AZAR, SECRETARY OF HEALTH AND HUMAN SERVICES v. ALLINA HEALTH SERVICES ET AL.
No. 17-1484
SUPREME COURT OF THE UNITED STATES
June 3, 2019
587 U. S. ____ (2019)
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 15, 2019
(Slip Opinion)
OCTOBER TERM, 2018
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
AZAR, SECRETARY OF HEALTH AND HUMAN SERVICES v. ALLINA HEALTH SERVICES ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 17-1484. Argued January 15, 2019—Decided June 3, 2019
Held: Because the government has not identified a lawful excuse for neglecting its statutory notice-and-comment obligations, its policy must be vacated. Pp. 5-17.
(a) This case turns on whether the government‘s 2014 announcement established or changed a “substantive legal standard.” The government suggests the statute means to distinguish a substantive from an interpretive legal standard and thus tracks the Administrative Procedure Act (APA), under which “substantive rules” have the “force and effect of law,” while “interpretive rules” merely “advise the public of the agency‘s construction of the statutes and rules which it administers,” Perez v. Mortgage Bankers Assn., 575 U. S. 92, ____. Because the policy of counting Part C patients in the Medicare fractions would be treated as interpretive rather than substantive under the APA, the government submits, it had no statutory obligation to provide notice and comment before adopting the policy.
The government‘s interpretation is incorrect because the Medicare Act and the APA do not use the word “substantive” in the same way. First, the Medicare Act contemplates that “statements of policy” can establish or change a “substantive legal standard,”
(b) The Medicare Act‘s text and structure foreclose the government‘s position in this case, and the legislative history presented by the government is ambiguous at best. The government also advances a policy argument: Requiring notice and comment for Medicare interpretive rules would be excessively burdensome. But courts are not free to rewrite clear statutes under the banner of their own policy concerns, and the government‘s argument carries little force even on its own terms. Pp. 13-16.
(c) Because this Court affirms the court of appeals’ judgment under
863 F. 3d 937, affirmed.
GORSUCH, J., delivered the opinion of the Court, in which ROBERTS, C. J., and THOMAS, GINSBURG, ALITO, SOTOMAYOR, and KAGAN, JJ., joined. BREYER, J., filed a dissenting opinion. KAVANAUGH, J., took no part in the cоnsideration or decision of the case.
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 17-1484
ALEX M. AZAR, II, SECRETARY OF HEALTH AND HUMAN SERVICES, PETITIONER v. ALLINA HEALTH SERVICES, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
[June 3, 2019]
JUSTICE GORSUCH delivered the opinion of the Court.
One way or another, Medicare touches the lives of nearly all Americans. Recognizing this reality, Congress has told the government that, when it wishes to establish or change a “substantive legal standard” affecting Medicare benefits, it must first afford the public notice and a chance to comment.
I
Today, Medicare stands as the largest federal рrogram after Social Security. It spends about $700 billion annually to provide health insurance for nearly 60 million aged or disabled Americans, nearly one-fifth of the Nation‘s popu-lation. Needless to say, even seemingly modest modifications to the program can affect the lives of millions.
As Medicare has grown, so has Congress‘s interest in ensuring that the public has a chance to be heard before changes are made to its administration. As originally enacted in 1965, the Medicare Act didn‘t address the possibility of public input. Nor did the notice-and-comment procedures of the Administrative Procedure Act apply. While the APA requires many other agencies to offer public notice and a comment period before adopting new regulations, it does not apply to public benefit programs like Medicare.
This solution came under stress in the 1980s. By then, Medicare had grown exponentially and the burdens and benefits of public comment had come under new scrutiny. The government now took the view that following the APA‘s procedures had become too troublesome and proposed to relax its сommitment to them. See 47 Fed. Reg. 26860-26861 (1982). But Congress formed a different judgment. It decided that, with the growing scope of Medicare, notice and comment should become a matter not merely of administrative grace, but of statutory duty. See §9321(e)(1), 100 Stat. 2017; §4035(b), 101 Stat. 1330–78.
Notably, Congress didn‘t just adopt the APA‘s notice-and-comment regime for the Medicare program. That, of course, it could have easily accomplished in just a few words. Instead, Congress chose to write a new, Medicare-specific statute. The new statute required the government to provide public notice and a 60-day comment period (twice the APA minimum of 30 days) for any “rule, requirement, or other statement of policy (other than a national coverage determination) that establishes or changes a substantive legal standard governing the scope of benefits, the payment for services, or the eligibility of individuals, entities, or organizations to furnish or receive services or benefits under [Medicare].”
Our case involves a dispute over this language. Since Medicare‘s creation and under what‘s called “Medicare Part A,” the federal government has paid hospitals directly for providing covered patient care. To ensure hospitals have the resources and incentive to serve low-income patients, the government has also long offered additional payments to institutions that serve a “disproportionate number” of such persons.
