Episode 93 Recap – What the Chevron Ruling Means for Healthcare

The print version of the FLATLINING Podcast

In this episode, Matthew and Ron discuss the impact of the recent overturning of Chevron U.S.A. Inc. v Natural Resources Defense Council, Inc. (NRDC) by the U.S. Supreme Court.  The 1984 case set a precedent that gave government agencies deference in interpreting federal law when setting policy or regulation. This case came about when in 1981 the EPA redefined the meaning of what a “source” meant when discussing air pollution in the Clean Air Act of 1962. The Supreme Court ruled in favor of the NRDC and the “Chevron deference” was born and has been applied to thousands of cases over the past 40 years.

Ron begins the conversation by giving a short history of the case and further explains that when federal laws are signed, some details will need to be fleshed out during implementation. He explained that up until this recent ruling, federal agencies were given deference when disputes arose between parties and the federal government.  What the court said, according to Ron, is that now no deference will be given, and “each individual court must decide what the spirit, intent and what is written in the law and interpret it themselves” he said. The removal of 40 years of precedent will likely cause some chaos, Ron said. He predicts that several areas of the healthcare industry will now bring action in areas such as the Federal Drug Administration (FDA), the Centers for Medicare and Medicaid Services (CMS), or maybe Health and Human Services (HHS).

Ron took a deeper dive into what he thinks will be the first possible cases. He is confident that the FDA’s approval of the abortion pill Mifepristone will be challenged. He said there is nothing written in the law that gives the FDA the approval to do that, he said. Another very interesting case may be one involving CMS’s ability to set the reimbursement rate for physicians, he said. Ron asked hypothetically, where is it written in law that CMS can do that? Following up with the thought that if it isn’t written in law, then possibly CMS can’t set the reimbursement rate. He noted that the Medicare reimbursement rate is “fundamental” to how physicians get paid. One other case that he is confident will come up will be the Biden Administration’s negotiating of drug prices. Ron said he is confident that drug companies will likely ask where is it written law that the administration can do this.

Taking all this speculation a step further, noting that the ruling said each court must decide these cases, Ron asked hypothetically what would happen when you get two different jurisdictions that rule differently. Likely it will then come back to the Supreme Court he said. But in the meantime, it will be confusing and we are going to have to wait for the dust to settle, he said.

Matthew moved the conversation onto the No Surprises Act (NSA) and the Texas Medical Association’s (TMA) lawsuit against the Biden Administration for not enforcing the NSA. The judge in the case sided with the TMA. Ron did not think this recent Chevron decision would have an impact on the NSA, but pointed to one of the four lawsuits particularly, TMA 3. He reminded us that this case dealt with the proper administration of the NSA, addressing things like how to calculate the QPA, transparency, the IDR process, many of the things that were at the core of the complaint about how HHS was implementing the law.  The judge ruled in favor of TMA and told HHS to fix it, and HHS has appealed.

Ron thinks the recent Chevron decision will make it difficult for the government to win on appeal because much of the case HHS was making was based on Chevron, saying that they, HHS, should receive deference because it is their role to interpret what the law meant. Ron added that Chevron was often used when a law was ambiguous, in the case of TMA the judge said the law was not unclear and HHS was not following the law. With the legal precedent that HHS was claiming out of the picture, Ron thinks it’s unlikely they can win and given the clarity of the law, he did not think HHS had much of a chance anyway.  With that said, enforcement is another matter.

The discussion moved on to ask that ver question. How do you get the federal government to comply with NSA? Especially when the agency claimed they have “enforcement discretion.” It is not likely that the director of HHS will be held in contempt of court Ron said. He speculated that we won’t see NSA get fully implemented correctly until there is some other litigation, possibly against the payers or a change in administration. Ron shared a story about another federal case where a judge was in the position to try and compel a federal agency to comply, they did not, and the judge was able to get the plaintiff justice. He said that the judge in the TMA case is in much the same position, trying to get the federal government to comply without much in the way of enforcement capability.  Ron thought the judge did leave the door open for litigation against the insurance companies. He speculated that if the payers get hit with high-dollar judgments, you will likely see the NSA get implemented correctly. But until then we are in a kind of “standoff” he said.

Matthew asked Ron to bring us up to speed on some upcoming important dates regarding the NSA. November is the deadline for CMS’s “enforcement discretion” to end Ron said. He reminded us that this phrase meant that CMS wasn’t going to conduct any audits, issue penalties, or other enforcement until November of this year. That date can get pushed out further, he said. He added that the election will likely determine if anything gets done. If Biden wins, Ron thinks that the date will get pushed, if Trump wins, then he thinks the current secretary will choose to do nothing as a lame-duck administrator.

The discussion wrapped up with Matthew asking Ron about some possible changes to the NSA. He asked about proposed “prescribed rates” in the IDR process versus using the QPA calculations from the payers. Using a prescribed rate limits what can be charged for services if a dispute goes to the IDR process, Ron said. Payers are worried that the NSA will be fully implemented and cost them a bunch of money, he said. If implemented as written it would be very good for hospital-based physicians, Ron said. So we are likely to see the insurance companies lobby for a “prescribed rate.”

Ron explained that since the NSA was a bi-partisan effort, it was pitched to lawmakers to save money, by cutting costs on “non-contracted hospital-based physicians”, by reducing costs on the government as an employer and subsidies to the Affordable Care Act. The cost savings haven’t materialized as of yet, mainly since physicians are winning most of the arbitration arguments, Ron said. So given the timing of the next mid-term elections, Ron sees that the payers could advocate to “close this loophole” in the IDR process by lobbying Congress to change the law to put in a prescribed rate, to ostensibly save the government money.

If the prescribed rate was implemented, that would be “game over” Ron said. But to loop it back to the Chevron discussion, he said you can ask the question of who can set those rules, and then it gets a mirky.