On June 28, 2024, SCOTUS (Justice Roberts) decided Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, 219 L. Ed. 2d 832 (2024). This decision held that courts need not, and under the Administrative Procedure Act (APA) may not, defer to an administrative agency’s interpretation of ambiguous statutes. In no uncertain terms, this decision overrules the Chevron Doctrine of “agency deference” that has been the status quo for over 40 years.[1]
Relative to your Montana workers’ compensation practice, this decision will likely have implications for MSA compliance in workers’ compensation claims, and, as usual, experts are already debating what the future holds.
The APA and the Chevron Doctrine.
A quick refresher: in 1946, Congress enacted the APA “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.”[2] The APA was the culmination of a “comprehensive rethinking of the place of administrative agencies in a regime of separate and divided powers.”[3] It was created following several SCOTUS cases, most notably Skidmore v. Swift & Co., 323 U.S. 134 (1944), which addressed the delineation of power between the executive and judicial branches as relating to deference and statutory interpretation.
The APA delineates the contours of judicial review of agency decision-making. Section 706 directs that “the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.”[4] The APA requires courts to “hold unlawful and [to] set aside agency action, findings, and conclusions found to be … not in accordance with law.”[5]
The APA thus codifies for agency cases the unremarkable, yet elemental proposition reflected by judicial practice dating back to Marbury: that courts decide legal questions by applying their own judgment. It specifies that courts, not agencies, will decide “all relevant questions of law” arising on review of agency action, § 706 (italicized emphasis added) — even those involving ambiguous laws — and set aside any such action inconsistent with the law as they interpret it. And it prescribes no deferential standard for courts to employ in answering those legal questions.”[6]
The Chevron Doctrine applied a two-prong test which, under certain circumstances, instructed deference to an agency’s regulatory interpretation of a statute. The two-prong test asked: (1) is the statute silent or ambiguous; and if so, (2) is the agencies regulatory interpretation of the statute “reasonable” or “rational?” [7] If this two-prong test was satisfied (under Chevron), an agency’s regulatory interpretation of the statute was afforded deference. Following Loper Bright (see below), statutory interpretation has formally been returned to the courts.
Judicial Interpretation Under Loper Bright.
The principle take-away from this decision is that the Chevron Doctrine violated the express mandates of the APA. The Loper Bright Court confirmed that Chevron defies the command of the APA, i.e., that “the reviewing court — not the agency whose action it reviews — is to decide all relevant questions of law and [to] interpret … statutory provisions.”[8] Loper Bright continues, the Chevron Doctrine requires a court to ignore, not follow, “the reading [decision] the court would have reached” had it exercised its independent judgment as required by the APA.[9]
The Loper Bright Court also distinctly identified that, while agency factual findings may be afforded deference, Courts “do not extend similar deference to agency resolutions of questions of law (emphasis maintained).” [10] Loper Bright instead makes clear, repeatedly, that “[t]he interpretation of the meaning of statutes, as applied to justiciable controversies, is exclusively a judicial function.”[11]
Justice Roberts noted that courts are still free to “respect” agency interpretations as described in Skidmore.[12] Specifically, “[i]n exercising such judgment … courts may — as they have from the start — seek aid from the interpretations of those responsible for implementing particular statutes. Such interpretations ‘constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance’ consistent with the APA.’”[13] However, the Loper Bright Court emphasized: ‘“[r]espect,’ though, was just that. The views of the Executive Branch could inform the judgment of the Judiciary, but did not supersede it. Whatever respect an Executive Branch interpretation was due, a judge ‘certainly would not be bound to adopt the construction given by the head of a department.’”[14]
In conclusion, SCOTUS confirmed “Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.”[15]
Workers’ Compensation Medicare Set-Aside (WCMSA) Legal Authority.
Medicare may not pay for a beneficiary’s medical expenses when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.” 42 U.S.C. § 1395y(b)(2) and § 1862(b)(2)(A)(ii) (Social Security Act). However, “Medicare may pay conditionally, subject to later recovery if there is a subsequent settlement, judgment, award, or other payment.” 42 C.F.R. § 411.21; 42 C.F.R. § 411.45.
If a lump-sum workers’ compensation award stipulates an amount paid to compensate the individual for future medical expenses due to the work-related injury, “Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment.” 42 C.F.R. § 411.46(a). Finally, if a compromise lump-sum settlement agreement allocates an amount for future medical services related to the work injury, “Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.” 42 C.F.R. § 411.46(d)(2).
That is the extent of Medicare’s statutory and regulatory authority, which has resulted in the robust and complicated set-aside process practitioners wrestle with today. Notably, these statutory/regulatory authorities make no mention of phrases we often see in Medicare correspondence, i.e., “Medicare Set Asides,” “submission to Medicare,” or “Medicare-approved WCMSAs.”
