Experts ponder how U.S. Supreme Court ruling will affect health care law

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A recent U.S. Supreme Court ruling involving the interpretation and execution of federal laws could have effects on health care policy.

On July 25, attorneys met online for “Beyond Chevron: How the Court’s Decision Will Change Health Policy Legislating and Rulemaking.” The webinar was part of KFF’s periodic Health Policy Wonk Shop, which features expert discussion about contemporary issues in health care.

Last month, the High Court handed down its ruling in the case known as Loper Bright Enterprises v. Gina Raimondo, Secretary of Commerce. The judgment, shortened in conversation to Loper Bright, has become known for overturning what is known as Chevron deference, named for a 1984 court case involving the Chevron U.S.A. Inc. energy company.

“Neither Chevron nor Loper Bright have anything to do with health care,” said Larry Leavitt, KFF executive vice president for health policy. “But this decision could have big implications for health policy. We could see more legal challenges to federal health regulations. Federal regulators may get more cautious, and Congress might try to get more prescriptive, which may or may not be successful.”

What is it?

Chevron deference was a framework that federal courts used to make decisions when certain federal regulations were challenged in court, said Kaye Pestaina, JD, vice president and director of KFF’s program on patient and consumer protection. Based on the court case involving Chevron U.S.A. Inc. and the Natural Resources Defense Council, “federal courts were to give deference to a reasonable agency interpretation of a law when the agency was interpreting either an unclear or ambiguous provision in a law or an issue in which the law was silent,” she said.

“So that meant that federal courts would defer to an agency regulation … that a court found to be reasonable, even if there were other reasonable interpretations of that provision that a judge might thought think were a better interpretation of the law,” Pestaina said. “But nevertheless, the court had to uphold that agency regulation unless it found that somehow it was arbitrary or inconsistent with the statute.”

Over the last 40 years, it became a foundational concept in administrative law, although there were policy debates about whether that was the right approach, she said. Opponents argued unelected agency regulators should not have the final word on policy and that deference tilted too much power to the executive branch of government. Supporters claimed the agencies were tasked with executing policies and had expertise to do so, while being accountable to the president.

The Supreme Court’s Loper Bright ruling, authored by Chief Justice John Roberts, said Chevron deference runs counter to the federal Administrative Procedure Act (APA). That act sets parameters for federal administrative processes, and the Supreme Court said courts should decide legal questions by applying their own independent judgment, not deferring to federal agencies, Pestaina said.

‘Clear as mud’

Two examples of Congress delegating authority to executive agencies in health care are Medicare and Medicaid, said Cindy Mann, JD, a partner in Manatt Health and former deputy administrator of the Centers for Medicare & Medicaid Services (CMS).

In those programs, there is lots of delegation of authority. Some is specific, such as Congress stating the secretary shall establish rules to determine income eligibility, Mann said.

Some is general, and some needs more detail.

“In other areas, there may not be a specific delegation of authority, but it's clear that if Congress's intent is going to be actualized, there needs to be some more details,” Mann said. “For example, the statute says in Medicaid that rates paid to managed care plans should be actuarially sound, a concept that is clear as mud. So CMS regularly issues regulations and guidance to states on how to come up with a methodology for determining actuarial soundness.”

The Supreme Court opinion says courts should respect at least explicit delegations of authority, but it does not talk much about cases where executing agencies “need to fill in the gap.” There are concerns in some circles about lots more litigation and questions, and some agencies and their legal counsels may be “more reluctant, more concerned, more cautious about moving forward,” Mann said.

Ambiguity as a necessity?

Ambiguity in the law is a negotiating strategy in Congress when lawmakers are trying to pass legislation, said Dean A. Rosen, JD, citing his experience as an aide in the Senate. A partner in Mehlman Consulting, Rosen is former chief health care adviser to Senate Majority Leader Bill Frist.

“I think it will make legislation more challenging, potentially, there's no question, at least in some areas,” Rosen said. When there are questions about execution, Congress sometimes approves laws without knowing answers that don’t emerge until stakeholders weigh in, in a regulatory process that’s more specific, he said.

“So I think there will be some political challenges to getting agreement because of the specificity requirements that are clearly going to emanate from the case,” Rosen said. There also will be pragmatic challenges because members of Congress are not detailed experts on things like actuarial value, he added.

The court ruling could create an environment that puts a premium on bipartisan legislation or bills where one side has a substantial majority, “things we haven’t seen very much in the last couple of Congresses,” Rosen said.

Changing court cases?

There is ambiguity in some health care laws that can lead to legal fights, said Laurie Sobel, JD, KFF associate director women’s health policy.

For example, she cited Section 1008 the federal Title X program of the Office of Population Affairs, which states: “None of the funds appropriated under this title shall be used in programs where abortion is a method of family planning.” That “is definitely ambiguous,” has been interpreted differently by the administrations of different presidents, and has prompted legal fights over federal funding for family planning in Oklahoma and Tennessee, Sobel said.

Another example: Section 1557 of the Affordable Care Act, “which prohibits discrimination on the basis of race, color, national origin, age, disability, or sex,” in any health care program or activity that receives federal funding.

“So every one of those terms needs some defining, especially the last part – by any health care program or activity, what does that mean in terms of funding? Sobel said. “Is it anybody who gets any federal money? How broad is that?

“And this is another area where regulations have changed from each administration, and the Biden administration has issued regulations that include sexual orientation and gender identity in the definition of sex, which is now being challenged,” she said. There has been a flurry of activity citing the Supreme Court’s ruling, up to a nationwide injunction blocking the Biden administration’s regulation to define sex to include gender identity, Sobel said.

In those cases, some of the legal actions are less than a month old. The federal court ruling came July 15 in the Oklahoma lawsuit against the U.S. Department of Health and Human Services (HHS), according to Reuters. The HHS inclusion of sexual orientation and gender identity was to become effective July 5; it has been blocked by a federal court ruling of July 3, according to Bloomberg Law news.