Azar v. Allina Health Services , 204 L. Ed. 2d 139 ( 2019 )

(Slip Opinion) OCTOBER TERM, 2018 1
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
The Medicare program offers additional payments to institutions that
serve a “disproportionate number” of low-income patients. 42
U.S. C. §§1395ww(d)(5)(F)(i)(I). These payments are calculated in
part using what is called a hospital’s “Medicare fraction.” The frac-
tion’s denominator is the time the hospital spent caring for patients
who were “entitled to benefits under” Medicare Part A, while the
numerator is the time the hospital spent caring for Part-A-entitled
patients who were also entitled to income support payments under
the Social Security Act. §1395ww(d)(5)(F)(vi)(I). Congress created
Medicare Part C in 1997, leading to the question whether Part C en-
rollees should be counted as “entitled to benefits under” Part A when
calculating a hospital’s Medicare fraction. Respondents claim that,
because Part C enrollees tend to be wealthier than Part A enrollees,
counting them makes the fraction smaller and reduces hospitals’
payments considerably. In 2004, the agency overseeing Medicare is-
sued a final rule declaring that it would count Part C patients, but
that rule was later vacated after hospitals filed legal challenges. In
2013, it issued a new rule prospectively readopting the policy of
counting Part C patients. In 2014, unable to rely on either the vacat-
ed 2004 rule or the prospective 2013 rule, the agency posted on its
website the Medicare fractions for fiscal year 2012, noting that they
included Part C patients. A group of hospitals, respondents here,
sued. They claimed, among other things, that the government had
violated the Medicare Act’s requirement to provide public notice and
a 60-day comment period for any “rule, requirement, or other state-
ment of policy . . . that establishes or changes a substantive legal
standard governing . . . the payment for services,” §1395hh(a)(2). The
2 AZAR v. ALLINA HEALTH SERVICES
Syllabus
court of appeals ultimately sided with the hospitals.
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 announce-
ment 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 Administra-
tive 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, ___. Be-
cause 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 pro-
vide 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,” §1395hh(a)(2),
while APA statements of policy are not substantive by definition but
are grouped with and treated as interpretive rules, 5 U.S. C.
§553(b)(A). Second, §1395hh(e)(1)—which gives the government lim-
ited authority to make retroactive “substantive change[s]” in, among
other things, “interpretative rules” and “statements of policy”—would
make no sense if the Medicare Act used the term “substantive” as the
APA does, because interpretive rules and statements of policy—and
any changes to them—are not substantive under the APA by defini-
tion. Third, had Congress wanted to follow the APA in the Medicare
Act and exempt interpretive rules and policy statements from notice
and comment, it could have simply cross-referenced the exemption in
§553(b)(A) of the APA. And the fact that Congress did cross-reference
the APA’s neighboring good cause exemption found in §553(b)(B), see
§1395hh(b)(2)(C), strongly suggests that it “act[ed] intentionally and
purposefully in the disparate” decisions, Russello v. United States,
464 U.S. 16, 23. Pp. 5–12.
(b) The Medicare Act’s text and structure foreclose the govern-
ment’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 inter-
pretive 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.
Cite as: 587 U. S. ____ (2019) 3
Syllabus
(c) Because this Court affirms the court of appeals’ judgment under
§1395hh(a)(2), there is no need to address that court’s alternative
holding that §1395hh(a)(4) independently required notice and com-
ment. Nor does this Court consider the argument, not pursued by the
government here, that the policy did not “establis[h] or chang[e]” a
substantive legal standard—and so did not require notice and com-
ment under §1395hh(a)(2)—because the statute itself required the
government to count Part C patients in the Medicare fraction.
Pp. 16–17.
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 consideration or decision of the case.
Cite as: 587 U. S. ____ (2019) 1
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, Wash-
ington, 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. 42 U.S. C. §1395hh(a)(2). In 2014, the
government revealed a new policy on its website that
dramatically—and retroactively—reduced payments to
hospitals serving low-income patients. Because affected
members of the public received no advance warning and
no chance to comment first, and because the government
has not identified a lawful excuse for neglecting its statu-
tory notice-and-comment obligations, we agree with the
court of appeals that the new policy cannot stand.
