Many providers have expressed concern about the use of “guidance” and “interpretive guidelines,” for example, by the Centers for Medicare and Medicaid Services (CMS) to make major changes to requirements of the Medicare Program. On June 3, 2019, the U.S. Supreme Court issued an important decision that requires CMS to provide notices and comment periods in formal rulemaking processes when establishing or changing “substantive legal standards” (Azar, Secretary of Health and Human Services v. Allina Health Services et al., No. 17-1484, U.S. Supreme Court, June 3, 2019). The Court said that when CMS doesn’t identify a lawful excuse for neglecting its obligations to provide statutory notices and comment periods, policies that aren’t based on such notices and comment periods must be vacated.
The key issue is, of course, what counts as a “substantive legal standard.” CMS said that the statute requiring notice and a comment period distinguishes substantive from interpretive legal standards. “Substantive rules” have the “force and effect of law” while “interpretive rules” just “advise the public of CMS’ construction” of statutes and rules that it administers.
The Court rejected CMS’ argument because the Medicare Act and the Administrative Procedure Act (APA) do not use the word “substantive” in the same way. First, said the Court, the Medicare Act says that “statements of policy” can establish or change a “substantive legal standard,” while the APA says that statements of policy are not substantive by definition, but are treated as interpretive rules. In addition, federal statutes giving the government limited authority to make retroactive “substantive changes” in “interpretative rules” and “statements of policy” make no sense if the Medicare Act uses the term “substantive,” as the APA does. Interpretive rules and statements of policy and any changes to them are not substantive under the APA by definition. Further, said the Court, if Congress wanted to follow the APA in the Medicaid Act and exempt interpretive rules and policy statements from notice and comment, it could have simply cross-referenced the exemption in the APA. The Court concluded that legislative history presented by CMS was ambiguous at best.
Finally, CMS argued that requirements to provide notice and comment periods would be excessively burdensome. The Court rejected this argument.
This case means that if CMS establishes or makes a change to substantive legal standards of the Program, it may do so only by publishing proposed rules and providing for comment periods on the proposed rules. CMS cannot make changes to substantive legal standards by relying on “interpretive guidelines,” “guidance,” etc. Good news for providers!
©2019 Elizabeth E. Hogue, Esq. All rights reserved.
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