The Supreme Court just limited federal power. Healthcare is feeling the shockwaves

This is a KFF Health News story.

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

The June 28 decision overturns a 1984 precedent that said courts must defer to federal agencies in legal challenges to their regulatory or scientific decisions. Instead of giving precedence to agencies, courts will now exercise their own independent judgment as to what Congress intended when it drafted a particular law.

The decision is likely to have seismic consequences for health policy. A flood of lawsuits — with plaintiffs such as small businesses, drugmakers and hospitals challenging regulations they say are not specified in the law — could leave the country with a variety of health regulations that vary by location.

Agencies like the FDA are likely to be much more careful in drafting regulations, Congress is expected to take longer to complete legislation to avoid legal challenges, and judges will be more inclined to strike down current and future regulations.

Health policy leaders say patients, providers and health systems must prepare for more uncertainty and less stability in the health care system. Even routine government functions, such as setting the fee to pay doctors for treating Medicare beneficiaries, can become embroiled in lengthy legal battles that impede patient care or pressure providers to conform.

Groups that oppose a regulation can seek and secure partisan judges to overturn the agency’s decision-making, said Andrew Twinamatsiko, director of the Health Policy and Law Initiative at Georgetown University’s O’Neill Institute. An example would be challenges to the FDA’s approval of a drug used in abortions, which survived a Supreme Court challenge to a term technique.

“Judges will be more tolerant of second-guessing agencies,” he said. “It will open up agencies to attack.”

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

Until now, when agencies issued a regulation, a single rule usually applied statewide. However, after the high court’s ruling, lawsuits filed in more than one jurisdiction could result in conflicting rulings and regulatory requirements — meaning that health care policies for patients, providers or insurers could differ greatly from one area to the next.

One county may uphold a regulation from the Centers for Disease Control and Prevention, for example, while other counties may have different views.

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

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

In the near future, health policy leaders say agencies should prepare for more litigation over controversial initiatives. A requirement that most Affordable Care Act health plans cover preventive services, for example, is already being discussed. Multiple challenges to the mandate can 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 more expensive drugs to negotiate prices with Medicare — a key cog in President Joe Biden’s push to lower drug prices and control health care costs.

Parts of the health care industry may receive reimbursement rates for physicians that are determined by the Centers for Medicare Services & Medicaid because those specific fees are not written into the law. The agency issues rules to update payment rates in Medicare, a health insurance program for people 65 and older and younger people with disabilities. Groups representing doctors and hospitals regularly flock to Washington, DC, to lobby against cuts 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 takes effect for most people in 2022, aims to protect patients from unexpected, out-of-network medical bills, especially in emergencies. The high court’s decision is expected to prompt more litigation over its implementation.

“This will really create a tectonic shift in the administrative regulatory landscape,” Twinamatsiko said. “The approach since 1984 has created stability. When the FDA or CDC pass regulations, they know that those regulations will be followed. This is taken again.”

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

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

“The legislation that drives most of the work in the health space, like the FDA and CMS, is not prescriptive,” he said.

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

The high court’s decision will be particularly important to the nation’s federal health agencies, because their regulations are often complex, creating the potential for tougher legal battles.

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

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

Other consequences are possible. Congress may try to hash out more details when drafting legislation to avoid challenges — an approach that could increase partisan infighting and slow an already icy pace in passing legislation, Levitt said.

Agencies are expected to be much more careful in writing regulations to ensure that they do not go beyond the contours of the law.

The Supreme Court’s 6-3 decision overturned Chevron USA v. Natural Resources Defense Council, which held that courts generally must uphold a federal agency’s statutory interpretation as long as it was reasonable. Republicans have largely hailed the new ruling as necessary to ensure agencies don’t overstep their authority, while Democrats said after the ruling that it amounts to a usurpation of judicial power.