I
Today, Medicare stands as the largest federal program
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-
2 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
lation. Needless to say, even seemingly modest modifica-
tions 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 pro-
grams like Medicare. 5 U.S. C. §553(a)(2). Soon enough,
though, the government volunteered to follow the informal
notice-and-comment rulemaking procedures found in the
APA when proceeding under the Medicare Act. See Clarian
Health West, LLC v. Hargan, 878 F.3d 346, 356–357
(CADC 2017).
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 pro-
posed to relax its commitment 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, re-
quirement, or other statement of policy (other than a
Cite as: 587 U. S. ____ (2019) 3
Opinion of the Court
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].” 42 U.S. C.
§1395hh(a)(2).
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. §1395ww(d)(5)(F)(i)(I). These
payments are calculated in part using a hospital’s so-
called “Medicare fraction,” which asks how much of the
care the hospital provided to Medicare patients in a given
year was provided to low-income Medicare patients. The
fraction’s denominator is the time the hospital spent
caring for patients who were “entitled to benefits under”
Medicare Part A. The numerator is the time the hospital
spent caring for Part-A-entitled patients who were also
entitled to income support payments under the Social
Security Act. §1395ww(d)(5)(F)(vi)(I). The bigger the
fraction, the bigger the payment.
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-
4 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
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 Medi-
care fraction. At first, it did not include them. See North-
east 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 ab-
rupt change prompted various legal challenges from hospi-
tals. 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 switch-
eroo’ ” 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 devel-
opments, the agency in 2013 issued a new rule that pro-
spectively “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 agen-
cy’s solution? It posted on a website a spreadsheet an-
nouncing the 2012 Medicare fractions for 3,500 hospitals
nationwide and noting that the fractions included Part C
patients.
Cite as: 587 U. S. ____ (2019) 5
Opinion of the Court
That Internet posting led to this lawsuit. A group of
hospitals who provided care to low-income Medicare pa-
tients in 2012 argued (among other things) that the gov-
ernment 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 meaning 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 sub-
stantive legal standard governing . . . the payment for
services.” §1395hh(a)(2). Before us, everyone agrees that
the government’s 2014 announcement of the 2012 Medi-
care fractions governed “payment for services.” It’s clear,
too, that the government’s announcement was at least a
“statement of policy” because it “le[t] the public know [the
agency’s] current . . . adjudicatory approach” to a critical
question involved in calculating payments for thousands of
hospitals nationwide. Syncor Int’l Corp. v. Shalala, 127
F.3d 90, 94 (CADC 1997). So whether the government
had an obligation to provide notice and comment winds up
turning on whether its 2014 announcement established or
6 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
changed a “substantive legal standard.” That phrase
doesn’t seem to appear anywhere else in the entire United
States Code, and the parties offer at least two ways to
read it.
The hospitals suggest the statute means to distinguish a
substantive from a procedural legal standard. On this
account, a substantive standard is one that “creates du-
ties, rights and obligations,” while a procedural standard
specifies how those duties, rights, and obligations should
be enforced. Black’s Law Dictionary 1281 (5th ed. 1979)
(defining “substantive law”). And everyone agrees that a
policy of counting Part C patients in the Medicare fraction
is substantive in this sense, because it affects a hospital’s
right to payment. From this it follows that the public had
a right to notice and comment before the government could
adopt the policy at hand. 863 F.3d, at 943.
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 “inter-
pretive 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 government’s inter-
pretation 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
Cite as: 587 U. S. ____ (2019) 7
Opinion of the Court
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.” 42 U.S. C. §1395hh(a)(2)
(emphasis added). Yet, by definition under the APA,
statements of policy are not substantive; instead they are
grouped with and treated as interpretive rules. 5 U.S. C.