Calculating Medicare fractions got more complicated in 1997. That year, Congress created “Medicare Part C,” sometimes referred to as Medicare Advantage. Under Part C, beneficiaries may choose to have the government pay their private insurance premiums rather than pay for their hospital care directly. This development led to the question whether Part C patients should be counted as “entitled to benefits under” Part A when calculating a hospital‘s Medicare fraction. The question is important as a practical matter because Part C enrollees, we‘re told, tend to be wealthier than patients who opt for tradi-tional Part A coverage. Allina Health Services v. Price, 863 F. 3d 937, 939 (CADC 2017). So counting them makes the fraction smaller and reduces hospitals’ payments considerably—by between $3 and $4 billion over a 9-year period, according to the government. Pet. for Cert. 23.
The agency overseeing Medicare has gone back and forth on whether to count Part C participants in the Medicare fraction. At first, it did not include them. See Northeast Hospital Corp. v. Sebelius, 657 F. 3d 1, 15–16 (CADC 2011). In 2003, the agency even proposed codifying that practice in a formal rule. 68 Fed. Reg. 27208. But after the public comment period, the agency reversed field and issued a final rule in 2004 declaring that it would begin counting Part C patients. 69 Fed. Reg. 49099. This abrupt change prompted various legal challenges from hospitals. In one case, a court held that the agency couldn‘t apply the 2004 rule retroactively. Northeast Hospital, 657 F. 3d, at 14. In another case, a court vacated the 2004 rule because the agency had “pull[ed] a surprise switcheroo” by doing the opposite of what it had proposed. Allina Health Services v. Sebelius, 746 F. 3d 1102, 1108 (CADC 2014). Eventually, and in response to these developments, the agency in 2013 issued a new rule that prospectively “readopt[ed] the policy” of counting Part C patients. 78 Fed. Reg. 50620. Challenges to the 2013 rule are pending.
The case before us arose in 2014. That‘s when the agency got around to calculating hospitals’ Medicare fractions for fiscal year 2012. When it did so, the agency still wanted to count Part C patients. But it couldn‘t rely on the 2004 rule, which had been vacated. And it couldn‘t rely on the 2013 rule, which bore only prospective effect. The agency‘s solution? It posted on a website a spreadsheet announcing the 2012 Medicare fractions for 3,500 hospitals nationwide and noting that the fractions included Part C patients.
That Internet posting led to this lawsuit. A group of hospitals who provided care to low-income Medicare patients in 2012 argued (among other things) that the government had violated the Medicare Act by skipping its statutory notice-and-comment obligations. In reply, the government admitted that it hadn‘t provided notice and comment but argued it wasn‘t required to do so in these circumstances. Ultimately, the court of appeals sided with the hospitals. 863 F. 3d, at 938. But in doing so the court created a conflict with other circuits that had suggested, if only in passing, that notice and comment wasn‘t needed in cases like this. See, e.g., Via Christi Regional Medical Center, Inc. v. Leavitt, 509 F. 3d 1259, 1271, n. 11 (CA10 2007); Baptist Health v. Thompson, 458 F. 3d 768, 776, n. 8 (CA8 2006). We granted the government‘s petition for certiorari to resolve the conflict. 585 U. S. ____ (2018).
II
This case hinges on the meаning of a single phrase in the notice-and-comment statute Congress drafted specially for Medicare in 1987. Recall that the law requires the government to provide the public with advance notice and a chance to comment on any “rule, requirement, or other statement of policy” that “establishes or changes a substantive legal standard governing... the payment for services.”
Very differently, the government suggests the statute means to distinguish a substantive from an interpretive legal standard. Under the APA, “substantive rules” are those that have the “force and effect of law,” while “interpretive rules” are those that merely “‘advise the public of the agency‘s construction of the statutes and rules which it administers.‘” Perez v. Mortgage Bankers Assn., 575 U. S. 92, ____ (2015) (slip op., at 2-3). On the government‘s view, the 1987 Medicare notice-and-comment statute meant to track the APA‘s usage in this respect. And the government submits that, because the policy of counting Part C patients in the Medicare fractions would be treated as interpretive rather than substantive under the APA, it had no statutory obligation to provide notice and comment before adopting its new policy.
Who has the better reading? Several statutory clues persuade us of at least one thing: The governmеnt‘s interpretation can‘t be right. Pretty clearly, the Medicare Act doesn‘t use the word “substantive” in the same way the APA does—to identify only those legal standards that have the “force and effect of law.”
First, the Medicare Act contemplates that “statements of policy” like the one at issue here can establish or change a “substantive legal standard.”
