Daily Briefing

SCOTUS' Chevron decision: How it will impact healthcare

By: Natalie Trebes, Vidal Seegobin, Susan McDonald, and Max Hakanson 

The Supreme Court of the United States (SCOTUS) recently overturned the Chevron doctrine, which required courts to defer to federal agencies' interpretation of ambiguous laws. Advisory Board's Natalie Trebes, Vidal Seegobin, Susan McDonald, and Max Hakanson explain how this could impact healthcare and highlight what they'll be watching in the post-Chevron era.   

SCOTUS' Chevron decision

In a 6-3 decision, SCOTUS overturned the Chevron doctrine on June 28, repealing a 40-year-old legal precedent that required courts to defer to regulatory agencies to interpret ambiguous laws. 

Since Chevron v. Natural Resources Defense Council was decided in 1984, it has become one of the most cited cases in American law, serving as the basis for 70 Supreme Court decisions and 17,000 decisions in lower courts.

Under Chevron deference, federal agencies had the flexibility to use their expertise to interpret and apply broad statutes. This was particularly important in complex areas of law, where agencies needed to respond to advances in technology and changing circumstances.

However, with the overturn of Chevron, the power to interpret complex regulatory questions no longer lies with the agencies tasked with enforcing them. Instead, that responsibility now lies with the courts. 

"Chevron is overruled," Chief Justice John Roberts wrote in the majority opinion. "Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority."

Justice Elena Kagan expressed her dissent on the bench. "Courts, in particular this court, will now play a commanding role" in deciding policy, she noted.

According to Kagan, overturning Chevron "gives courts control over matters they know nothing about." Kagan argued that regulatory agencies are better equipped to address highly technical issues.

It's important to note that while Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce ruled that courts shouldn't automatically side with an agency's interpretation when there are statutory gaps or ambiguities, they can still decide that's the appropriate course of action for a given case.  

In addition, SCOTUS specified that the rulings in prior cases that relied on the Chevron framework are still lawful, but they can be challenged, which means there are no guarantees they will stand.

Recent SCOTUS rulings will impact healthcare

The Chevron decision isn't the only recent ruling poised to impact healthcare. There are a few other notable rulings that will also affect administrative law moving forward: 

  • Corner Post v. Board of Governors of the Federal Reserve System ruled that the default six-year statute of limitations for lawsuits against U.S. agencies doesn't start running until a regulation first injures a company — it was previously when the regulation was first issued. Older, established regulations may now also be challenged.  
  • SEC v. Jarkesy ruled that agencies can't impose major financial penalties on lawbreakers without a judgment from a court. This could make it much more difficult for healthcare agencies to penalize violations, such as fines for Medicare fraud. 
  • Ohio v. EPA blocked an environmental rule, with the Court arguing that the Environmental Protection Agency didn't offer an adequate response to the concerns of the industry players and states who opposed the rule. Moving forward, agencies are going to be faced with a greater burden for justifying their regulatory choices.

Altogether, these decisions paired with the Chevron decision will have widespread implications for how regulatory agencies operate — and are poised to have a significant impact on the healthcare landscape. 

The legal landscape: Unanswered questions

The Chevron decision will spur an increase in legal challenges to regulations — both inside and outside of healthcare. Without the barrier created by Chevron deference, every firm with a legal team may try to understand what plausible challenges they can make. 

The general interpretation of the what the decision means breaks down into two camps:

  • People who believe Congress should make all policy decisions, judges should decide what's legal, and agencies should carry it out
  • People who believe Congress isn't equipped to fill in policy details at a practical scale and timeframe, and agencies don't have the resources to keep up with a flood of legal challenges

Generally, legal experts agree that we'll just have to wait and see what lawsuits arise and how lower courts rule to get a sense of how this will unfold, as SCOTUS did not explicitly stipulate what would replace Chevron. But there are many theories about what could happen, with a few major questions under debate: 

Will Congress become more active? 