§553(b)(A). This strongly suggests the Medicare Act just
isn’t using the word “substantive” in the same way as the
APA. Even the government acknowledges that its contrary
reading leaves the Medicare Act’s treatment of policy
statements “incoherent.” Tr. of Oral Arg. 19.
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 §1395hh(a)(2) in order to capture “substantive rules in
disguise.” Post, at 5 (opinion of BREYER, J.).
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 Con-
gress used that phrase in the APA and in other provisions
of §1395hh, it referred to things that really are statements
of policy. See, e.g., Pacific Gas & Elec. Co. v. Federal
Power Comm’n, 506 F.2d 33, 38 (CADC 1974); post, at 4–5
(discussing §1395hh(e)(1)). Yet, to accept the govern-
ment’s view, we’d have to hold that when Congress used
the very same phrase in §1395hh(a)(2), it sought to refer
to things an agency calls statements of policy but that in
fact are nothing of the sort. The dissent admits this “may
seem odd at first blush,” post, at 5, but further blushes
don’t bring much improvement. This Court does not lightly
8 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
assume that Congress silently attaches different meanings
to the same term in the same or related statutes. See Law
v. Siegel, 571 U.S. 415, 422 (2014).
Besides, even if the statute’s reference to “statements of
policy” could bear such an odd construction, the govern-
ment 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 §1395hh gives the government limited authority
to make retroactive “substantive change[s]” in, among
other things, “interpretative rules” and “statements of
policy.” But this statutory authority would make no sense
if the Medicare Act used the term “substantive” as the
APA does. It wouldn’t because, again, interpretive rules
and statements of policy—and any changes to them—are
not substantive under the APA by definition.
Here, too, the government offers no satisfactory reply.
It concedes, as it must, that the term “substantive” in
Cite as: 587 U. S. ____ (2019) 9
Opinion of the Court
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 exemp-
tions 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 §1395hh(b)(2)(C). If, as the government
supposes, Congress had also wanted to borrow the other
APA exemption, for interpretive rules and policy state-
10 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
ments, it could have easily cross-referenced that exemp-
tion in exactly the same way. Congress had recently done
just that, cross-referencing both of the APA’s exceptions in
the Clean Air Act. See §305(a), 91 Stat. 772, 42 U.S. C.
§7607(d)(1). Yet it didn’t do the same thing in the Medi-
care Act, and Congress’s choice to include a cross-reference
to one but not the other of the APA’s neighboring exemp-
tions strongly suggests it acted “ ‘intentionally and pur-
posefully in the disparate’ ” decisions. Russello v. United
States, 464 U.S. 16, 23 (1983).
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 §1395hh(a)(2) limiting the notice-and-comment re-
quirement to rules governing benefits, payment, or eligi-
bility, post, at 17; but we can’t see why this would have
made a cross-reference less desirable than the phrase
“substantive legal standard” as a means of incorporating
the APA’s interpretive-rule exemption. So we’re left with
nothing but the doubtful proposition that Congress sought
to accomplish in a “surpassingly strange manner” what it
could have accomplished in a much more straightforward
way. RadLAX Gateway Hotel, LLC v. Amalgamated Bank,
566 U.S. 639, 647 (2012); see Advocate Health Care Net-
work v. Stapleton, 581 U. S. ___, ___ (2017) (slip op., at 8)
(“When legislators did not adopt ‘obvious alternative’
language, ‘the natural implication is that they did not
intend’ the alternative”).
The dissent would have us disregard all of the textual
Cite as: 587 U. S. ____ (2019) 11
Opinion of the Court
clues we’ve found significant because the word “substan-
tive” carried “a special meaning in the context of adminis-
trative law” in the 1980s, making it “almost a certainty”
that Congress had that meaning in mind when it used the
word “substantive” in §1395hh(a)(2). Post, at 3, 8. But it
was the phrase “substantive rule” that was a term of art in
administrative law, and Congress chose not to use that
term in the Medicare Act. Instead, it introduced a seem-
ingly new phrase to the statute books when it spoke of
“substantive legal standards.” And, for all the reasons we
have already explored, the term “substantive legal stand-
ard” in the Medicare Act appears to carry a more expan-
sive scope than that borne by the term “substantive rule”
under the APA.