To be sure, the government suggests that the statutory incoherence produced by its reading turns out to serve a rational purpose: It clarifies that the agency overseeing Medicare can‘t evade its notice-and-comment obligations for new rules that bear the “force and effect” of law by the simple expedient of “call[ing]” them mere “statements of policy.” Id., at 19-20. The dissent echoes this argument, suggesting that Congress included “statements of policy” in
But the statute doesn‘t refer to things that are labeled or disguised as statements of policy; it just refers to “statements of policy.” Everyone agrees that when Congress used that phrase in the APA and in other provisions of
Besides, even if the statute‘s reference to “statements of policy” could bear such an odd construction, the government and the dissent fail to explain why Congress would have thought it necessary or appropriate. Agencies have never been able to avoid notice and comment simply by mislabeling their substantive pronouncements. On the contrary, courts have long looked to the contents of the agency‘s action, not the agency‘s self-serving label, when deciding whether statutory notice-and-comment demands apply. See, e.g., General Motors Corp. v. Ruckelshaus, 742 F. 2d 1561, 1565 (CADC 1984) (en banc) (“[T]he agency‘s own label, while relevant, is not dispositive“); Guardian Fed. Sav. & Loan Assn. v. Federal Sav. & Loan Ins. Corp., 589 F. 2d 658, 666–667 (CADC 1978) (if “a so-called policy statement is in purpose or likely effect... a binding rule of substantive law,” it “will be taken for what it is“). Nor is there any evidence before us suggesting that Congress thought it important to underscore this prosaic point in the Medicare Act (and yet not in the APA)—let alone any reason to think Congress would have sought to make the point in such an admittedly incoherent way.
Second, the government‘s reading would introduce another incoherence into the Medicare statute. Subsection (e)(1) of
Here, too, the government offers no satisfactory reply. It concedes, as it must, that the term “substantive” in subsection (e)(1) can‘t carry the meaning it wishes to ascribe to the same word in subsection (a)(2). Tr. of Oral Arg. 16-18. So that leaves the government to suggest (again) that the same word should mean two different things in the same statute. In (e)(1), the government says, it may bear the meaning the hospitals propose, but in (a)(2) it means the same thing it does in the APA. But, once more, the government fails to offer any good reason or evidence to unseat our normal presumption that, when Congress uses a term in multiple places within a single statute, the term bears a consistent meaning throughout. See Law, 571 U. S., at 422.
Third, the government suggests Congress used the phrase “substantive legal standard” in the Medicare Act as a way to exempt interpretive rules and policy statements from notice and comment. But Congress had before it—and rejected—a much more direct path to that destination. In a single sentence the APA sets forth two exemptions from the government‘s usual notice-and-comment obligations:
“Except when notice or hearing is required by statute, this subsection [requiring notice and comment] does not apply—
“(A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or
“(B) when the agency for good cause finds... that notice and public procedure thereon are impracticable, unnecessary,
or contrary to the public interest.” 5 U. S. C. §553(b) .
In the Medicare Act, Congress expressly borrowed one of the APA‘s exemptions, the good cause exemption, by cross-referencing it in
The government‘s response asks us to favor a most unlikely reading over this obvious one. The government submits that Congress simply preferred to mimic the APA‘s interpretive-rule exemption in the Medicare Act by using the novel and enigmatic phrase “substantive legal standard” instead of a simple cross-reference. But the government supplies no persuasive account why Congress would have thought it necessary or wise to proceed in this convoluted way. The dissent suggests that a cross-reference could not have taken the place of other language in
The dissent would have us disregard all of the textual clues we‘ve found significant because the word “substantive” carried “a special meaning in the context of administrative law” in the 1980s, making it “almost a certainty” that Congress had that meaning in mind when it used the word “substantive” in
In reply, the dissent stresses that
In the end, all of the available evidence persuades us that the phrase “substantive legal standard,” which appears in
III
Unable to muster support for its position in the statutory text or structure, the government encourages us to look elsewhere. It begins by inviting us to follow it into the legislative history lurking behind the Medicare Act. “But legislative history is not the law.” Epic Systems Corp. v. Lewis, 584 U. S. ____, ____ (2018) (slip op., at 23). And even those of us who believe that clear legislative history can illuminate ambiguous text won‘t allow “ambiguous legislative history to muddy clear statutory language.” Milner v. Department of Navy, 562 U. S. 562, 572 (2011). Yet the text before us clearly forecloses the government‘s position in this case, and the legislative history presented to us is ambiguous at best.
The conference report on the 1987 bill that did adopt the statutory language before us today doesn‘t offer much help to the government either. The House version of the bill would have required notice and comment for rules with a “significant effect” on payments, a condition no doubt present here. H. R. 3545, 100th Cong., 1st Sess., reprinted in 133 Cong. Rec. 30019. Later, the conference committee replaced the House‘s language with the current language of subsection (a)(2), which the report said “reflect[ed] recent court rulings.” H. R. Conf. Rep. No. 100–495, р. 566 (1987). The government contends that this was an oblique reference to a then-recent decision discussing the APA‘s interpretive-rule exception and an implicit suggestion that interpretive rules shouldn‘t be subject to notice and comment. See American Hospital Assn. v. Bowen, 834 F. 2d 1037, 1045–1046 (CADC 1987). But, as the hospitals point out, Bowen was mostly about the APA‘s treatment of procedural rules. See id., at 1047–1057. So it seems at least equally plausible that the conference committee revised the House‘s language because it feared that language would have subjected procedural rules to notice-and-comment obligations.
