Supreme Court overrules Chevron deference, dealing blow to federal healthcare agencies

The U.S. Supreme Court, by a vote of 6-3, has overturned the Chevron deference, stripping power from federal agencies to interpret and enforce regulations.

Under the long-standing precedent, courts are required to determine whether an agency’s interpretation of an ambiguous law is reasonable. This has given agencies room to advance regulatory priorities.

In Loper Bright Enterprises v. Raimondo—where commercial fishermen sued the National Marine Fisheries Service for mandating they pay compliance observers, which was combined with Relentless v. Department of Commerce—the Supreme Court opted to reverse the court’s 1984 decision in Chevron v Natural Resources Defense Council.

“Today, the court places a tombstone on Chevron no one can miss,” said Justice Neil Gorsuch in a concurring opinion.

Now that Chevron is overturned and no longer permissible under the Administrative Procedure Act, courts do not have to defer to reasonable agency interpretations.

“Instead, they can decide how persuasive that interpretation is,” said Richard Hughes IV, a healthcare attorney for Epstein Becker Green.

"We’re likely to see more scrutiny where an agency leans on its authority to accomplish an ambitious, progressive policy aim, but courts may be more deferential the more obscure the statute and issues at hand,” he added.

Chief Justice John Roberts, writing the majority opinion, specified that the decision 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 our change in interpretive methodology."

In other words, previous cases in which the court made its ruling under the Chevron deference will not be immediately upended by today's decision.

Hughes predicts the Centers for Medicare & Medicaid Services will be under a microscope from the courts going forward, and there will be more scrutiny towards provider reimbursement cuts, drug pricing regulation and the Inflation Reduction Act.

"In healthcare regulation, clarity transcends permissibility; agencies must now demonstrate that their interpretations are not only allowable but optimal,” said Kelly Cleary, a former Deputy General Counsel at HHS and chief legal officer for CMS, who is currently a partner at law firm Akin.

In prior arguments reflecting the original Chevron decision, the Biden administration has argued that Congress broadly intends for government agencies to resolve statutory ambiguities because they staff the subject matter experts best equipped to fill in the blanks. 

The court's majority disagreed, writing that the expertise most relevant to interpreting law is held by those within the judicial branch.

“Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do,” the Supreme Court wrote in the opinion's headnote.

Experts with the O’Neill Institute for National & Global Health Law at Georgetown University wrote in a joint statement that the decision will have significant consequences.

“Today’s Supreme Court decision ... reflects the latest attack in a long-running campaign to weaken federal agencies and their ability to address pressing policy challenges that affect our nation’s health, safety and the environment,” they said. “This ruling not only limits how Congress may rely on experts in a politically accountable, co-equal branch of government, it also concentrates power in the courts, making them the ultimate arbiters of policy and political issues.”

Others argue the ruling will eliminate unnecessary burdens on providers and remove power from the administrative class.

"By affording the courts with the authority to interpret ambiguities in statutes, it levels the playing field for all healthcare providers that are subject to an oftentimes complex web of rules, regulations and subregulatory guidance,” Peggy Kozal, a healthcare attorney at Dickinson Wright, told Fierce Healthcare in an email. “In a system where healthcare providers have the cards stacked against them in regulatory appeals, administrative agencies will be held more accountable in judicial review processes.”

“This decision will promote stability in the law, granting both industry and the general public much greater certainty in the meaning of statutes,” said Geoffrey Manne, president of The International Center for Law & Economics. “It will also put the onus on the people’s representatives in Congress, rather than unelected bureaucrats, to fix statutes in light of new social problems.

In her dissent, liberal Supreme Court justice Elena Kagan thoroughly disagreed with the court’s decision.

“[Chevron] has become part of the warp and woof of modern government, supporting regulatory efforts of all kinds—to name a few, keeping air and water clean, food and drugs safe, and financial markets honest,” she said. “And the rule is right.”

She added: “…given Chevron’s pervasiveness, the decision to [overturn] is likely to produce large-scale disruption.”

The majority declared that past decisions upholding agency action should not be reversed just because Chevron is no longer the law of the land. Kagan asks, “how good is that assurance really?”

“Courts motivated to overrule an old Chevron-based decision can always come up with something to label a ‘special justification,’” she explained.

Although it’s expected the effects of Chevron overturning won’t be felt immediately, more challenges to legal rules are coming, said Danielle Stempel, senior associate for Hogan Lovells, in an April webinar discussing the ramifications of the case.

This decision could also limit the ability of agencies to adapt to new technologies like artificial intelligence, said Krista Drobac, a partner at Sirona Strategies, a policy and lobbying firm focused on healthcare, during the same webinar.

“You really need the agency to be able to change the regulations through a rulemaking process every single year,” she explained, noting it may take four years for a bill to pass through Congress.