In reply, the dissent stresses that §1395hh refers to
agency actions requiring notice and comment as “regula-
tions.” This is significant, the dissent says, because
“courts had sometimes treated [the term ‘regulations’] as
interchangeable with the term ‘substantive rules’ ” around
the time of the 1987 Medicare Act amendments. Post,
at 4. So if only “regulations” must proceed through notice
and comment, the dissent reasons, that necessarily en-
compasses only things that qualify as substantive rules
under the APA. In fact, however, by 1987 courts had
commonly referred to both substantive and interpretive
rules as “regulations,” so the dissent’s logical syllogism
fails on its own terms. To see this, one need look no fur-
ther than Chrysler Corp. v. Brown, 441 U.S. 281 (1979),
which described the substantive-interpretive divide as “the
central distinction among agency regulations found in the
APA.” Id., at 301 (emphasis added); see also, e.g., Batter-
ton v. Francis, 432 U.S. 416, 425, n. 9 (1977) (distinguish-
ing between “[l]egislative, or substantive, regulations” and
“interpretative regulation[s]”); United Technologies Corp.
v. EPA, 821 F.2d 714, 719 (CADC 1987) (“most of the
12 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
regulations at issue are . . . interpretative”). 1
In the end, all of the available evidence persuades us
that the phrase “substantive legal standard,” which ap-
pears in §13955hh(a)(2) and apparently nowhere else in
the U. S. Code, cannot bear the same construction as the
term “substantive rule” in the APA. We need not, however,
go so far as to say that the hospitals’ interpretation,
adopted by the court of appeals, is correct in every particu-
lar. To affirm the judgment before us, it is enough to say
the government’s arguments for reversal fail to withstand
scrutiny. Other questions about the statute’s meaning can
await other cases. The dissent would like us to provide
more guidance, post, at 13–14, but the briefing before us
focused on the issue whether the Medicare Act borrows
the APA’s interpretive-rule exception, and we limit our
holding accordingly. In doing so, we follow the well-worn
path of declining “to issue a sweeping ruling when a nar-
row one will do.” McWilliams v. Dunn, 582 U. S. ___, ___
(2017) (slip op., at 14). 2
——————
1 Nor does §1395hh(e)(1) imply that the statute is using “regulations”
and “interpretative rules” to mean different things. Post, at 4–5. True,
that provision refers to “regulations, manual instructions, interpreta-
tive rules, statements of policy, or guidelines of general applicability.”
But contrary to the dissent’s suggestion that each item in the list
“refers to something different,” post, at 5, the items appear to have
substantial overlap. For example, many manual instructions surely
qualify as guidelines of general applicability; and, as explained above,
the statute explicitly requires some statements of policy to be issued as
regulations.
2 Nor is it obvious that the dissent’s approach would provide signifi-
cantly clearer guidance. Lower courts have often observed “that it is
quite difficult to distinguish between substantive and interpretative
rules,” Syncor Int’l Corp. v. Shalala, 127 F.3d 90, 93 (CADC 1997), and
precisely where to draw the boundary has been a subject “of much
scholarly and judicial debate,” Perez v. Mortgage Bankers Assn., 575
U.S. 92, ___ (2015) (slip op., at 3).
Cite as: 587 U. S. ____ (2019) 13
Opinion of the Court
III
Unable to muster support for its position in the statu-
tory 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 legis-
lative 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 government points us first to a conference report on
the 1986 bill that adopted §1395hh(b). The 1986 report
opined that the bill adopted at that time wouldn’t require
notice and comment for interpretive rules. See H. R. Conf.
Rep. No. 99–1012, p. 311 (1986). But the 1986 bill didn’t
include the statutory language at issue here. Congress
added that language only the following year, when it
enacted §1395hh(a)(2). Nor does the government try to
explain how a report on a 1986 bill sheds light on the
meaning of statutory terms first introduced in 1987. If
anything, the fact that Congress revisited the statute in
1987 may suggest it wasn’t satisfied with the 1986 notice-
and-comment requirements and wished to enhance them.