The hospitals call our attention to other indications, too, that Members of Congress didn‘t understand the conference‘s language to track the APA. For example, the relevant provision in the final bill was titled “Publication as Regulations of Significant Policies.” §4035(b), 101 Stat. 1330–78 (emphasis added). And, as we‘ve seen, “significant policies” don‘t always amount to substantive rules under the APA. The House Ways and Means Committee likewise described the final bill as requiring notice and comment for “[s]ignificant policy changes,” not just substantive rules. Summary of Conference Agreement on Reconciliation Provisions Within the Jurisdiction of the Committee on Ways and Means, 100th Cong., 1st Sess., 12-13 (Comm. Print 1987). So in the end and at most, we are left with exactly the kind of murky legislative history that we all agree can‘t overcome a statute‘s clear text and structure.
That leads us to the government‘s final redoubt: a policy argument. But as the government knows well, courts aren‘t free to rewrite clear statutes under the banner of our own policy concerns. If the government doesn‘t like Congress‘s notice-and-comment policy choices, it must take its complaints there. See, e.g., Henson v. Santander Consumer USA Inc., 582 U. S. ____, ____ (2017) (slip oр., at 9-10); Sebelius v. Cloer, 569 U. S. 369, 381 (2013). Besides, the government‘s policy arguments don‘t carry much force even on their own terms. The
Not only has the government failed to document any draconian costs associated with notice and comment, it also has neglected to acknowledge the potential countervailing benefits. Notice and comment gives affected parties fair warning of potential changes in the law and an opportunity to be heard on those changes—and it affords the agency a chance to avoid errors and make a more informed decision. See 1 K. Hickman & R. Pierce, Administrative Law §4.8 (6th ed. 2019). Surely a rational Congress could have thought those benefits especially valuable when it comes to a program where even minor changes to the agency‘s approach can impact millions of people and billions of dollars in ways that are not always easy for regulators to anticipate. None of this is to say Congress had to proceed as it did. It is only to say that Congress reasonably could have believed that the policy decision reflected in the statute would yield benefits sufficient to outweigh the speculative burdens the government has suggested. And if notice and comment really does threaten to “become a major roadblock to the implementation of” Medicare, post, at 10, the agency can seek relief from Congress, which—unlike the courts—is both qualified and constitutionally entitled to weigh the costs and benefits of different approaches and make the necessary policy judgment.
IV
There are two more lines of argument that deserve brief acknowledgment. One concerns
Separately, we can imagine that the government might have sought to argue that the policy at issue here didn‘t “establis[h] or chang[e]” a substantive legal standard—and so didn‘t require notice and comment under
*
The judgment of the court of appeals is
Affirmed.
JUSTICE KAVANAUGH took no part in the consideration or decision of this case.
JUSTICE BREYER, dissenting.
The statute before us, a subsection of the Medicare Act, refers to a “rule, requirement, or other statement of policy that establishes or changes a substantive legal standard.”
The Government argues that the language at issue, like the notice-and-comment provisions of the Administrative Procedure Act (APA), applies only to “substantive” or “legislative” rules. In its view, the language does not cover “interpretive” rules (which it believes the agency promulgated here). After considering the relevant language, the statutory context, the statutory history, and the related consequences, I believe the Government is right. I would remand this case to the Court of Appeals to consider whether the agency determination at issue in this case is a substantive rule (which requires notice and comment) or an interpretive rule (which does not).
I
The arguments in support of my interpretation are simple. By using wоrds with meanings that are well settled in the APA context, Congress made clear that the notice-and-comment requirement in the Medicare Act applies only to substantive, not interpretive, rules. The statutory language, at minimum, permits this interpretation, and the statute‘s history and the practical consequences provide further evidence that Congress had only substantive rules in mind. Importantly, this interpretation of the statute, unlike the Court‘s, provides a familiar and readily administrable way for the agency to distinguish the actions that require notice and comment from the actions that do not.
A
I begin with the specific language of the statute. There are, in my view, three relevant subsections that must be read together. The first, a general provision, has been part of the Medicare Act since Congress created the program in 1965. It says that the Secretary “shall prescribe such regulations as may be necessary to carry out the administration of the insurance programs.”
“No rule, requirement, or other statement of policy that establishes or changes a substantive legal standard governing the scope of benefits, the paymеnt for services, or the eligibility . . . to furnish or receive services or benefits . . . shall take effect unless it is promulgated by the Secretary by regulation under paragraph (1).”
§1395hh(a)(2) (emphasis added).
