US Supreme Court Overturns Chevron Doctrine in Monumental Decision Weakening Authority of All Federal Administrative Agencies
Written by: Brendon De Souza, Esq.
Legal Background
Last Friday, after forty years of precedent, the Supreme Court of the United States decisively overturned Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), which was a landmark Supreme Court decision forcing federal courts to defer to a federal agency’s interpretation of a law or statute under certain circumstances. That deference, more popularly known as “Chevron deference”, has been cited in more than fifteen thousand federal court cases, and Chevron is widely considered to be one of the most important administrative law cases in United States history.
The Chevron deference included a two-part test: (1) has Congress directly spoken to the precise question at issue (e.g., is the law clear and unambiguous); and (2) is the federal agency’s interpretation of the law a “permissible construction” (e.g., is the federal agency’s interpretation of the law reasonable)? If Congressional intent was unclear and the federal agency’s interpretation of the law was reasonable, federal courts were required to defer to the federal agency’s position. However, last week marked the end of Chevron and the inception of Loper.
Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882 (June 28, 2024) involved a dispute between a group of New England fisheries and the National Marine Fisheries Service (or “NMFS”, a subsidiary agency of the United States Department of Commerce) regarding a provision of the Magnuson-Stevens Fishery Conservation and Management Act (“Fishery Act”). The Fishery Act required certain fisheries to allow federal observers onboard their vessels to collect data for overfishing prevention, and the NMFS interpreted the Fishery Act to also require such fisheries to pay the salaries of the observers. The New England fisheries challenged the NMFS’ interpretation of the Fishery Act, but district and appellate courts both ruled that NMFS’ interpretation was reasonable. Ultimately, the Supreme Court was petitioned to determine whether Chevron (and by extension, the Chevron deference) should be overruled outright.
In a 6-3 decision, the Supreme Court overruled its 1984 Chevron decision and held that the Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether a federal agency has acted within its statutory authority. In other words, courts cannot defer to a federal agency’s interpretation of a law simply because a statute is ambiguous.
Sanderson Firm Commentary and What This Means
Last week’s Supreme Court decision strips significant power, and perhaps, even credibility,[1] from federal administrative agencies, and it will have long-lasting effects on many industries within the United States (e.g., Medicare, EPA, OSHA, etc.).
How could the Loper decision affect how the Centers for Medicare & Medicaid Services (“CMS”) interprets the Medicare Secondary Payer Act, particularly as in published administrative guidance such as the Workers’ Compensation Medicare Set-Aside (“WCMSA”) Reference Guide and/or the Section 111 Reporting NGHP User Guide?
Just as one example, consider Section 4.3 of the WCMSA Reference Guide which was added to the Guide in early 2022 and appeared to discredit non-submitted MSAs. As we have discussed in prior blogs, CMS has interpreted 42 C.F.R. 411.46 to allow the government, at its sole discretion, to deny a Medicare beneficiary’s coverage benefits if it determines that the funding of the non-submitted MSA was insufficient or the MSA funds were spent inappropriately.
We have always staunchly advocated that CMS has improperly misinterpreted the regulations and has ignored subsection 42 CFR 411.46 (d)(2), which allows settling parties to carve out a portion of the settlement for future medical and thereby protects the rest of the settlement dollars from Medicare’s recovery.
Accordingly, we view CMS’ interpretation of the law in Section 4.3 of the WCMSA Reference Guide as an improper interpretation of the regulations supporting MSP. Further, guidance issued by administrative agencies has never held the weight of the law. Guidance from administrative guidance is merely, well, guidance. With this Loper decision, it is even more clear now that an agency’s interpretation of the law will not have automatic deference/authority and a court may question an administrative agency’s interpretation of laws.
Under Chevron (had it not been overturned), a federal court may have deferred to CMS’ interpretation without issue. However, now under Loper, a federal court could freely decide that CMS’ interpretation is invalid, removing any potential attempts by CMS to question non-submission of MSAs.
If you have any questions about last Friday’s decision or would like to contact us regarding our Medicare Set-Aside services, please contact us.
[1] Justice Kagan, joined by Justices Sotomayor and Jackson, commented that the majority opinion “insists that agencies have no special competence in filling gaps or resolving ambiguities.”
