Chevron Deference Overturned: Potential Impacts on MSP Compliance

by B. Smith and P. Czuprynski

In Loper Bright Enterprises v. Raimondo, 2024 U.S. LEXIS 2882, the United States Supreme Court overturned the way courts were ordered to view federal agencies’ interpretation of laws that were ambiguous. This is commonly referred to as “chevron deference” based on the Supreme Court decision in Chevron v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778 (1984).

Chevron deference is the scope given to federal agencies to interpret the statutes they administer when there is a dispute. If the wording of the statute was clear, then the agency was obligated to follow the letter of the law. If the statute was ambiguous and open to reasonable interpretation, the courts would defer to the federal agency regarding how to implement the law. For years, this deference allowed federal agencies to pass various regulations without intervention from the courts.

In Loper, the Supreme Court determined that rather than the deferential treatment previously given to federal agencies, federal courts “must exercise their independent judgement in deciding whether an agency has acted within its statutory authority.” So, what is the potential impact of this decision, if any, on Medicare Secondary Payer compliance? The Medicare Secondary Payer (MSP) Act is very clear with respect to Medicare’s power to create guidelines and rules regarding Section 111 reporting (see 42 U.S. Code § 1395y(b)(7)). In this section of the statute, the Secretary of Health and Human Services (Medicare) has been given authority to determine the information needed to identify when a carrier/self-insured may be a primary payer. Moreover, the statute gives Medicare the authority to determine the form and manner of reporting Section 111 information.

However, the MSP Act is not explicit when it comes to the requirements of a Medicare Set-Aside. In fact, the term “Medicare Set-Aside” is not mentioned in the statute and is a term of art that was created as a way to protect Medicare’s interests. Although all would agree that protecting Medicare’s interests under the Act, and preventing a burden shift to Medicare is required, the method for accomplishing it is subject to additional scrutiny.

The MSP Act does not state that a MSA is required for every settlement but does make it clear that parties need to consider Medicare’s interests associated with a settlement. This consideration may involve funding an MSA.

To enforce the provisions of the Medicare Secondary Payer Act, the Act states that Medicare is allowed to deny payment or make payment and seek reimbursement when:

• There is a reasonable expectation of payment under a plan or law; and
• Where there is a demonstration of responsibility for payment

While acknowledging that the statute does not require submission of an MSA to CMS. Medicare has interpreted this statute to authorize itself to establish an MSA review process and hire a Workers’ Compensation Review Contractor. In addition, if parties choose to utilize the CMS review process, CMS has created various guidelines for determining allocations. As part of this review, CMS rejected certain binding state law findings. However, looking closely at the statute, there is no ambiguity in Medicare’s power to deny or make payment and then seek reimbursement.

Aside from the authority to implement a review process, overturning Chevron may also impact any deference a court would give to Medicare regarding the amount of an MSA.

This would mean that in the event Medicare believes an MSA amount should have been more, deference should not be given to Medicare’s higher amount. Instead, the courts should look at the merits of the case and decide if the MSA was adequate based on the facts and applicable state laws associated with the claim. Currently, CMS does not always recognize certain medical reports even though they may be binding (pursuant to state workers’ compensation laws). Further, CMS reviews have been found to be inconsistent in regard to granting zero waivers and CMS has noted that they look to what may be possible in the future, which often results in overfunded MSA amounts.

What is clear at this point, from the Supreme Court’s decision, is that federal agencies’ interpretation of statutory provisions may be subject to judicial review. This is not automatic however and must be determined on the merits of each case.

Based on the Court’s recent ruling on Chevron, now is a good time to assess your current MSA program and the options available to you for protecting Medicare’s interests without overfunding your MSA. To learn more about our Certified MSAs, Non-Submit MSA programs, and WCMSA submissions with mitigation, please contact the IMPAXX Settlement Consulting team at [email protected].