Some legislative history even says as much. See H. R.
Rep. No. 100–391(I), p. 430 (1987) (expressing concern
that, despite the 1986 legislation, the agency was still
announcing “important policies” without notice and
comment).
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
14 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
“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, p. 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 com-
ment. 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 lan-
guage 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 confer-
ence’s language to track the APA. For example, the rele-
vant 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, “signifi-
cant 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 sub-
stantive 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
Cite as: 587 U. S. ____ (2019) 15
Opinion of the Court
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 op.,
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 government
warns that providing the public with notice and a chance
to comment on all Medicare interpretive rules, like those
in its roughly 6,000-page “Provider Reimbursement Man-
ual,” would take “ ‘many years’ ” to complete. Brief for
Petitioner 18, 42. But the dissent points to only eight
manual provisions that courts have deemed interpretive
over the last four decades, see post, at 10–12, and the
government hasn’t suggested that providing notice and
comment for these or any other specific manual provisions
would prove excessively burdensome. Nor has the gov-
ernment identified any court decision invalidating a man-
ual provision under §1395hh(a)(2) in the nearly two years
since the court of appeals issued its opinion in this case.
For their part, the hospitals claim that only a few dozen
pages of the Provider Reimbursement Manual might even
arguably require notice and comment. Tr. of Oral Arg. 49–
51. And they tell us that the agency regularly and without
much difficulty undertakes notice-and-comment rulemak-
ing for many other decisions affecting the Medicare pro-
gram. See Brief for Respondents 58; App. to Brief in
Opposition 1a–3a. The government hasn’t rebutted any of
these points.
Not only has the government failed to document any
draconian costs associated with notice and comment, it
also has neglected to acknowledge the potential counter-
vailing benefits. Notice and comment gives affected par-
ties fair warning of potential changes in the law and an
16 AZAR v. ALLINA HEALTH SERVICES
Opinion of the Court
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, Admin-
istrative Law §4.8 (6th ed. 2019). Surely a rational Con-
gress could have thought those benefits especially valua-
ble 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 §1395hh(a)(4), which
provides that a Medicare regulation struck down for not
being a logical outgrowth of the government’s proposal
can’t “take effect” until the agency provides a “further
opportunity for public comment.” The hospitals claim, and
the court of appeals held, that subsection (a)(4) also and
independently required notice and comment here. But
given our holding affirming the court of appeals’ judgment
under §1395hh(a)(2), we have no need to reach this
question.
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
Cite as: 587 U. S. ____ (2019) 17
Opinion of the Court
so didn’t require notice and comment under
§1395hh(a)(2)—because the statute itself required it to
count Part C patients in the Medicare fraction. But we
need not consider this argument either, this time because
the government hasn’t pursued it and we normally have
no obligation to entertain grounds for reversal that a party
hasn’t presented. Far from suggesting that the Medicare
Act supplies the controlling legal standard for determining
whether to count Part C patients, the government has
insisted that the statute “does not speak directly to the
issue,” Brief for Appellant in Northeast Hospital Corp. v.
Sebelius, No. 10–5163 (CADC), p. 22, and thus leaves a
“ ‘gap’ ” for the agency to fill, Brief for Appellee in Allina v.
Price, No. 16–5255 (CADC), p. 50 (quoting Northeast
Hospital Corp., 657 F.3d, at 13). The courts below ac-
cepted the government’s submission, and the government
hasn’t sought to take a different position in this Court. So
we express no opinion on whether the statute in fact con-
tains such a “gap.” We hold simply that, when the gov-
ernment establishes or changes an avowedly “gap”-filling
policy, it can’t evade its notice-and-comment obligations
under §1395hh(a)(2) on the strength of the arguments it
has advanced in this case.
*
The judgment of the court of appeals is
Affirmed.
JUSTICE KAVANAUGH took no part in the consideration
or decision of this case.