And the third relevant provision, eight paragraphs away, contains the notice-and-comment requirement:
“[B]efore issuing in final form any regulation under subsection (a) . . . , the Secretary shall provide for notice of the proposed regulation in the Federal Register and a period of not less than 60 days for public comment thereon.”
§1395hh(b)(1) (emphasis added).
Taken together, these provisions say that the Secretary must use notice-and-comment procedures before promulgating any “regulation,” and that a “rule, requirement, or other statement of policy” counts as a “regulation” whenever it “establishes or changes a substantive legal standard.”
The question at hand is whether an interpretive rule qualifies as the type of “regulation” that Congress intended to subject to the notice-and-comment requirement when it added the second and third provisions in the 1980s. In my view, the answer is no.
In the 1980s, the words “regulation” and “substantive” (which I have repeatedly italicized above) carried a special meaning in the context of administrative law. This Court had recognized the “central distinction” drawn by the APA between “‘substantive rules’ on the one hand and ‘interpretative rules, general statements of policy, or rules оf agency organization, procedure, or practice’ on the other.” Chrysler Corp. v. Brown, 441 U. S. 281, 301 (1979). A “substantive rule,” often promulgated pursuant to specific statutory authority, is a rule that “‘bind[s]’ the public or has “‘the force and effect of law.‘” Id., at 301-302. Substantive rules had also come to be known as “legislative rules.” Id., at 302. And some courts referred to substantive rules as “regulations” as well, see, e.g., American Hospital Assn. v. Bowen, 834 F. 2d 1037, 1045 (CADC 1987) (“‘regulations,’ ‘substantive rules,’ or ‘legislative rules’ are those which create law“); Cabais v. Egger, 690 F. 2d 234, 238 (CADC 1982) (same), although this practice was both less common and less consistent.
By way of contrast, courts had held that “interpretive rules” do not have the “force and effect of law“; they simply set forth the agency‘s interpretation of the statutes or regulations that it administers. Chrysler Corp., 441 U. S., at 302, and n. 31; see also American Hospital Assn., 834 F. 2d, at 1045 (interpretive rules “merely clarify or explain existing law or regulations“). Then, as today, whether a rule was substantive or interpretive determined whether it had to be promulgated using the APA‘s notice-and-comment rulemaking procedures.
At this point, we can begin to see support in the statutory language for the Government‘s interpretation of the notice-and-comment provisions—one that excludes interpretive
Another subsection of the statute,
There is, however, an important counterargument. As the Court emphasizes, ante, at 7-8, the provision before us includes the words “statement[s] of policy.”
The answer to this question linguistically is that our provision does not include all “statements of policy,” but rather only those that are, in effect, substantive rules. That is because the statute does not “just refe[r] to ‘statements of policy,‘” ante, at 7; it refers to “statement[s] of policy . . . that establis[h] or chang[e] a substantive legal standard,”
B
I turn next to the history of the statute, which provides significant support for believing that the Medicare rule- making provision does not extend to interpretive rules. As enacted in 1965, the Medicare Act authorized the agency to promulgate “regulations” as necessary, but did not require the agency to follow any particular rulemaking procedures. See §102(a), 79 Stat. 331. The APA‘s notice-and-comment requirements did not apply to Medicare regulations, for the APA specifically exempts “matter[s] relating to . . . benefits” from its scope.
In 1971, the agency nonetheless adopted a policy of voluntarily promulgating most regulations through notice-and-comment rulemaking. See Public Participation in
In the early 1980s, the agency proposed to change its notice-and-comment policy: It no longer intended to use notice and comment when the disadvantages of doing so “outweigh[ed] the benefits of receiving public comment.” Administrative Practice and Procedures, 47 Fed. Reg. 26860 (1982). This announcement provoked widespread opposition. Citizens’ groups and others asked Congress to “make it clear, by statute, that Medicare regulations . . . should be subject to” the APA. Medicare Appeals Provisions: Hearing on S. 1158 before the Subcommittee оn Health of the Senate Committee on Finance, 99th Cong., 1st Sess., 62 (1985). In 1986, Congress responded to these requests by enacting a provision that required public notice and a 60-day comment period for “any regulation,” with a few exceptions. See
Congress meant the term “regulation” to include only substantive or legislative rules. As I have said, supra, at 3, at the time Congress wrote the notice-and-comment provision in the 1980s, courts sometimes used all three terms interchangeably. See, e.g., Cabais, 690 F. 2d, at 238. And the legislative history confirms that Congress expected the APA principles to apply. The House-Senate Conference Report stated that the 1986 notice-and-comment provision would not require rulemaking for “items (such as interpretive rules, general statements of policy, or rules of agency organization, procedure or practice) that are not currently subject to that requirement.” H. R. Conf. Rep. No. 99-1012, p. 311.
As of 1986, then, it was clear that the Medicare Act required notice-and-comment rulemaking only for substantive rules, not for interpretive rules. That was true even though the Medicare Act did not expressly cross-reference the APA‘s exception for interpretive rules. Instead, Congress simply understood that the statutory term “regulation” excluded interpretive rules, statements оf policy, and the like.
