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The Supreme Court Just Limited Federal Power. Health Care Is Feeling the Shockwaves.

The Supreme Court Just Limited Federal Power. Health Care Is Feeling the Shockwaves.

The Supreme Court's June 28 decision overturned a 1984 precedent that said courts should give deference to federal agencies in legal challenges over their regulatory or scientific decisions. Instead, courts will exercise their independent judgment about what Congress intended when drafting a particular law. (Al Drago/Bloomberg via Getty Images)

A landmark Supreme Court decision that reins in federal agencies’ authority is expected to hold dramatic consequences for the nation’s health care system, calling into question government rules on anything from consumer protections for patients to drug safety to nursing home care.

The June 28 decision overturns a 1984 precedent that said courts should give deference to federal agencies in legal challenges over their regulatory or scientific decisions. Instead of giving priority to agencies, courts will now exercise their own independent judgment about what Congress intended when drafting a particular law.

The ruling will likely have seismic ramifications for health policy. A flood of litigation — with plaintiffs like small businesses, drugmakers, and hospitals challenging regulations they say aren’t specified in the law — could leave the country with a patchwork of disparate health regulations varying by location.

Agencies such as the FDA are likely to be far more cautious in drafting regulations, Congress is expected to take more time fleshing out legislation to avoid legal challenges, and judges will be more apt to overrule current and future regulations.

Health policy leaders say patients, providers, and health systems should brace for more uncertainty and less stability in the health care system. Even routine government functions such as deciding the rate to pay doctors for treating Medicare beneficiaries could become embroiled in long legal battles that disrupt patient care or strain providers to adapt.

Groups that oppose a regulation could search for and secure partisan judges to roll back agency decision-making, said Andrew Twinamatsiko, director of the Health Policy and the Law Initiative at Georgetown University’s O’Neill Institute. One example could be challenges to the FDA’s approval of a medication used in abortions, which survived a Supreme Court challenge this term on a technicality.

“Judges will be more emboldened to second-guess agencies,” he said. “It’s going to open agencies up to attacks.”

Regulations are effectively the technical instructions for laws written by Congress. Federal agency staffers with knowledge related to a law — say, in drugs that treat rare diseases or health care for seniors — decide how to translate Congress’ words into action with input from industry, advocates, and the public.

Up until now, when agencies issued a regulation, a single rule typically applied nationwide. Following the high court ruling, however, lawsuits filed in more than one jurisdiction could result in contradictory rulings and regulatory requirements — meaning health care policies for patients, providers, or insurers could differ greatly from one area to another.

One circuit may uphold a regulation from the Centers for Disease Control and Prevention, for example, while other circuits may take different views.

“You could have eight or nine of 11 different views of the courts,” said William Buzbee, a professor at Georgetown Law.

A court in one circuit could issue a nationwide injunction to enforce its interpretation while another circuit disagrees, said Maura Monaghan, a partner at Debevoise & Plimpton. Few cases are taken up by the U.S. Supreme Court, which could leave clashing directives in place for many years.

In the immediate future, health policy leaders say agencies should brace for more litigation over controversial initiatives. A requirement that most Affordable Care Act health plans cover preventive services, for example, is already being litigated. Multiple challenges to the mandate could mean different coverage requirements for preventive care depending on where a consumer lives.

Drugmakers have sued to try to stop the Biden administration from implementing a federal law that forces makers of the most expensive drugs to negotiate prices with Medicare — a key cog in President Joe Biden’s effort to lower drug prices and control health care costs.

Parts of the health care industry may take on reimbursement rates for doctors that are set by the Centers for Medicare & Medicaid Services because those specific rates aren’t written into law. The agency issues rules updating payment rates in Medicare, a health insurance program for people 65 or older and younger people with disabilities. Groups representing doctors and hospitals regularly flock to Washington, D.C., to lobby against trims to their payment rates.

And providers, including those backed by deep-pocketed investors, have sued to block federal surprise-billing legislation. The No Surprises Act, which passed in 2020 and took effect for most people in 2022, aims to protect patients from unexpected, out-of-network medical bills, especially in emergencies. The high court’s ruling is expected to spur more litigation over its implementation.

“This really is going to create a tectonic change in the administrative regulatory landscape,” Twinamatsiko said. “The approach since 1984 has created stability. When the FDA or CDC adopt regulations, they know those regulations will be respected. That has been taken back.”

Industry groups, including the American Hospital Association and AHIP, an insurers’ trade group, declined to comment.

Agencies such as the FDA that take advantage of their regulatory authority to make specific decisions, such as the granting of exclusive marketing rights upon approval of a drug, will be vulnerable. The reason: Many of their decisions require discretion as opposed to being explicitly defined by federal law, said Joseph Ross, a professor of medicine and public health at Yale School of Medicine.

“The legislation that guides much of the work in the health space, such as FDA and CMS, is not prescriptive,” he said.

In fact, FDA Commissioner Robert Califf said in an episode of the “Healthcare Unfiltered” podcast last year that he was “very worried” about the disruption from judges overruling his agency’s scientific decisions.

The high court’s ruling will be especially significant for the nation’s federal health agencies because their regulations are often complex, creating the opportunity for more pitched legal battles.

Challenges that may not have succeeded in courts because of the deference to agencies could now find more favorable outcomes.

“A whole host of existing regulations could be vulnerable,” said Larry Levitt, executive vice president for health policy at KFF.

Other consequences are possible. Congress may attempt to flesh out more details when drafting legislation to avoid challenges — an approach that may increase partisan standoffs and slow down an already glacial pace in passing legislation, Levitt said.

Agencies are expected to be far more cautious in writing regulations to be sure they don’t go beyond the contours of the law.

The Supreme Court’s 6-3 decision overturned Chevron U.S.A. v. Natural Resources Defense Council, which held that courts should generally back a federal agency’s statutory interpretation as long as it was reasonable. Republicans have largely praised the new ruling as necessary for ensuring agencies don’t overstep their authority, while Democrats said in the aftermath of the decision that it amounts to a judicial power grab.