Cite as: 587 U. S. ____ (2019) 1
BREYER, J., dissenting
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 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 stand-
ard.” 42 U.S. C. §1395hh(a)(2). This phrase is nested
within a set of provisions that, taken together, require
the Secretary of Health and Human Services to use
notice-and-comment rulemaking before promulgating
“regulations.”
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 promul-
gated 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
2 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
simple. By using words 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 interpreta-
tion, and the statute’s history and the practical conse-
quences provide further evidence that Congress had only
substantive rules in mind. Importantly, this interpreta-
tion of the statute, unlike the Court’s, provides a familiar
and readily administrable way for the agency to distin-
guish 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 pro-
gram in 1965. It says that the Secretary “shall prescribe
such regulations as may be necessary to carry out the
administration of the insurance programs.” 42 U.S. C.
§1395hh(a)(1) (emphasis added).
The other two relevant provisions were added in the
1980s. The provision contained in the very next para-
graph is the one directly at issue here. It says:
“No rule, requirement, or other statement of policy
. . . that establishes or changes a substantive legal
standard governing the scope of benefits, the payment
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
Cite as: 587 U. S. ____ (2019) 3
BREYER, J., dissenting
subsection (a) . . . , the Secretary shall provide for no-
tice of the proposed regulation in the Federal Register
and a period of not less than 60 days for public com-
ment thereon.” §1395hh(b)(1) (emphasis added).
Taken together, these provisions say that the Secretary
must use notice-and-comment procedures before promul-
gating 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 ‘inter-
pretative rules, general statements of policy, or rules of
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. Sub-
stantive rules had also come to be known as “legislative
rules.” Id., at 302. And some courts referred to substan-
tive 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
4 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
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. 5 U.S. C. §553(b)(3)(A)
(exempting “interpretative rules,” among other things,
from the notice-and-comment requirement); see also
Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 99
(1995) (“Interpretive rules do not require notice and
comment”).
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 inter-
pretive rules from their scope. By applying the statute
only to agency actions that “establish or change a substan-
tive legal standard,” §1395hh(a)(2) (emphasis added),
Congress used words that courts had long used to describe
substantive rules under the APA. See, e.g., American
Hospital Assn., 834 F.2d, at 1045, 1046 (“ ‘substantive
rules’ ” are rules that “ ‘create law’ ” or “ ‘establis[h] a
standard of conduct which has the force of law’ ”); Linoz v.
Heckler, 800 F.2d 871, 877 (CA9 1986) (substantive rules
“ ‘effect a change in existing law or policy’ ”). Moreover, by
limiting the notice-and-comment requirement to “regula-
tion[s],” §1395hh(b)(1) (emphasis added), Congress used a
word that courts had sometimes treated as interchangeable
with the term “substantive rules.”
Another subsection of the statute, §1395hh(e)(1), simi-
larly implies that Congress had only substantive rules in
mind when it used the term “regulations.” That subsec-
tion bars the agency from retroactively applying certain
policy changes articulated in “regulations, manual instruc-
Cite as: 587 U. S. ____ (2019) 5
BREYER, J., dissenting
tions, interpretative rules, statements of policy, or guide-
lines of general applicability.” Ibid. By using the word
“or” to connect “regulations” and the other words in the
list, Congress suggested that each linked phrase refers to
something different. This textual distinction between
“regulations” and “interpretive rules” further suggests
that the “regulations” that must go through notice and
comment do not include interpretive rules.
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.” §1395hh(a)(2).
Even if we can easily read the words “rule[s]” and “re-
quirement[s]” as referring to substantive or legislative
rules, “statement[s] of policy” are a different matter. Ibid.
Indeed, the APA explicitly excludes “statements of policy”
from its notice-and-comment requirements. 5 U.S. C.
§553(d)(2). So how can we say that our provision—which
explicitly includes statements of policy—encompasses only
those legislative rules that the APA subjects to notice-and-
comment rulemaking?
