Impact of Supreme Court Chevron Decision on Health Policy

The Supreme Court has overturned longstanding precedent by striking down the “Chevron doctrine,” a 40-year-old standard that required courts to defer to regulatory agencies to interpret ambiguous laws. Experts, including credit agency Moody’s Ratings, say it will dramatically change the way key health agencies do business and the decision is sending shockwaves through the policymaking community that will reverberate for years to come. The anticipated impact of this ruling includes legal challenges to regulations, a slower rulemaking process, diminished federal ability to develop new programs or innovations, or impose new requirements such as the Center for Medicare and Medicaid Service’s (CMS) minimum-staffing requirements for nursing homes, EPA rules about limiting air pollution for lung health, Food and Drug Administration rules ensuring the safety and efficacy of drug trials and keeping food free of contaminants, and more.

Background on Chevron

The Chevron doctrine (or Chevron deference) gets its name from a 1984 Supreme Court case giving federal agencies the flexibility to use their expertise to interpret broad statutes in order to implement regulations. This is particularly important in complex areas of law, where agencies need to respond to advances in technology and changing circumstances, including public health emergencies. As explained in Scientific American:

For example, if Congress passed a law that allowed the Environmental Protection Agency or the Food and Drug Administration to set limits on toxins as a broad category, people at those agencies would then use scientific evidence and expertise to determine which toxins should be limited, what the limits should be and what procedures would be best to monitor the toxins, among other things. If an entity challenged those regulations in court, owing to Chevron deference, judges would “defer” to the relevant agency’s reasonable interpretation of the law, allowing it to set those regulations. The benefits were twofold: Congress could leave some ambiguity when it drafted a given law and not get bogged down with every tiny detail. And agencies could adapt to meet new threats, challenges and opportunities that would fall under that law

Before being struck down, Chevron had become among the most frequently cited cases in American administrative law, with over 17,000 lower court and 70 Supreme Court decisions citing Chevron deference. But criticism of administrative agencies has been an ongoing theme from conservatives concerned with overregulation of industry and this case is part of an ongoing deregulatory effort to restrain federal agencies. Project 2025— the Heritage Foundation’s policy playbook for a possible Trump second term — encouraged a dismantling of “the administrative state,” with a particular focus on HHS, the agency with most of the administrative authority over Medicare, Medicaid, the Affordable Care Act and other health statutes, and that houses key public health organizations such as the Centers for Disease Control and Prevention and the National Institutes of Health.

Writing for the six-justice majority Court, Chief Justice Roberts explained:

“Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the [Administrative Procedure Act (APA)] requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry.

And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”

Health Policy Impact

In addition to the numerous potential areas where recent federal health policy is expected to be affected — such as Medicare drug price negotiations, surprise medical billing rules, preventive health care services, rules and regulations regarding the pandemic (such as vaccines and public health), and patients’ data protection and privacy — the overturning of Chevron deference is expected to have both an indirect and direct impact on states. According to Moody’s, “heightened litigation will likely slow the regulatory process until the courts speak. This burden of statute interpretation may overwhelm lower courts, causing delays and potential inconsistencies … In the event of a divided Congress failing to provide timely clarity on regulations or enforcements, courts and states may step in to fill the void lead(ing) to states reestablishing their own regulations.”

The direct impact on state health policy will affect Medicaid and the Children’s Health Insurance Program (CHIP), with potentially wide-reaching implications. In fact, on the same day of the Chevron ruling, a New Jersey health system challenged the Department of Health and Human Services’ (HHS) formula for disproportionate share hospital payments in federal court. Examples include:

• Increased legal challenges to regulations: More lawsuits challenging existing CMS regulations and interpretations are anticipated, which could include reimbursement amounts, coverage of services, Medicaid expansion, access, quality, and payment standardization, value-based payment innovation, Medicaid standards for state programs, Medicaid state waiver approvals, including work requirements, coverage flexibility, and more.
• Slower and more cautious rulemaking and policy implementation: Because courts will now have the final say on statutory interpretations of federal law, experts are concerned about inconsistent decisions and backlogs of lower court rulings, resulting in a lack of timely and clear guidance for agencies, which will also impact state Medicaid programs.
• Fewer new programs and innovations: Without explicit Congressional approval, federal agencies will be reluctant to overreach in responding to emerging health care needs or in deploying new programs such as those championed by the Centers for Medicare and Medicaid Innovation.
• Increased role of Congress: Congress will be expected to be more specific and directive when drafting legislation, which will slow the legislative process. Negotiating over details in legislation will also make political consensus more difficult. This will increase pressure on states to craft their own laws where there are federal gaps.

Looking Ahead

Going forward, courts are likely to be more amenable to challenges of HHS regulations, especially in cases where challengers can point to the ambiguity or misinterpretation of the underlying law. The ruling leaves many questions unanswered. What does it mean that courts may not defer to agencies’ legal interpretations but should give careful attention or respect to the agencies’ judgment? And under what circumstances should courts conclude that Congress has delegated interpretive authority to an agency within the constitutional limits? Given the breadth of Chevron on the prior 40 years of administrative law, determining the full scope of the Supreme Court’s ruling will take some time, with high stakes in the balance and likely unforeseen consequences.