Since Friday, February 28, there have been numerous news articles about HHS suddenly reversing its position on the "Richardson Waiver." (E.g. Sidley Austin law firm).
In short, the 1946 Administrative Procedures Act provided an "exemption" from notice and comment rulemaking when it involved "benefits." But arguably, most of what CMS does in Medicaid and Medicare are "benefits," which currently generated thousands of pages of annual rulemaking (DRG, RVU, OPPS, Part D, etc).
The concise 1971 "Richardson Waiver" said that what we now call HHS would not take advantage of the exemption of "Federal benefits" from rulemaking.
(By the way, that's the Nixon administration, and Elliott Richardson).
See a new one-page policy published March 3, 2025, in Federal Register. It statesthat henceforth, HHS will follow the original text of the APA, and will view benefits policymaking as exempted, not merely optionally exempted. 90 FR 11029.
Here's a Chat GPT 4o reading of the original APA 1946, the Waiver 1971, and the New Policy March 2025. I asked some follow up questions about special statutes that apply to rulemaking at CMS, which are separate from APA; see FN7 in the Sidley article linked earlier.
- Because these CMS-specific regulations are important, I've highlighted some of the CMS-specific legal discussion in yellow.
I've verified the Chat-generated text to the best of my ability; I'm a policy expert and not an attorney.
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AI CORNER - Chat GPT 4o
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The Reversal of the Richardson Waiver:
A Shift in HHS Rulemaking Policy
Introduction
On February 28, 2025, the U.S. Department of Health and Human Services (HHS), under the leadership of Secretary Robert F. Kennedy Jr., rescinded the longstanding Richardson Waiver, a 54-year-old policy that required the agency to follow notice-and-comment rulemaking procedures for certain regulatory actions. The waiver had previously mandated public participation for HHS rules relating to public property, loans, grants, benefits, or contracts, despite the Administrative Procedure Act (APA) exempting these categories from such requirements.
This abrupt policy reversal marks a significant regulatory shift, particularly for major HHS programs like Medicare and Medicaid, and is expected to alter stakeholder engagement, accelerate regulatory changes, and provoke legal challenges.
Background: The Richardson Waiver and Its Historical Role
The Administrative Procedure Act (APA), enacted in 1946, generally requires federal agencies to engage in notice-and-comment rulemaking before implementing new regulations. However, 5 U.S.C. § 553(a)(2) provides an exemption for rules related to:
- Agency management or personnel
- Public property
- Loans, grants, benefits, or contracts
Despite this exemption, in 1971, then-HHS Secretary Elliot Richardson voluntarily adopted a policy—later termed the Richardson Waiver—committing HHS to follow notice-and-comment procedures for these exempt categories. This decision was influenced by recommendations from the Administrative Conference of the United States (ACUS), which had deemed the exemption an “anachronism” that reduced transparency in public benefit programs.
Since its adoption, the Richardson Waiver ensured that stakeholders, including healthcare providers, insurers, and beneficiaries, had a formal avenue to provide input on key regulatory decisions. This was particularly relevant for rulemaking related to Medicare, Medicaid, and public health grants.
The waiver was never codified as an official regulation, though a 1982 Reagan administration proposal sought to do so while allowing for broad discretionary exceptions. That proposal was never finalized.
The Justification for Repeal
In rescinding the waiver, HHS justified its decision on legal and operational grounds, arguing that:
The waiver was inconsistent with the APA.
- The agency cited the 2015 Supreme Court case Perez v. Mortgage Bankers Association, which held that courts cannot impose extra-statutory procedural requirements on federal agencies. HHS contended that the Richardson Waiver improperly imposed procedural burdens beyond those required by the APA.
Notice-and-comment rulemaking imposes unnecessary costs and delays.
- According to HHS, requiring public comment for grants, benefits, and contracts impairs regulatory flexibility and slows down implementation of new policies, particularly when urgent changes are needed in response to legal or policy shifts.
The waiver limited the department’s ability to use the APA’s "good cause" exception.
- The APA permits agencies to bypass notice-and-comment requirements when rulemaking is deemed “impracticable, unnecessary, or contrary to the public interest.” The Richardson Waiver had mandated a "sparingly used" standard, which HHS now views as an artificial restriction on its discretion.
HHS components will now have greater regulatory discretion.
- Individual HHS agencies, such as the Centers for Medicare & Medicaid Services (CMS), will still have the option to voluntarily seek public comment—but they are no longer required to do so unless a separate statutory mandate applies.
Potential Consequences and Implications
1. Faster Regulatory Changes, but Less Stakeholder Input
One immediate effect of the Richardson Waiver's repeal is that HHS can issue rules affecting billions in public benefits without requiring public input. This includes funding allocations, Medicaid waivers, and Medicare reimbursement policies.