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 ‘state-
ments of policy,’ ” ante, at 7; it refers to “statement[s] of
policy . . . that establis[h] or chang[e] a substantive legal
standard,” §1395hh(a)(2) (emphasis added). Those words,
read together, are simply another way of referring to
substantive rules in disguise. This reading may seem odd
at first blush, but the statutory history and the conse-
quences of the alternative interpretation persuade me that
this is precisely what Congress intended.
B
I turn next to the history of the statute, which provides
significant support for believing that the Medicare rule-
6 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
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. 5 U.S. C.
§553(a)(2).
In 1971, the agency nonetheless adopted a policy of
voluntarily promulgating most regulations through notice-
and-comment rulemaking. See Public Participation in
Rule Making, 36 Fed. Reg. 2532. But the agency did not
use notice and comment for all policy decisions during this
time. It also provided extensive guidance to participants
in the Medicare system through less formal means like
manuals (a practice it still follows today). See, e.g.,
Daughters of Miriam Ctr. for the Aged v. Mathews, 590
F.2d 1250, 1254 (CA3 1978) (describing the agency’s
Provider Reimbursement Manual, which “interprets and
elaborates upon” Medicare regulations).
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 Provi-
sions: Hearing on S. 1158 before the Subcommittee on
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 42 U.S. C. §1395hh (1982 ed.,
Cite as: 587 U. S. ____ (2019) 7
BREYER, J., dissenting
Supp. IV); §9321(e)(1), 100 Stat. 2017.
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 prac-
tice) 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 sub-
stantive 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
of 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 Repre-
sentatives passed a version of the provision that seemed to
say yes. The House Report on that bill said that the provi-
sion 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
8 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
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 Com-
mittee agreed with the Senate, not the House. It revised
the House version by taking out the words “has (or may
have) a significant effect on the scope of ” benefits, pay-
ment, or eligibility, and by substituting for those words
the current language—namely, “establishes or changes a
substantive legal standard governing the scope of ” bene-
fits, payment, or eligibility. §1395hh(a)(2) (emphasis
added); see §4035(b), 101 Stat. 1330−78 (1987); H. R. Conf.
Rep. No. 100–495, p. 566 (1987). The revised language
thus focused on the legal effect of the agency decision, not
its practical importance.
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.
Cite as: 587 U. S. ____ (2019) 9
BREYER, J., dissenting
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 characteri-
zation at least some weight. See Telecommunications, 800
F.2d, at 1186 (finding “no reason to question the Commis-
sion’s characterization” of the challenged action as a “pol-
icy 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 indica-
tion that Congress intended to require notice and com-
ment 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
10 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
participants navigate the statutory and regulatory
scheme, the agency has issued tens of thousands of pages
of manual instructions, interpretive rules, and other guid-
ance documents. And it has followed this practice since
well before Congress enacted the notice-and-comment
provisions at issue here. See supra, at 6.
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 proce-
dures are elaborate and take time to complete. The Gov-
ernment 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 Rule-
making 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 Appeals’ interpreta-
tion 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 Reimburse-
ment Manual, which the agency has published for dec-
ades. 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).
Cite as: 587 U. S. ____ (2019) 11
BREYER, J., dissenting
• 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.” Na-
tional 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 con-
tract 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 arrange-
ments 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 reim-
bursements resulting from a provider depreciating its
assets using an accelerated method. Daughters of Mir-
iam Ctr., 590 F.2d, at 1254–1255.
• A provision governing whether providers are entitled
to reimbursement for bad debts when States are obli-
gated 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
12 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
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. §1395hh(a)(2). These include the
Medicare General Information, Eligibility and Entitlement
Manual; the Medicare Claims Processing Manual; the
Medicare Benefit Policy Manual; the Medicare Secondary
Payer Manual; the Medicare Program Integrity Manual;
the Medicare Prescription Drug Benefit Manual; and
many others. Many provisions of these manuals have
been deemed interpretive rules as well. See, e.g., Erringer
v. Thompson, 371 F.3d 625, 632 (CA9 2004) (provisions of
Program Integrity Manual governing contractors’ creation
of local coverage determinations); Linoz, 800 F.2d, at 876–
878 (provision of Carrier’s Manual carving out an excep-
tion to the rule governing reimbursement for ambulance
service).