Now I shall turn to the subsection before us, a provision enacted one year later. Did that provision, enacted in 1987, significantly change the scope of the Medicare Act‘s notice-and-comment requirement? The House of Representatives passed a version of the provision that seemed to say yes. The House Report on that bill said that the provision arose from a “concer[n] that important policies [were] being developed without benefit of the public notice and comment period and, with growing frequency, [were] being transmitted, if at all, through manual instructions and other informal means.” H. R. Rep. No. 100-391, pt. 1, p. 430 (emphasis added). Thus, the House bill required notice and comment for any “rule, requirement, or other statement of policy . . . that has (or may have) a significant effect on the scope of benefits, the payment for services, or the eligibility” for benefits or services. H. R. 3545, 100th Cong., 1st Sess., §4073(a)(2) (1987), 133 Cong. Rec. 30019.
The Senate, however, thought the scope of this language was too broad. And the House-Senate Conference Committee agreed with the Senate, not the House. It revised the House version by taking out
The Conference Report explains that the Committee substituted its language for that of the House in order to “reflec[t] recent court rulings.” Ibid. What were those “court rulings“? I have described many of them above. See supra, at 3-4. Among others, they included rulings describing “substantive rules” as rules that “‘establis[h] a standard of conduct which has the force of law‘” or that change “substantive standards.” American Hospital Assn., 834 F. 2d, at 1046, 1056. Given this case law, it is almost a certainty that the Conference Committee had in mind the meaning that courts had already given to the term “substantive“; indeed, neither the Court nor the hospitals point to any other recent rulings to which the Report could have referred. And if that is correct, Congress would not have intended to include interpretive rules within the scope of the revised provision.
Then-recent court rulings also explain why Congress added the words “statement of policy,” given its desire to mimic the scope of the APA‘s rulemaking provision. At the time Congress added this language in 1987, the D. C. Circuit had recently described it as “well established that a court, in determining whether notice and comment procedures apply to an agency action, will consider the agency‘s own characterization of the particular action.” Telecommunications Research and Action Ctr. v. FCC, 800 F. 2d 1181, 1186 (1986); see also United Technologies Corp. v. EPA, 821 F. 2d 714, 718 (CADC 1987) (“[T]he agency‘s characterization of a rule is ‘relevant‘“). And in practice, courts appeared to give the agency‘s characterization at least some weight. See Telecommunications, 800 F. 2d, at 1186 (finding “no reason to question the Commission‘s characterization” of the challenged action as a “policy statement“); General Motors Corp. v. Ruckelshaus, 742 F. 2d 1561, 1565 (CADC 1984) (en banc) (finding a rule exempt from notice and comment in part because “the agency regarded its rule as interpretative“). These cases thus reinforce the likelihood that Congress inserted the words “statement of policy” to make clear that the agency could not evade the notice-and-comment obligation simply by calling a substantive rule a “statement of policy.” In deciding whether a particular agency action is (or is not) a substantive rule, it is the substantive legal effect that will matter, not the label.
In short, the statute‘s history provides considerable evidence that Congress intended to replicate the APA framework. Nowhere in this history is there any indication that Congress intended to require notice and comment for a broader category than substantive rules.
C
The third—and perhaps strongest—reason for believing that Congress intended this interpretation is a practical reason. Medicare is a massive federal program, “embodied in hundreds of pages of statutes and thousands of pages of often interrelated regulations.” Shalala v. Illinois Council on Long Term Care, Inc., 529 U. S. 1, 13 (2000). To help participants navigate the statutory and regulatory scheme, the
This combination of regulations and informal guidance is, we have said, “a sensible structure for the complex Medicare reimbursement process.” Guernsey Memorial Hospital, 514 U. S., at 101. Notice-and-comment procedures are elaborate and take time to complete. The Government cites a study showing that notice-and-comment rulemakings take an average of four years to complete. Pet. for Cert. 20 (citing GAO, D. Fantone, Federal Rulemaking 5, 19 (GAO-09-205, 2009)).
To imagine that Congress wanted the agency to use those procedures in respect to a large percentage of its Medicare guidance manuals is to believe that Congress intended to enact what could become a major roadblock to the implementation of the Medicare program. As the Government warns us, the Court of Apрeals’ interpretation may “substantially undermine” and even “cripple” the administration of the Medicare scheme. See Brief for Petitioner 21, 42. To illustrate this point, consider the following provisions of the Medicare Provider Reimbursement Manual, which the agency has published for decades. All of these provisions were held by courts to be “interpretive rules,” and hence not subject—before today—to the statute‘s notice-and-comment requirements:
- Provisions governing when provider contributions to employee deferred compensation plans are necessary and proper and therefore reimbursable. Visiting Nurse Assn. Gregoria Auffant, Inc. v. Thompson, 447 F. 3d 68, 76-77 (CA1 2006).
