What Does the Overturning of Chevron Mean for Healthcare?

The U.S. Supreme Court issued a significant ruling on June 28, 2024, that changes the respective roles of administrative agencies and the courts in interpreting statutes. In Loper Bright Enterprises v. Raimondo, the court voted 6-3 to overturn its 1984 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. decision. Although the decision pertains to fishing rather than healthcare, it is likely to have a significant impact on healthcare laws and regulations due to the industry's highly regulated nature.

Under the Chevron deference, in situations where federal laws are silent or ambiguous with respect to a particular issue, the courts were instructed to defer to interpretations on those issues made by administrative agencies, provided the interpretation is reasonable and neither arbitrary nor capricious. This "Chevron deference" was to be applied even if the court, in its own reading, would have interpreted the statute differently.

In overturning Chevron, the Supreme Court majority concluded that the 1946 Administrative Procedure Act (APA) mandates courts to exercise their own independent judgment in interpreting statutes that are ambiguous or silent on key issues. They emphasized that statutory interpretation is fundamentally a judicial responsibility. The Court's decision, however, leaves the door open to some forms of deference. First, the Court emphasized that the APA "does mandate that judicial review of agency policymaking and fact-finding be deferential." Specifically, courts may give substantial weight to an agency's subject matter expertise and reasoned consideration of issues, particularly when the agency's interpretation has been long-standing and consistent. Secondly, even when the reviewing court is engaged in statutory interpretation, the court may use the agency’s interpretation to "help inform that inquiry." Additionally, the Court emphasized that overruling Chevron was not an invitation to revisit settled cases.

Although the decision is significant, the real-world impact of the decision remains to be seen. Overruling Chevron will not result in challenges to every aspect and element of healthcare regulatory law. For example, the ruling is unlikely to affect whether a manufacturer has produced adequate evidence of safety and efficacy to satisfy the U.S. Food and Drug Administration (FDA) for drug or device marketing approval, nor does it impact a Centers for Medicare & Medicaid Services (CMS) determination that evidence supporting a particular treatment is sufficient for Medicare coverage under the "medically reasonable and necessary" standard. Additionally, the scope of the Chevron decision has been modified over the years, and many courts have not rigorously applied the deference it instructs them to provide, often avoiding it by disagreeing with the premise that a statutory provision is ambiguous.

Agency Implications

That said, 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. (See Holland & Knight's previous alerts, "FDA Announces Final Regulation Governing Laboratory Developed Tests," May 1, 2024, and "CMS Proposes Minimum Staffing Standards for Long-Term Care Facilities," Sept. 7, 2023.)

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 (which the Supreme Court will consider next year), the interpretation of the Emergency Medical Treatment and Active Labor Act (EMTALA) to mandate emergency abortion services in states that ban the procedure (currently the subject of active litigation that may reach the Supreme Court), the FDA's post-Dobbs changes to the regulation of mifepristone (potentially facing new litigation challenges with new plaintiffs), and recent changes to health privacy regulations regarding the turnover of abortion records to law enforcement agencies. (See Holland & Knight's previous alert, "Reproductive Healthcare Privacy Rule Brings New Requirements for All Providers," May 10, 2024.)

Conclusion

The ruling is expected to lead to slower and more cautious rulemaking. It will also likely impact how Congress drafts legislation and communicates its intent. Thorny interpretive issues have always been papered over in the legislative process; however, under Chevron, there was confidence that a sympathetic administration would interpret ambiguous laws favorably. Now, with this change, Congress may become more involved in the regulatory rulemaking process by engaging with agencies before drafting proposed rules and providing comments once the proposed rules are published in the Federal Register.

Ultimately, this decision presents both challenges and opportunities for healthcare stakeholders. The industry's perspective will be valuable as Congress and regulatory agencies work to develop more precise legislation and regulations.

For more information on the Court's decision, members of Holland & Knight's multidisciplinary Chevron Deference Working Team will present a Webinar: Post-Decision Chevron Discussion on Tuesday, July 9, 2024, to explore the scope and impact of the Supreme Court's ruling on Chevron deference.

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