as one of the most regulated industries, will be significantly impacted by the end of Chevron deference.

Federal regulatory agencies may have to alter their use of existing statutes to address new concerns under the post-Chevron landscape. Federal agencies also may have to go back to Congress to address new, emerging regulatory concerns not yet considered by statute.

The post-Chevron landscape also may shift how Congress chooses to delegate its legislative authority to health care agencies of jurisdiction. Below, we discuss how industry may need to change how it interfaces with key Congressional health care committees and federal executive agencies post-Chevron. 

Understanding the Loper decision. Although not the exclusive question in the petitioners’ cases, the Court limited the question in Loper Bright Enterprises v. Raimondo and Relentless Inc. et al., Petitioners v. Department of Commerce, et al., to “whether Chevron should be overruled or clarified.”[1] During the Chevron doctrine’s 40-year life span, federal courts gave deference to federal administrative agencies’ judgment on how to promulgate federal regulations when there is ambiguous statutory language in the federal statute.

In the post-Chevron landscape, federal courts are no longer required to defer to federal agencies’ reasonable interpretations of ambiguous federal statutes. Instead, courts will adhere to the APA’s provision that a “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.”[2] Chief Justice Roberts viewed Chevron as incompatible with “the traditional interpretive tools” that the APA provided.[3]

What does this mean? Who does this apply to? Parties challenging federal regulations in court will now be on equal footing with federal agencies as to the statutory interpretation of ambiguous federal statutes.

It is expected that this decision, in conjunction with the one in Corner Post, Inc. v. Board of Governors of the Federal Reserve, released by the Supreme Court days after Loper, will lead to an uptick of legal challenges to federal regulations issued by both federal executive and federal independent agencies.

Corner Post changes when a plaintiff can challenge any final regulation. Previously, plaintiffs could only file suit to challenge a final regulation if they filed the lawsuit within six years of the final regulation’s enactment. Now, the six-year window does not begin until the plaintiffs are injured by the federal regulation. Therefore, any federal regulation—no matter how long ago it was finalized—is vulnerable to disruption if a plaintiff claims injury and files suit within six years of said injury. The issue shifts to when injuries occur.

II. Which Federal Health Statutes Are Implicated and Why?

Not all federal health care regulations are affected by this Loper decision.

First, Chevron deference only applied where the federal statute was ambiguous, and the federal agency’s proffered interpretation was reasonable. Federal statutes that are clear as to Congress’ delegation of its legislative power are less likely to require agencies to draft federal regulations that resolve ambiguities.

Second, there are numerous critical Medicare regulatory actions that Congress has specifically precluded from judicial review. These statutory provisions are not affected by the overruling of Chevron. A sample of provisions in Medicare where judicial review is precluded by statute include:

Medicare payment methodology for:

• Ambulatory surgical centers (ASCs)
• Critical access hospitals
• Hospital outpatient departments
• Physician-administered drugs
• Physician services including coding, relative value units, and the physician fee schedule conversion factor
• Durable medical equipment and prosthetics or orthotics and supplies (DMEPOS)

III. Post Loper, Will There Be Changes in the Federal Rulemaking Process?

 The federal rulemaking process remains unchanged, but the approach by industry and federal agencies may be different. This is because the record created during the proposed rulemaking now becomes even more relevant to a federal court that may need to decide whether to uphold the federal regulation or not. It is more important than ever for the health care industry to weigh in before or during the federal notice and rulemaking process prescribed by the APA.

IV. How Is the Process for Challenging Federal Regulations Different Now?

In the new post-Chevron landscape, no given party has an automatic victory or advantage in the process for challenging or defending federal regulations.  Those challenging federal regulations will need to be more thoughtful in deciding when to invest the time and resources it takes to pursue such a challenge. In making that decision, parties will want to review the congressional record, the regulatory record, and the strength of the ambiguity in the statute.

V. How Will Influencing Congress Change? What Might Congress Do in Response?

Each point of the federal legislative process will now be more important in shaping future interpretation of the underlying federal statute during regulatory implementation.

Congressional intent to delegate legislative power to federal agencies can be established through legislative history including:

• Statutory text;
• Amendment deliberation;
• Committee reports;
• Committee Prints with Member Statements for the Record;
• Conference reports;
• Floor Statements; and
• Voting records.

