Frenemies at Last?: How Legislative History Could Save Justice Kavanaugh’s Opinion in Azar v. Allina


Newly minted Justice Brett Kavanaugh is an avowed textualist, skeptical of the use of legislative history—the practice of reviewing congressional sources generated during a bill’s passage onto law—in interpreting statutory mandates. He has joined other critics in likening the practice to picking out one’s friends at a party. Yet, in Azar v. Allina Health Service, No. 17-1484, the legislative history would go a long way toward saving his decision, issued while he presided at the US Court of Appeals for the District of Columbia, from being overturned. Unfortunately, the Court may miss a key part of this legislative history record when it decides the case. (Justice Kavanaugh has recused himself from the matter.)

Allina’s facts sound like eye-glazing bureaucratic banality. In 2014, the Department of Health and Human Services (HHS) published a spreadsheet containing new fractions to calculate FY 2012 hospital Medicare reimbursements, negatively affecting a number of hospitals. These hospitals challenged the agency’s procedure, arguing the change was subject to the notice and comment requirements of the Administrative Procedures Act (APA) as applied to Medicare. HHS replied that its revised fraction was merely an interpretive rule and thus fell under an APA exception to the requirement of public notice of rule changes. Its view prevailed at the district court. The DC Circuit overturned the lower court, however, in an opinion penned by Judge Kavanaugh. The government appealed to the Supreme Court, which will hold oral argument on January 15, 2019.

While this dispute may seem mundane to most, how the Supreme Court rules could affect the huge number of interpretive rules and issuances that HHS and its contractors use in processing a vast number Medicare claims every year. So, did Congress intend for Medicare interpretive rules to be subject to the APA? This is a question that legislative history can answer.

The legislative history of Congress’ application of the APA to Medicare appears to be straightforward. Historically, Medicare, as a benefits program, was not subject to the APA and its notice and comment procedures. In 1986, however, Congress implemented a 60-day notice and comment period for proposed regulations and included a good cause exception to the law. The provision was negotiated by the conference committee that generated the Omnibus Budget Reconciliation Act of 1986, Pub. L. No. 99-509, 100 Stat. 1874 (1986). Interestingly, the conference report makes clear that at this point Congress intended to exclude interpretive rules.

If Congress had stopped there, Allina might not have reached the Supreme Court. However, in the next year, 1987, Congress added the provision presently in dispute:

No 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 this title shall take effect unless it is promulgated by the Secretary by regulation….

The provision was enacted in the Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, 101 Stat. 1330-78 (1987). The dispute over this section arises because HHS argues that interpretive rules cannot establish a substantive legal standard. Judge Kavanaugh, contradicting years of case law, read the statute’s absence of any text on interpretive rules to mean that the exception did not apply.

The legislative history, which requires a deep dig into the historical record, supports Judge Kavanaugh’s position, albeit much more persuasively than his reasoning does.

Context requires a return to the 1980s. Back then, Congress was concerned over the Reagan administration’s cutting of Medicare costs by limiting benefits and reimbursements, thereby effectively directing health policy without much warning and little, if any, public input. Senator Lloyd Bentsen even quipped that the Health Care Finance Administration (HCFA), the agency that oversaw Medicare at the time, was becoming a budget cutting arm of the White Office of Management and Budget.

Again, historically, Medicare was not subject to the APA, though, since 1971, the agencies that managed the program voluntarily complied with that law’s public input requirements. The Reagan administration appeared ready to abandon this policy in 1982 when the HCFA issued a proposed rule that it would no longer strictly comply with the APA. Though no final rule was ever published, senior citizen and health provider organizations complained to Congress that Medicare reimbursements were being cut and limited and claims were being increasingly denied, not through any regulatory changes, but by HCFA directives to its contractors which processed payments. Further, in 1984 HCFA repealed the right of Medicare beneficiaries to be represented by a provider during appeals. This change was implemented via a revision to a Medicare contractor manual. Organization representatives urged that Medicare be subject to the APA to thwart such actions. Congress listened and decided to act, passing the 1986 amendment.

The Congress that convened in 1987 was not mollified that the HCFA had been sufficiently reigned in. Rather, members were appalled that the agency was deliberately limiting the Medicare home care benefit to cut costs and that it was doing this through guidance documents, manuals, directives, and even reinterpretations of existing laws. The result was an alarming surge in claim denials.