- Supporters argue this change will allow HHS to respond more nimbly to policy changes without being bogged down by lengthy comment periods.
- Critics fear it reduces transparency, potentially allowing major shifts in healthcare funding or benefits without stakeholder scrutiny.
2. Increased Litigation Risks
The removal of mandatory public comment periods is expected to spark legal challenges, particularly if stakeholders believe HHS has acted arbitrarily or exceeded its authority. Key areas of potential litigation include:
- Defining the scope of exemptions.
- Courts may be asked to determine whether specific rules genuinely fall under the APA’s exemption categories.
- Challenges under the "arbitrary and capricious" standard.
- Even without notice-and-comment requirements, courts still review agency decisions under the Administrative Procedure Act’s "arbitrary and capricious" standard.
- Claims that specific public benefit rules still require notice-and-comment under separate laws.
- Some Medicare and Medicaid regulations are subject to independent statutory notice-and-comment requirements under 42 U.S.C. §§ 1395y(l), 1395hh(a)(2), 1395hh(b)(1).
3. Political and Policy Ramifications
The policy shift has generated strong political reactions, particularly given Secretary Robert F. Kennedy Jr.’s previous calls for "radical transparency." Critics have accused him of contradicting this commitment by ending a 54-year-old transparency practice.
- Some healthcare industry groups and legal experts view the move as an attempt to push through controversial changes without oversight.
- Others, particularly conservative legal scholars, argue that the Richardson Waiver was an outdated, self-imposed obligation that should have been repealed long ago.
4. Specific Impact on Medicare and Medicaid Rulemaking
A key question is how this will affect CMS regulations governing Medicare and Medicaid. While some mandatory public comment requirements remain in place (per statutory provisions), HHS now has greater latitude to issue certain payment and eligibility rules without public input.
- Example: If HHS wants to change Medicaid eligibility criteria through a new rule, it may no longer need to seek public comments—unless another law requires it.
- Example: New Medicare reimbursement adjustments could skip public input, unless governed by separate statutory notice requirements.
Conclusion: A Watershed Moment for HHS Rulemaking
The repeal of the Richardson Waiver represents one of the most significant changes to HHS regulatory processes in decades. While HHS asserts it is merely aligning with the APA, critics warn that the rollback reduces public oversight on decisions that affect millions of Americans.
Going forward, stakeholders—including healthcare providers, insurers, and patient advocacy groups—will need to adjust their strategies. Without guaranteed public comment opportunities, they may need to rely more on direct lobbying, litigation, and congressional advocacy to influence HHS policymaking.
Key Takeaways:
✅ HHS rescinded the Richardson Waiver, ending mandatory public comment for certain rulemaking processes.
✅ The repeal allows faster regulatory changes but limits transparency and stakeholder input.
✅ Litigation challenges are expected, especially in defining APA exemptions and applying the "good cause" exception.
✅ Medicare and Medicaid rules could see streamlined (but less scrutinized) changes.
✅ The policy shift signals a more aggressive regulatory stance under Secretary Robert F. Kennedy Jr.
The full impact of this policy shift will become clearer in the coming months, as HHS begins issuing new rules under this framework—and stakeholders react accordingly.
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AI QUESTION AND ANSWER SESSION
DO "BENEFITS" IN APA 1946, MEAN "MEDICARE?!"
Each year CMS publishes hundreds of pages of policymaking and regulatory edits in the Federal Register, such as Inpatient Rule, Outpatient Rule (OPPS), PFS Rule, Medicare Advantage and Part D rule, etc. These are "benefits" so are they now exempt from rulemaking? What did the APA mean by exempting "benefits," so to speak?
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Are CMS's Major Medicare and Medicaid Rules Now Exempt from Rulemaking?
With the rescission of the Richardson Waiver, a major question is whether CMS's annual rulemaking for Medicare and Medicaid benefits—such as the Inpatient Prospective Payment System (IPPS) Rule, Outpatient Prospective Payment System (OPPS) Rule, Physician Fee Schedule (PFS) Rule, and Medicare Advantage/Part D regulations—will now be exempt from notice-and-comment rulemaking under the Administrative Procedure Act (APA).
The short answer: Not entirely. Many of these rules still require notice and comment under separate statutory mandates, even if the APA itself provides an exemption for “benefits.” However, some regulatory actions could now bypass the rulemaking process more easily.
1. What Did the APA Mean by Exempting “Benefits”?
The Administrative Procedure Act (APA), enacted in 1946, generally requires agencies to publish a proposed rule, allow public comment, and issue a final rule before enforcing regulatory changes. However, 5 U.S.C. § 553(a)(2) exempts certain categories from this requirement:
“This section applies, according to the provisions thereof, except to the extent that there is involved—
(2) a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.”