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 im-
pose 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
Cite as: 587 U. S. ____ (2019) 13
BREYER, J., dissenting
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 natu-
ral, 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 standard”? 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 en-
forced.” 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 ” “sup-
plie[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 de-
nies. 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 stat-
ute); 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 and comment
because they did not “bind” the agency and because exist-
ing statutory and regulatory provisions “establish[ed the]
14 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
substantive legal standards”). If the Court is going to
effectively exempt interpretive rules from the notice-and-
comment requirement, why not simply say so?
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 frac-
tion. 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 pay-
ment”? 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 Medi-
care 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 evidence that Congress did not
intend the statute to be construed in this way.
To consider these consequences in no way invades Con-
gress’ 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 poten-
tial consequences of each competing interpretation helps
us perform that task, as we can presume that Congress
Cite as: 587 U. S. ____ (2019) 15
BREYER, J., dissenting
did not intend to produce irrational or undesirable practi-
cal 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 “practi-
cal 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 ascrib-
ing 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 interpre-
tation. 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 inade-
quate. The Court points, for example, to §1395hh(e)(1),
which Congress added in 2003. See §903(a)(1), 117 Stat.
2376. That subsection limits the agency’s authority to
make retroactive any “substantive change” in “regulations,
manual instructions, interpretative rules, statements of
policy, or guidelines of general applicability.” The Court
points out that the word “substantive” in this subsection
does not mean a “substantive rule” under the APA. Ante,
at 8−9. And I agree with that observation. But I cannot
see how that fact sheds light on the meaning of the phrase
“establishes or changes a substantive legal standard,”
16 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
where the adjective “substantive” modifies an entirely
different noun.
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 §1395hh(e)(1) modifies the word “change,”
and the phrase “substantive change” has a known mean-
ing in the law. It refers to a change to the substance of a
rule, rather than a technical change to its form. See, e.g.,
Northwest, Inc. v. Ginsberg, 572 U.S. 273, 282 (2014)
(noting that statutory recodification “did not effect any
‘substantive change’ ” to the law); see also Black’s Law
Dictionary 1469 (8th ed. 2004) (defining “substance” as,
inter alia, “the essential quality of something, as opposed
to its mere form” (emphasis added)). Thus, §1395hh(e)(1)
simply says that the agency cannot retroactively apply
nontechnical changes made to policies articulated in
“regulations, manual instructions, interpretative rules,
statements of policy, or guidelines of general applicabil-
ity.” The provision before us deals with an entirely differ-
ent subject, namely, the use of notice-and-comment proce-
dures. And the word “substantive” in this context has a
different and significantly narrower scope.
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 inter-
pretive 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 his-
tory suggests that the absence of a cross-reference is a par-
ticularly unreliable 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
Cite as: 587 U. S. ____ (2019) 17
BREYER, J., dissenting
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 bene-
fits, 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 then cross-referencing
the interpretive-rule exception. But the language of
§1395hh(a)(2) accomplishes both of those tasks at once.
And even were that not so, there is no rule requiring
Congress to use cross-references. As I have explained, the
Medicare Act’s notice-and-comment provisions already
operate by way of three cross-linked subsections. See
supra, at 2−3. Given the complexity of this scheme, I
would not second-guess Congress’ decision not to add yet
another cross-reference here.
* * *
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 defini-
tion, lack the force and effect of law. I fear that the Court,
18 AZAR v. ALLINA HEALTH SERVICES
BREYER, J., dissenting
in rejecting this interpretation, has improperly (and need-
lessly) “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. John-
son 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 seri-
ous confusion or delay, Congress can, 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., dissent-
ing). Rather than requiring Congress to “revisit the mat-
ter” 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 com-
ment 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 agen-
cy’s decision in this case qualifies as a substantive or an
interpretive rule.
For these reasons, I respectfully dissent.