Following the 1984 landmark US Supreme Court case Chevron USA, Inc. v. Natural Resources Defense Council, Inc., and the 1997 case Auer v. Robbins, federal courts have deferred to federal agencies to interpret ambiguous statutory language and regulations as long as that interpretation is considered reasonable. Since Chevron, the courts have generally used a two-part test to first determine if Congress has directly spoken to the issue at hand and then if Congress has unambiguously expressed its intent. If the law is silent or ambiguous, agency action can be predicated on its understanding of the law within reason.

In May 2023, the Supreme Court announced that it would consider question 2 of Loper Bright Enterprises v. Raimondo. This question asked whether the court should overrule Chevron or, at a minimum, clarify that statutory silence regarding controversial powers that are “expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.”

Overturning Chevron deference may have a wide range of impacts across the healthcare industry.

Deference to Healthcare Agencies

Given the complexity of operationalizing healthcare laws, federal agencies have relied on Chevron deference and authority under the Administrative Procedures Act to issue guidance and proposed rules based on agency expertise. In recent years, administrative law scholars have increasingly debated when it is appropriate for the court to continue to defer to agency actions when an agency is acting under an ambiguous law.

Historically, the Chevron doctrine has insulated agencies like the Centers for Medicare & Medicaid Services and the Food and Drug Administration from significant scrutiny. Overturning this decision can have a significant impact on how federal agencies issue rules and whether they will be able to successfully defend arguably ambiguous agency actions.

Several seminal healthcare cases have involved Chevron deference. For example, in King v. Burwell, the court heard a dispute regarding whether individuals in states that did not create their own Affordable Care Act (ACA) exchanges would be eligible for tax credits. While the ACA’s legislative language referred to exchanges created by states, the Internal Revenue Service (IRS) made those tax credits available through both state and federal exchanges. The Supreme Court ruled that while Congress did not delegate the authority to the Internal Revenue Service, the ACA intended tax credits to be available through both federal and state exchanges. Interestingly, the court noted in its opinion that Chevron deference does not apply to questions that are of “deep economic and political significance.” In American Hospital Association v. Becerra, the American Hospital Association (AHA) sued the Department of Health & Human Services (HHS) after HHS reduced the reimbursement rate for 340B hospitals. The court ruled that HHS could not vary reimbursement rates in 2018 and 2019 for 340B hospitals without first conducting a survey on hospital acquisition costs. While the AHA argued that the Supreme Court should consider the language, origin, structure, and operation of the 340B statute before allowing HHS to exercise Chevron deference, the court did not invoke Chevron.

Potential Impacts of Overturning Chevron Deference

The issue at the core of the debate on the Chevron doctrine revolves around the issues of balance of powers, expediency, and technical expertise. If the Supreme Court overturns the Chevron precedent, a significant increase in litigation, limitations in agency power, and a shift in judicial outcomes may occur.

In the past two years, observers expected several cases in which the Supreme Court could challenge the Chevron framework, but the justices opted not to discuss it. By granting review of the Loper Bright Enterprises question, the Supreme Court is likely to directly decide whether to put some limits on agency deference or at least provide clarity on the landmark case later this year.

Avalere’s policy experts can provide a 360° perspective on potential outcomes in Loper Bright Enterprises and the impacts on healthcare policymaking. To learn more about how a potential ruling may affect your policy design and advocacy strategies, connect with us.