On June 28, 2024, the Supreme Court of the United States overruled longstanding “Chevron deference” in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, changing the way courts will review disputes involving interpretation of statutes and agency rules. While much has now changed, the true effects of these rulings in the health care industry will be seen as courts begin issuing decisions to resolve disputes arising from conflicting interpretations of health care statutes — such as the interpretation by the Centers for Medicare and Medicaid Services (CMS) — without deference to the agency.

This law bulletin summarizes Chevron, the new Supreme Court ruling, and implications for the health care industry.

Chevron

The decision in Chevron U.S.A., Inc v. NRDC, 467 U.S. 837 (1984) established what is referred to as “Chevron deference.”

When interpreting federal statutes implemented by administrative agencies, courts applied a two-step analysis established in the Chevron case. The first step was determining whether Congress had directly addressed the statutory interpretation in question. If yes, the court would defer to that Congressional intent, denying the agency’s construction. If no, due to silence or ambiguity regarding Congress’s intent, the courts would defer to the agency’s interpretation after determining it to be a permissible construction of the statute.

The court reasoned that “the power of an administrative agency to administer a congressionally created program necessarily requires the formulation of policy and the making of rules to fill any gaps left, implicitly or explicitly, by Congress.” Chevron deference represented a delegation of authority to agencies to interpret a specific provision of a statute by regulation when Congress had explicitly left a gap for the agency to fill. These legislative regulations were then given controlling weight unless they were “arbitrary, capricious, or manifestly contrary to the statute” – thereby, limiting the court’s ability to substitute its own construction of a statutory provision for a reasonable interpretation made by the agency.

In Chevron, the court recognized the expertise of congressional agencies. The court reasoned that judges are not experts in the field in controversy, while Congressional agencies have far more expertise in their respective fields. Agencies are granted policy-making responsibilities and can, within the limits of their delegated powers, make policy choices to resolve the competing interests and ambiguities in statute left unresolved by Congress. The Chevron decision established that the assessment of policy choices was not solely judicial by requiring judges to respect the legitimate policy determinations made by the agencies granted with such rulemaking authority.

Loper

Chevron deference guided agency regulation for nearly four decades. Then, on June 28, 2024, the Supreme Court released the opinion of Loper Bright Enterprises v. Raimondo, which overruled Chevron.

In Loper, the court overruled the Chevron deference standard. The court reasoned that the Administrative Procedure Act (5 U.S.C. §§ 551-559) requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and further held, the courts may not defer to an agency interpretation of the law simply because a statute is ambiguous. The court also explained that Article III of the Constitution assigns the Federal Judiciary the responsibility and power to adjudicate cases and controversies. The holding followed the foundational decision in Marbury v. Madison which declared that “it is emphatically the province and duty of the judicial department to say what the law is.” Ultimately, agency interpretations can inform the judgment of the judiciary, those same interpretations may not supersede a judiciary’s determination in that regard, and the courts are not at the liberty to surrender to the agencies.

Loper makes clear that the decision to overrule Chevron does not question prior cases that relied on the Chevron framework. These previous holdings, specifying agency requirements and statutory interpretation, are still subject to stare decisis — the principle that courts should generally adhere to their past cases — despite the court’s change in interpretative methodology. The reasoning is that mere reliance on Chevron cannot constitute a “special justification” for overruling such holdings.

Impact

The Loper decision changes the standard employed by the courts when a party challenges an agency regulation. Going forward, courts will look at the totality of the matter, such as the legislative history of the statute and Congressional committee comments, when determining whether the agency’s interpretation of the law is reasonable.

Because the Loper court did not question Chevron-reliant determinations, the decision did not overrule or lessen any current agency statutory interpretation or requirement. Therefore, the health care industry must continue to comply with applicable laws and regulations.

According to the majority opinion, “all [the] decision means” is that, going forward, federal courts will “resolve cases and controversies without any systematic bias in the government’s favor.” Courts are no longer bound to accept an agency’s interpretation of statutory ambiguities. Instead, courts will read and interpret statutes and regulations independently to determine the best reading of the statute and regulation.

Although Chevron and Loper involved environmental regulations, the court’s decision will have significant implications in health care. Specific to health care, CMS has issued complex rules, regulations, and other guidance including advisory opinions and manuals, some of which have been criticized as surpassing the authority granted by Congress for oversight of federal health care payment programs. These particular areas are ripe for litigation under the new standard.

In an amicus brief filed by the American Cancer Society Cancer Action Network and the National Health Law Program, the entities explained worries they had regarding health care and life sciences due to the Loper decision. The largest concern revolved around the impact on federal health care payment programs — Medicare, Medicaid, and CHIP. The concern stems from the need for expertise required to competently administer these programs, promulgate rules, and render interpretative decisions in connection with these complex statutes – which the authors of such briefs suggested the courts would be challenged to do. On the other hand, as noted, many have long disagreed with certain CMS interpretation of federal statutes governing these health care payment programs. While Loper does not overturn past court decisions, its extinguishment of Chevron deference provides a new opportunity to litigate the agency’s interpretation on controversial matters.

Conclusion

Overruling Chevron restores the pre-Chevron standard, allowing courts to consider the agency’s interpretation of an ambiguous statute without deferring to the agency. This will impact ongoing and future litigation as litigants challenge agency statutory interpretation. Courts must now apply their own interpretation, derived via the rules of statutory construction, regardless of what the agency thinks is necessary. This jolt to the legal system could lead to favorable results for health care organizations while also potentially creating some confusion if there are inconsistent results from federal courts around the country.

The Taft Health Care and Life Sciences group is available to assist with questions pertaining to regulatory interpretation in light of the recent U.S. Supreme Court decisions. Please reach out to a Taft attorney or any member of the Taft team.

Taft summer associates Julia Greve-Hoffman and Zachary Powell contributed to this article.