Without more specific congressional guidance, Medicare has released a plethora of internal publications. After dozens of memos, CMS essentially re-published all prior memos in a single source, its “WCMSA Reference Guide,” and this was recently updated to “version 4.1” on August 1, 2024.[16] Medicare has always stated that, when “a CMS-approved set-aside amount is exhausted and accurately accounted for to CMS, Medicare will pay primary for future Medicare-covered expenses related to the WC injury that exceed the approved set-aside amount.”[17]
The primary benefit of an approved MSA is the certainty associated with CMS reviewing and approving the proposed MSA. However, according to 42 C.F.R. § 411.46(d)(2), submitting an MSA to Medicare for review and approval is not required. The only requirement is that the parties to settlement “protect Medicare’s interests in all workers compensation claims.”[18] Medicare openly acknowledges the entire MSA process is built on the understanding that “submission, review, and approval of a WCMSA by CMS is voluntary.” Despite this acknowledgement, Medicare maintains the MSA process is voluntary but recommends and proposes a litany of circumstances where it will not honor settlement agreements without an approved MSA.
There is no law that specifically provides Medicare with the authority to prescribe the settlement conditions detailed in its Reference Guides. See, e.g., FN 16, generally. Therefore, the compliance requirements have been exclusively promulgated via internal Medicare-issued policy statements. Coming full circle, in this post-Loper era wherein agency deference is no longer afforded under the Chevron Doctrine, Medicare Secondary Payer compliance is in a different position. Now, Medicare’s internal and extra-statutory policies will be challenged under a different legal standard.
WCMSA Issues for Consideration Post-Loper Bright.
As mentioned above, SCOTUS’ major criticism of Chevron was that it undermined the purpose of the APA by creating a two-step test that, if passed, provided outright deference to agency interpretation of statutory law. In effect, the Chevron Doctrine delegated lawmaking and statutory interpretation to the fourth branch of government, i.e., the “administrative state.”
Overturning Chevron may have a significant impact on administrative agencies, the deference they receive, and their status in courts. Significant litigation regarding agency statutory interpretation is almost certain to follow.
Medicare, and the Medicare Secondary Payer programs, fall within the sphere of agencies, whose internal policies are subject to judicial review under the new Loper Bright standard. In fact, in her dissent in Loper Bright, Justice Kagan, in defending Chevron, presented a Medicare hypothetical when by emphasizing the importance of administrative experts in assisting Courts with their decision-making. [19]
The list of WCMSA hypotheticals that can be litigated is vast. Here is a list of potential issues ripe for litigation under the MSP Act according to the law firm of Cattie and Gonzalez, experts in the field of MSP Compliance:[20]
- What can be defined as a “conditional payment” under the MSP Act?
- When can such payments be recovered?
- Does the MSP Act’s three-year statute of limitations for recovery of conditional payments made as applied against the federal government run from the date that Medicare receives notice of a case resolution, or from the date of last payment?
- What is the proper statute of limitations for recovery actions against conditional payments made by Medicare Advantage and Prescription Drug Plans?
- Does CMS have the legal authority to enforce the provisions within its Reference Guides absent specific statutory language?
- Can CMS require settling parties to obtain approved MSAs without a specific statutory requirement?
Here are some more questions which will not, under a plain reading of Loper Bright, be afforded agency deference:
- What is the impact of Montana’s 60-month medical benefit termination statute (Mont. Code Ann. § 704(1)(f)(i)) on an injured worker’s obligation to “protect Medicare’s interests?”
- Can Medicare preliminary reject “non-submit,” or evidence-based, MSAs without considering on a case-by-case basis?
- What is Medicare’s interest, if any, in a denied liability settlement with no specific future medical benefit allocation?
These are all issues that may require a court to interpret Medicare statutes, which are vague at best on these subjects. While most of these questions have significant “guidance” created by Medicare, this guidance may or may not be afforded deference. Further, there is no guidance regarding the interplay of Medicare and Social Security statutes with Montana-specific workers’ compensation laws.
Make no mistake. The overturn of Chevron does not allow injured workers, or their attorneys, to simply disregard Medicare’s interests (reporting, conditional payments, Medicare Set-Asides, etc.). However, now that Medicare will not receive Chevron deference, the above hypotheticals, and many more, may be addressed via Judicial statutory interpretation. Hopefully, litigation over many of Medicare’s administrative procedures will clarify the limitations of this vexing and ambiguous area of your workers’ compensation practice.
[1] Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694.
[2] Morton Salt, 338 U.S. at 644, 70 S.Ct. 357.
[3] Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 670–671, 106 S.Ct. 2133, 90 L. Ed.2d 623 (1986).
[4] 5 U.S.C. § 706
[5] 5 U.S.C. § 706(2)(A)
[6] Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, 2261, 219 L. Ed. 2d 832 (2024)
[7] Chevron U.S.A., Inc. v. National Resources Defense Council, 467 U.S. 837 (1984).
[8] 5 U.S.C. § 706
[9] Loper Bright, 144 S. Ct. 2244, at 2265.
[10] Loper Bright, 144 S. Ct. 2244, at 2258.
[11] Loper Bright, 144 S. Ct. 2244, at 2258.
[12] Skidmore v. Swift & Co., 323 U.S. 134 (1944).
[13] Loper Bright, 144 S. Ct. 2244, at 2262 (citations omitted).
[14] Loper Bright, 144 S. Ct. 2244 at 2258.
[15] Loper Bright, 144 S. Ct. 2244 at 2273.
[16] https://www.cms.gov/files/document/wcmsa-reference-guide-version-41.pdf
[17] Id. at pg. 4.
[18] Id. at pg. 6.
[19] Loper Bright, 144 S. Ct. 2244, at 2296.
[20] https://cattielaw.com/f/chevron-is-no-more-msp-compliance-in-a-new-world