- Provisions governing exceptions to the per diem cost limits that the Secretary can authorize in respect to routine extended care service costs. St. Francis Health Care Centre v. Shalala, 205 F. 3d 937, 940-943, 947 (CA6 2000).
- A provision governing whether certain hospital costs should be classified as “routine” or “ancillary.” National Med. Enterprises, Inc. v. Shalala, 43 F. 3d 691, 694 (CADC 1995).
- A provision governing whether borrowing is considered “necessary” when the provider has funds in its funded depreciation account that are not committed by contract to a capital purpose. Sentara-Hampton Gen. Hospital v. Sullivan, 980 F. 2d 749, 751, 756-760 (CADC 1992).
- A provision restricting the type of financial arrangements for which hospitals can recover reimbursement for on-call emergency room physicians. Samaritan Health Serv. v. Bowen, 811 F. 2d 1524, 1525, 1529 (CADC 1987).
- A provision regarding the recapture of excess reimbursements resulting from a provider depreciating its assets using an accelerated method. Daughters of Miriam Ctr., 590 F. 2d, at 1254-1255.
- A provision governing whether providers are entitled to reimbursement for bad debts when States are obligated to pay those debts under Medicaid. GCI Health Care Ctrs., Inc. v. Thompson, 209 F. Supp. 2d 63, 68-69 (DC 2002).
- A provision disallowing reimbursement of stock maintenance costs. American Medical Int‘l, Inc. v. Secretary of Health, Education and Welfare, 466 F. Supp. 605, 615-616 (DC 1979).
These examples all involve provisions of the Provider Reimbursement Manual, but the agency also publishes more than a dozen other manuals, with tens of thousands of additional pages of instructions governing “the scope of benefits, the payment for services, [and] the eligibility” for benefits or services.
Is it reasonable to believe that Congress intended to impose notice-and-comment requirements upon all, or most, or even many of these rules, requirements, or statements of policy? See ante, at 16. In my view, the answer is clearly no. Yet the Court‘s opinion might impose this unnecessary and potentially severe burden on the administration of the Medicare scheme.
D
Finally, interpreting the statute as replicating the APA has the added virtues of clarity and stability. We know that Congress could not have meant to require notice-and-comment rulemaking for all agency actions that could conceivably affect substantive Medicare policy. So there must be a way to distinguish the “substantive” rules that are covered from the “substantive” rules that are not. And the APA‘s notion of a “substantive rule” provides a natural, legally understandable, and customary way for judges, agencies, and lawyers to perform that task. In that sense, the APA offers us a familiar port in an interpretive storm.
The Court not only leaves the APA behind; it fails to substitute any reasonably clear alternative standard. How is the agency to determine whether a rule “establishes or changes a substantive legal stаndard“? At one point, the Court refers to the hospitals’ view that the statute applies to agency actions “that ‘creat[e] duties, rights and obligations,’ as distinct from [agency actions] that specif[y] how those duties, rights, and obligations should be enforced.” Ante, at 6. But it later declines to “go so far as” to fully endorse that view. Ante, at 12.
At another point, the Court refers to the notice-and-comment requirement as applying to “avowedly ‘gap‘-filling polic[ies],” suggesting the case might be different if the Government had argued that “the statute itself” “supplie[d] the controlling legal standard.” Ante, at 16-17. But these statements sound as if the Court is embracing the very interpretive-rule exception that its holding denies. See, e.g., Hemp Industries Assn. v. DEA, 333 F. 3d 1082, 1087 (CA9 2003) (interpretive rules “merely explain, but do not add to, the substantive law that already exists in the form of a statute“); American Hospital Assn., 834 F. 2d, at 1046 (agency action is interpretive where it “merely reminds parties of existing duties” under a statute); cf. Clarian Health West, LLC v. Hargan, 878 F. 3d 346, 355-356 (CADC 2017) (concluding, after the decision below, that manual instructions governing reconciliation of outlier payments did not require notice
Nor does the Court‘s resolution of this particular case offer clarity as to the scope of the statute. The Court holds that the agency must provide notice and comment before including Medicare Part C patients in the Medicare fraction. But it does not explain why that agency decision “establishes or changes a substantive legal standard.” Is it because the decision “affects a hospital‘s right to payment“? Ante, at 6. Is it because the decision‘s financial impact is “considerabl[e]“? Ante, at 3-4. Is it because the agency had previously sought to adopt the same policy through notice and comment? Ante, at 4. The Court does not say.
This lack of explanation aggravates the potential burden that the Court‘s opinion already imposes upon the Medicare program. It may also lead to legal challenges to the validity of interpretive rules (or even procedural rules) previously thought to have been settled. And it will thereby increase the confusion that is inevitable once the Court rejects the settled and readily available principles that courts have learned to use to identify substantive rules under the APA. These potential adverse consequences are, in my view, persuasive evidenсe that Congress did not intend the statute to be construed in this way.