For example, Congress is currently working to determine how best to regulate artificial intelligence (AI). In May, after several AI Insight Forums with leaders from industry, government, and civil rights groups, Senate Majority Leader Charles Schumer and a group of bi-partisan Senators released a Bipartisan Roadmap for Artificial Intelligence Policy In The United States Senate. As lead Loper dissenter Justice Elena Kagan pointed out in oral arguments, AI will likely be the next “big piece of legislation on the horizon.”

As Congress determines how to regulate AI, it will need to consider how best to delegate to the federal agencies any decision making where Congress lacks competencies. At EBG, our interdisciplinary AI Working Group is closely monitoring not just how Congress is approaching federal AI regulation, but also how the White House and federal agencies are regulating AI. We are particularly watching the use of existing statutes to regulate AI, as there will be increased scrutiny as to whether Congress could have contemplated regulating a technology like AI before generative AI was mainstream or in existence. With a heightened scrutiny of statutes that might have been used to regulate AI in the era of Chevron deference, we expect the decision in Loper to affect this dynamic and the way AI will be regulated. 

AI is currently being used across the health care spectrum from patient care, to clinical decision support, to drug development, to billing, coding and reimbursement. How specific Congress is in delegating its legislative authority to implementing federal agencies will determine how AI regulation progresses. 

It is important for the health care industry to understand this new dynamic not just for new legislative priorities, like AI, but also for existing federal statutes and proposed federal statutes.

Congressional committees will need to be more precise and inclusive when writing and passing federal legislation. Federal agencies will want to be more involved in the crafting and passage of federal legislation. Political deals may be harder to negotiate as more specificity will be required in the underlying statutory text.

This change in dynamic creates many new opportunities for industry to engage and influence. Industry engagement also is needed to help Congress create more precise and directed federal statutes at the time of Congressional enactment to avoid statutory ambiguities.

How approaching Congress might change. First, Congress may need to update legislation currently moving through the legislative process. Industry should circle back with committees of jurisdiction to ensure their interests are being captured in any revisions.

Whether or not a committee is proactively engaging, it would be prudent for industry to revisit any and all legislative text for clarity and to ensure there is no ambiguity.

Second, political agreements may need to be revisited, as ambiguity in the underlying text sometimes allowed for political agreement. Again, industry should proactively engage in this process. 

What Congress might do in response to the Loper decision. Congress could decide to update and amend the APA. The majority in Loper is clear that Chevron deference is overruled because it is inconsistent with the existing APA and congressional intent when writing the existing APA.[4]  While Justice Clarence Thomas wrote separately to say that the Court should have decided Chevron was inconsistent with the Constitution, he was alone in that assertion. Justice Neil Gorsuch, who also wrote separately in concurrence, made clear that “Chevron deference is inconsistent with the directions Congress gave us in the APA”[5] and that “it is Congress’s view of ‘good government,’ not ours, that controls.” [6]

Passed in 1946 by the new Republican Congress as a response to the “New Deal,” the APA sought to provide an appropriate framework for the time. In 2005, House Judiciary Chair Jim Sensenbrenner (R) alongside Ranking Member John Conyers (D) called for the House Judiciary Committee to look at the “fundamental question that arises…whether the act [APA] is still able to facilitate effective rulemaking in the 21st century.” Congress could undertake a similar effort to amend the APA to expressly provide what should be the interpretive methodology for federal courts to use for federal regulations created by federal agencies when there is an ambiguity in a federal statute in a post-Chevron landscape.

The Loper decision took effect on June 28, 2024. EBG will continue to monitor developments in this area and is here to assist you as you navigate this new landscape.

Julie Renfroe, a Summer Associate in Epstein Becker Green’s Washington, DC, office (not admitted to practice) contributed to the preparation of this piece.

ENDNOTES

[1] No. 22–451, 603 U.S. __ (2024) at 6. The Court's decision was also issued in Loper’s sister case, Relentless, Inc. v. Dep't of Commerce, No. 22–1219.

[2] 5 U.S.C. §706.

[3] No. 22–451, 603 U.S. __ (2024) at 19.

[4] “The text of the APA means what it says. And a look at its history if anything only underscores that plain meaning. According to both the House and Senate Reports on the legislation, Section 706 “provide[d] that questions of law are for courts rather than agencies to decide in the last analysis.” H.R. Rep. No. 1980, 79^th Cong., 2d Sess., 44 (1946)(emphasis added)” 603 U.S. ­­­___ (2024) p. 15.

[5] Gorsuch, J. concurring p. 33.

[6] Gorsuch, J. concurring p. 13.