The Big Picture
On January 8, the U.S. Department of Health & Human Services (HHS) released a final rule that imposes a ten-year sunset date on most regulations that have ever been, or will ever be, issued by HHS and its component agencies, including the Centers for Medicare & Medicaid Services (CMS) and the Food and Drug Administration (FDA).1 To preserve a rule past this automatic expiration date, HHS must assess whether the rule significantly affects “small entities”; if so, HHS must publish an analysis of whether the rule ought to be preserved, amended or rescinded, as described below.
The so-called SUNSET rule—which stands for “Securing Updated and Necessary Statutory Evaluations Timely”—was finalized largely as proposed in November. The most significant difference pertains to the timeline for reviewing the backlog of rules that are already more than ten years old: HHS now has five years to complete these assessments, up from two years in the proposed rule. Other notable changes include a requirement for HHS to publish a monthly announcement of newly opened regulatory assessments, and an expanded list of current regulations that are exempt from the SUNSET rule’s requirements; this list includes certain key regulations related to Medicare payment, FDA product classifications, and healthcare fraud and abuse.
The SUNSET rule is scheduled to take effect on March 20 (60 days after publication in the Federal Register), although the rule extends the deadline for the first set of assessments until 2026, as described below.
Giving Teeth to the Regulatory Flexibility Act
The SUNSET rule’s requirement for retrospective regulatory review is modeled on the Regulatory Flexibility Act (RFA), 5 U.S.C. Chapter 6. The RFA directs federal agencies to maintain a plan for “periodic review” of existing rules, with the goal of minimizing any substantial economic impacts on small businesses and other entities. Both Democratic and Republican administrations have underscored the value of retrospective review of regulations, and HHS has, at different times, undertaken various forms of retrospective review and regulatory cleanup but has not previously undertaken a systematic review of all regulations.
The SUNSET rule gives new teeth to the RFA’s general directive by providing that the vast majority of HHS’s regulations will expire automatically unless HHS undertakes an assessment at least every ten years to assess—and potentially address—the rule’s impact on small entities. Notably, HHS estimates that only 11% of its regulations will meet the RFA’s standard of having a “significant economic effect on a substantial number of small entities” such that remedial action would be required. This figure likely reflects the fact that the definition of “small entities” does not include individual patients, most health plans, large life sciences companies or state governments; as a result, many Medicaid regulations would likely not satisfy the “significant economic effect” standard, meaning that HHS would not be required to undertake a substantive review of the regulations’ merits. Even so, the automatic expiration date applies to all regulations unless an exemption applies, meaning that HHS must invest significant resources in tracking expiration dates and assessing the impact of rules that do not fall within the SUNSET rule’s core focus—rules that have a significant economic impact on a substantial number of small entities.
New Constraints on HHS Flexibility in the Lead-up to Inauguration Day
The SUNSET rule is the latest in a series of actions in which HHS imposes new restrictions on its own administrative activities. Another notable example is the so-called Good Guidance rule, which, effective January 6, creates new procedural requirements surrounding the issuance and maintenance of subregulatory guidance documents.
Taken together, these executive actions suggest a push within HHS to finish regulatory to-do lists in the weeks leading up to the presidential transition. The rulemaking process for the SUNSET and Good Guidance rules provided for public comment periods of only 30 days each (except that, as required by statute, HHS permitted the usual 60-day deadline for Medicare-related comments on the SUNSET rule). Moreover, the 261-page SUNSET rule was sent to the Office of Management and Budget for review only two weeks after the initial comment period closed and finalized a mere four days following the close of the longer, Medicare-specific public comment period, notwithstanding the 532 public comments received. In the preamble to the final rule, HHS acknowledged that “commenters generally opposed the proposed rule,” with one in four commenters expressly requesting that HHS withdraw the rule entirely.
HHS justified the Good Guidance and SUNSET rules in the name of increased transparency and agency accountability. The press release announcing the final SUNSET rule, for example, declares that the rule will “incentivize HHS to conduct [] performance reviews of its regulations to ensure that rules are delivering the benefits projected in view of the best available science, data, and evidence.” At the same time, however, these new requirements impose significant constraints on HHS’s ability to prioritize among competing objectives and to respond nimbly to changing circumstances. These new constraints fall largely on the incoming Biden Administration and could therefore hinder efforts by the Biden HHS to alter Trump-era policies or implement new policy goals, including goals related to the ongoing COVID‑19 pandemic.
If the SUNSET rule is implemented in its current form, it will impose substantial administrative burdens on the Biden HHS: Not only will the White House transition occur during a record-setting month for COVID-19 deaths, but agency personnel will need to develop and implement the core procedures for SUNSET rule review in time to save 17,200 regulations from expiration in 2026.
The SUNSET rule may, in addition, create new opportunities for private litigants to challenge HHS rules in court: The SUNSET rule’s preamble predicts that HHS’s published step 1 and step 2 analyses will constitute “final agency actions” and so will be subject to judicial review under the Administrative Procedure Act. Because of this possibility, HHS will need to justify its decisions with sufficient rigor to withstand a judicial challenge, heightening the administrative burdens associated with the review process.
Conclusion
The SUNSET rule is a quintessential example of “midnight rulemaking”; indeed, the rule is scheduled for publication in the Federal Register on January 19, on the literal eve of the presidential transition. These timing details—and the rule’s substantial expected impact on the incoming Administration—call into question whether the rule will be implemented in its current form, or at all. Because the rule is not scheduled to take effect until well after Inauguration Day, the incoming Biden Administration could delay the rule’s effective date as part of the “regulatory freeze” order that typically accompanies a White House transition. This would buy time for HHS to undertake new rulemaking to rescind or modify the SUNSET rule, if desired.
In addition, the preamble states that HHS will submit the SUNSET rule for review under the Congressional Review Act (CRA), which offers a streamlined pathway for Congress to pass a joint resolution that revokes recently promulgated rules in their entirety. With both houses of Congress under Democratic control, the CRA may allow for swift reversals of this and other executive actions taken by the outgoing Trump Administration. Unlike reversals that are effectuated through executive action, CRA reversals do not require “notice and comment” procedures and are not subject to judicial review.
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1 The final rule creates new, materially identical provisions in 21 CFR Part 6; 42 CFR Parts 1, 404 and 1000; and 45 CFR Parts 6, 200, 300, 403, 1010 and 1390. Certain HHS rules are exempted from SUNSET rule requirements, as described below.