Fact Sheet: Deference to the Federal Agency in Medicaid Cases

In this fact sheet, we review and discuss court decisions on deference to sub-regulatory agency guidance. In these cases, parties argue whether and to what extent courts should defer to interpretations in, for example, guidance letters from the Centers for Medicare and Medicaid (CMS) services.2 The question also arises as to whether the approval by CMS of state Medicaid plans should be given deference.
This fact sheet provides background on deference. It also reviews cases dealing with deference and, finally, we analyze some significant recent cases in which courts have explained the basis for their deference decisions.
The Supreme Court has struggled to clarify the standards for according deference to federal agency interpretations of federal statutes. While clear standards have not emerged, in Chevron U.S.A.. v. Natural Resources Defense Council,3 the Court articulated a two-step inquiry for judicial review of administrative interpretations. First, the court must determine whether Congress has spoken to the specific issue. If so, the congressional statement will displace administrative interpretation. However, if Congress has not spoken to the point or if its statements are ambiguous, the court must defer to the administrative interpretation as long as it is ?reasonable.?4


In recent years, the Court has taken steps to narrow Chevron?s application. In Christensen v. Harris County,5 the Court refused to apply Chevron to an agency opinion letter, finding that ?[i]nterpretations such as those in opinion letters ? like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law ? do not warrant Chevron-style deference.?6Christensen held these types of agency interpretations are ?entitled to respect,? but only to the extent they have the power to persuade.7 This type of deference is called ?Skidmore deference? based on the 1944 decision in Skidmore v. Swift & Co.,8 which said the weight to be accorded to an administrative interpretation in a particular case ?will depend upon the thoroughness evident in its consideration, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.?9
In U.S. v. Mead Corporation,10 the Court discussed the circumstances for applying Chevron or Skidmore deference. At issue in Mead was a ?tariff ruling letter? authorized by regulation but not subjected to formal rulemaking. Tariff ruling letters also are formally binding only upon the particular entity to whom they are issued. The United States Customs Service argued that the letter at issue was entitled to Chevron deference. Rejecting this position, the eightmember majority attempted to clarify the circumstances for applying Chevron deference:
We hold that administrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority. Delegation of such authority may be shown in a variety of ways, as by an agency?s power to engage in adjudication or notice-and-comment rulemaking, or by some other indication of a comparable congressional intent.11
In other words, Chevron deference is limited to agency interpretations where ?it appears that Congress delegated authority to the agency to make rules carrying the force of law, and that the agency interpretation was promulgated in the exercise of that authority.?12 Applying this standard, the Court found no evidence of congressional intent for the agency?s tariff ruling letter to carry Chevron?s ?force of law.?13
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