These concerns gave rise to the provision at issue in Allina. The legislative details are complicated (as they often are) and are not fully in the record before the Court. The initial attempt to quell the HCFA’s limitation of home health care was proposed as independent legislation. Identical parallel bills, each titled “The Medicare Home Health Services Improvement Act of 1987”, were introduced in the Senate and House in April 1987—S. 1076 (1987) and H.R. 2138 (1987). Each bill contained the following restriction on HCFA policy changes:

No 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 of individuals, entities, or organizations to furnish or receive services or benefits under this title shall take effect unless it is promulgated by the Secretary by regulation under paragraph (1).”

The substantial similarity to the text of the provision at issue in Allina is striking. Both are nearly entirely the same, with only two differences. The first, which is not relevant for this case: the exclusion of the national coverage determinations from the requirement. The second is the replacement of the phrase “has (or may have) a significant effect” for “establishes or changes a substantive legal standard governing,” which will be discussed below.

It is, therefore, relevant what the sponsors of the bills said about their original legislation. When the Senate version was introduced, its sponsor, Senator Bill Bradley, and others were emphatic that the law’s provision on the HCFA publication requirement addressed the agency’s actions against home health care, subjected it to the APA and, not only required notice and comment for regulations, but for any significant statements of Medicare policy in any form. According to Senator David Pryor, one of the bill’s co-sponsors, the legislation would “subject the Health Care Financing Administration [HCFA] to administrative procedures act notice and comment requirements for all matters dealing with benefits.”

Neither S. 1076 or its companion House bill passed, but that is not the end of their story. Their text on notice and comment was incorporated into the reconciliation package that emerged from the Subcommittee on Health and Environment of the House Energy and Commerce Committee. This was not a surprise, as that subcommittee’s chair was Representative Henry Waxman, the sponsor of H.R. 2138. (Furthermore, Senator Bradley stated that his ultimate goal was to get elements of S. 1076, and specifically its notice and comment provision, into the reconciliation bill Congress would be deliberating upon in the fall of 1987.)

The House committee’s section-by-section analysis of the publication provision in the reconciliation bill reemphasized the goals enunciated by its Senate supporters in April 1987, but it also went further in documenting that the provision was intended to affect policies. If there was any doubt about whether or not the provision applied, it was to be resolved as if it did. This provision was ultimately included as section 4073 in the reconciliation package the House voted upon.

Although a slight alteration was made to the legislative language in conference—the replacement of the “significant effect” language for that of “substantive legal standard”—the full history of the provision demonstrates that this change is little more than what Congress said it was in its conference report for the reconciliation bill that passed: a clarification.

What is painfully clear from the debates around the publication requirement that emerge from Medicare Home Health Services Improvement Act of 1987 is that Congress wasn’t interested in discussing the APA nuances of substantive and interpretive rules, as HHS would claim in Allina. What its members were interested in was the HCFA’s use of interpretations of law to deny care to Medicare beneficiaries. Senator Bradley made this point on the Senate floor upon the introduction of his Medicare Home Health Services Improvement Act, S. 1076. “I’m asking that we end the arbitrary interpretations of the law that have caused too many people to be denied the care they need.” One particular HCFA interpretation that offended the legislators was that for “home bound” as required for Medicare to pay for home care. Senator Bradley elaborated upon this point at an August 1987 hearing in which he mentioned his bill:

HCFA then arbitrarily chooses to say that the law means something other than what it says very clearly in black and white.

They choose to do that, for example, by saying homebound means that somebody has to be in their bed; that they can’t be going to the hospital for chemotherapy, or going out for 5 minutes because they’re a heart patient. Any of those problems would require, HCFA says, them being disallowed Medicare coverage.

Congress was taking aim at policies that that were regulations in form but not in fact, policies that created or affected rights but without the requisite notice and comment.

Legislative history is often not a foolproof method of divining legislative intent, but, in the case of Allina, it provides significant clarity. The full legislative history of the APA’s application to Medicare shows that Congress intended and wanted certain interpretive rules issued by the agencies administering Medicare to be subject to notice and comment. The full legislative record supports the conclusion reached by Judge Kavanaugh, though with more evidence than he cited in his opinion. An unintended consequence of Allina could be that if legislative history and Kavanaugh cannot be good friends, perhaps they could at least be congenial acquaintances.

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