For decades, Congress has written legislation that presumes the context of Chevron deference. This ruling puts a much bigger onus on Congress to craft prescriptive, detailed legislation and explicitly delegate authority for interpretation to agencies. Even when Congress has authorized some amount of deference, that itself can be ambiguous and open to interpretation by the courts.  

Will courts be equipped to decide when to defer to agency expertise? 

The ruling determined that courts are better experts at interpreting law and identifying statutory ambiguities. But their ability to determine the correct answer may require more technical knowledge, which will be supplied by both the agency and plaintiffs. 

Is this actually going to change how courts interpret law? 

SCOTUS has added various exceptions and modifications to Chevron deference over the years, so this ruling is a final ultimatum to eliminate it entirely but nowhere near the first erosion on its impact.  

How will the industry navigate conflicting decisions from lower courts? 

When challenged, agency interpretations will only be deferred to on a case-by-case basis. Lower circuit court administrative law decisions may conflict with each other in how they treat the agency's position, potentially allowing a confusing patchwork array of caselaw across different states until cases get to SCOTUS. This will be problematic since healthcare organizations grow nationally. 

How much of a resource burden will this place on agencies? 

Agencies may need additional time, staff, and data to mitigate potential challenges and even more robustly address comments in rulemaking processes, as well as dedicate resources to increased litigation volumes. 

Which regulations are vulnerable? 

This question is probably the most burning one for healthcare organizations. According to SCOTUS, settled cases that relied on Chevron will not be automatically overturned, and this precedent will only apply to future cases. But those can include new cases challenging past cases — litigants can pursue action against past regulations. With the change to the statute of limitations for harm, it's likely that many existing policies are on the table to be challenged by affected industry players.   

Agencies will likely become slower

Ultimately, we expect that agencies will have less regulatory power and discretion and need to expend more resources and time for all future activities. For healthcare organizations, this may be destabilizing to normal operations — but it may also offer them more avenues for recourse to their business challenges and more specific legislation via Congress. 

To anticipate how this change to administrative law will play out in healthcare, we think it's helpful to consider what policies will be challenged alongside the ways in which normal agency activities will be slowed down across the following categories:  

It's difficult to comprehensively inventory and categorize all major federal health policy activities, but here's how we're thinking about the following health policy topics — and how they could be impacted. While we don't know for certain what will be considered "statutorily ambiguous" and open to challenge, we expect to see challenges within each of these domains due to the complexity of healthcare regulations.  

What we'll be watching

Recent healthcare lawsuits give a preview of the future areas most likely to prompt more challenges. 

Medicare drug price negotiations

Under the Inflation Reduction Act (IRA), Medicare will be able to negotiate certain prescription drug prices with pharmaceutical companies. This provision will initially apply to 10 drugs starting in 2026 and expand to 20 drugs in 2029. However, the program is the subject of several ongoing lawsuits filed by drug manufacturers that have argued the law is unconstitutional.

Surprise billing

In December 2020, Congress passed the No Surprises Act (NSA) to mitigate patients' exposure to surprise medical bills and require insurers and providers to resolve payment disputes for out-of-network care independently or use a new arbitration process. Since it passed, the NSA has faced to legal challenges from provider associations and air ambulance groups on issues like arbitration, enforcement, and payment rates

MA payments

Last month, CMS announced that it will review all MA Star Ratings for 2024, after two court cases found the agency improperly modified the way it assesses quality.

While the full impact of this ruling is yet to be seen, we'll be closely monitoring the impact of the Chevron decision as current and future legal challenges unfold. 

(Pifer, Healthcare Dive, 6/28; Sherman, Associated Press, 6/28; Liptak, New York Times, 6/28; Totenberg, NPR, 6/28; Cass, Becker's Hospital Review, 6/28; Roubein, Washington Post, 7/1; Bagley, The Atlantic, 6/29; Delionado/Gross, National Law Review, 7/8)






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