To consider these consequences in no way invades Congress’ constitutional authority to “weigh the costs and benefits of different approaches and make the necessary policy judgment.” Ante, at 16. Congress exercised that authority when it passed the Medicare Act‘s notice-and-comment provisions. But it used language that even the Court describes as “enigmatic,” ante, at 10, and our role as judges is to decipher that enigma. Examining the potential consequences of each competing interpretation helps us perform that task, as we can presume that Congress did not intend to produce irrational or undesirable practical consequences. See Kirtsaeng v. John Wiley & Sons, Inc., 568 U. S. 519, 538, 544-545 (2013) (concluding that Congress did not intend an interpretation of the copyright statute that would produce serious and extensive “practical problems“); cf. Home Depot U. S. A., Inc. v. Jackson, ante, at ___ (ALITO, J., dissenting) (slip op., at 8) (“[A] good interpreter also reads a text charitably, not lightly ascribing irrationality to its author“).
II
The reasons set forth above provide sufficient grounds to believe that Congress only intended to require notice and comment for substantive rules. The Court nonetheless concludes that three “textual clues” foreclose this interpretation. Ante, at 10-11. I have already mentioned one of them: Congress’ use of the words “statement of policy” in the provision before us. As I have explained, the most plausible explanation for this language is that Congress sought to make clear that the agency must use notice and comment for any agency pronouncement that amounts to a substantive rule—irrespective of the label that the agency applies. See supra, at 8-9.
The remaining two arguments that the Court offers to defend its interpretation are, in my view, similarly inadequate. The Court points, for example, to
We of course normally presume that the same word carries a single meaning throughout a given statute. Here, however, that presumption is overcome. The word “substantive” in
The Court also points to the fact that the Medicare Act cross-references the APA‘s good-cause exception. Had Congress wanted to pick up the APA‘s exclusion of interpretive rules, the Court says, it could simply have cross-referenced the APA‘s interpretive-rule exception as well. Ante, at 9-10. As a practical matter, the legislative history suggests that the absence of a cross-reference is a particularly unreliаble guide to congressional intent in this case. The initial version of the bill passed by the House of Representatives unambiguously sought to broaden the scope of the APA. See supra, at 7-8. Rather than starting anew, the Conference Committee retained some of the language from the House‘s version but revised it to reflect the APA‘s notion of a substantive rule. See ibid.
Even putting the drafting history aside, there are many reasons why Congress might have chosen to spell out the governing standard rather than rest upon an explicit cross-reference to a portion of the APA. Section 1395hh(a)(2), for example, reflects Congress’ judgment that rulemaking is necessary only for a certain subset of substantive rules—namely, those governing “the scope of benefits, the payment for services, or the eligibility” for benefits or services. A simple cross-reference to the APA‘s interpretive-rule exception would not have adequately captured this judgment. The APA‘s exception would have exempted interpretive rules, but Congress also wanted to exempt those substantive rules that do not govern benefits, payment, or eligibility. True, Congress could have produced the same result by first amending the statute to require notice-and-comment for any regulation governing benefits, payment, or eligibility and thеn cross-referencing the interpretive-rule exception. But the language of
And even were that not so, there is no rule requiring Congress to use cross-references. As I have explained, the Medicare
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Given the statute‘s context, its language, its history, and related practical consequences, I believe that Congress intended the provision before us to apply to all substantive rules, irrespective of the labels that the agency affixed. Congress did not, however, intend the provision to require notice and comment for interpretive rules that, by definition, lack the force and effect of law. I fear that the Court, in rejecting this interpretation, has improperly (and needlessly) “ignore[d] persuasive evidence of Congress’ actual purpose.” West Virginia Univ. Hospitals, Inc. v. Casey, 499 U. S. 83, 115 (1991) (Stevens, J., dissenting); cf. Johnson v. United States, 163 F. 30, 32 (CA1 1908) (Holmes, J.) (“[I]t is not an adequate discharge of duty for courts to say: We see what you are driving at, but you have not said it, and therefore we shall go on as before“).
If I am right, and if the Court‘s opinion will cause serious confusion or delay, Congress cаn, through legislation, fix the Court‘s mistake. “But legislative action takes time; Congress has much to do; and other matters . . . may warrant higher legislative priority.” Milner v. Department of Navy, 562 U. S. 562, 592 (2011) (BREYER, J., dissenting). Rather than requiring Congress to “revisit the matter” and “restate its purpose in more precise English,” Casey, 499 U. S., at 115 (Stevens, J., dissenting), I would hold that the Medicare Act only requires notice and comment for what this Court has traditionally considered to be substantive rules. I would remand for the Court of Appeals to decide in the first instance whether the agency‘s decision in this case qualifies as a substantive or an interpretive rule.
For these reasons, I respectfully dissent.