The key exemption here is “benefits”, which Congress likely included to allow agencies greater flexibility in administering federal programs that involve direct financial transfers to individuals or entities (e.g., welfare programs, Social Security, Medicare, Medicaid, and VA benefits). The rationale was that benefit programs must be adaptable and that requiring full rulemaking procedures for every administrative change could slow down the government’s ability to adjust eligibility rules, payment formulas, and coverage policies.
However, over the years, courts and Congress have imposed additional rulemaking requirements on specific benefit programs, particularly Medicare and Medicaid.
2. Are CMS’s Medicare and Medicaid Rules Now Exempt?
While the APA itself exempts benefit-related rules from notice-and-comment procedures, CMS is still bound by separate statutory requirements in the Social Security Act (SSA) that explicitly require rulemaking.
Key statutes include:
- 42 U.S.C. § 1395hh(a)(2) – Requires CMS to use notice-and-comment rulemaking for Medicare policies that establish or change a substantive legal standard affecting benefits, payment, or eligibility.
- 42 U.S.C. § 1395hh(b)(1) – Specifies that rules affecting Medicare providers and suppliers must be subject to public notice and comment.
Because of these statutory provisions, major Medicare and Medicaid payment rules (IPPS, OPPS, PFS, Medicare Advantage, etc.) still require notice-and-comment rulemaking, despite the APA’s general exemption for benefits.
However, the repeal of the Richardson Waiver could still have an impact in the following ways:
3. How Could the Repeal of the Richardson Waiver Affect CMS Rulemaking?
While the main Medicare and Medicaid payment rules remain subject to notice-and-comment requirements, CMS could now more easily avoid rulemaking in certain areas:
More Use of "Good Cause" Exceptions
- The Richardson Waiver had discouraged HHS and CMS from using the APA’s "good cause" exemption, which allows agencies to skip notice and comment if rulemaking would be “impracticable, unnecessary, or contrary to the public interest.”
- Now that the waiver is rescinded, CMS could invoke “good cause” more frequently, especially for time-sensitive payment policy changes.
- Example: CMS could modify Medicare Advantage Star Ratings calculations mid-year without seeking public input by claiming it is an administrative adjustment.
Non-Substantive Changes Could Be Implemented Without Notice-and-Comment
- Under 42 U.S.C. § 1395hh(a)(2), CMS is only required to use notice and comment when changing a substantive legal standard.
- Administrative updates, procedural clarifications, or technical corrections—which previously went through rulemaking under the Richardson Waiver’s influence—could now be issued without public input.
- Example: Updating quality reporting measures in Medicare programs without a formal public comment process.
Medicaid Regulations Could Be More Easily Adjusted
- Unlike Medicare, Medicaid operates under a mix of federal regulations and state administration, and some policies affecting Medicaid may now be exempt from formal rulemaking under the APA.
- Example: CMS could issue guidance changing the federal match rates for Medicaid expansion states without notice and comment.
Guidance Documents & Policy Memos Might Replace Formal Rulemaking
- Without the Richardson Waiver’s broad commitment to transparency, CMS and HHS could issue more informal guidance and sub-regulatory policies instead of full rulemakings.
- Example: Instead of publishing a rulemaking notice for Medicare Part D formulary changes, CMS could issue an informal bulletin that sidesteps the rulemaking process.
4. Will This Change Face Legal Challenges?
Yes. The rescission of the Richardson Waiver does not override the statutory requirements Congress has imposed on CMS, particularly for Medicare and Medicaid rulemaking.
- Stakeholders (hospitals, insurers, patient advocacy groups) may challenge CMS if it attempts to bypass rulemaking on issues that affect benefits, payments, or coverage.
- Litigation could focus on whether specific rule changes qualify as “substantive legal standards” under 42 U.S.C. § 1395hh(a)(2).
- Courts may scrutinize expanded use of the "good cause" exemption and rule against CMS if they believe public input was wrongly excluded.
5. Key Takeaways:
✅ Major Medicare and Medicaid rules (IPPS, OPPS, PFS, Medicare Advantage, Part D) still require rulemaking under separate statutes in the Social Security Act.
✅ CMS could now more frequently use "good cause" exemptions to bypass public comment on certain payment and benefit-related changes.
✅ Non-substantive changes (technical corrections, minor policy tweaks) could be implemented without formal rulemaking.
✅ CMS may shift more policymaking to informal guidance and sub-regulatory documents instead of formal rules.
✅ Legal challenges are likely if CMS oversteps its authority in defining what qualifies as a “substantive” benefit rule.
In short, the repeal of the Richardson Waiver does not mean CMS’s biggest rules are suddenly exempt—but it does create more flexibility for CMS to push through certain regulatory actions with less public oversight. How CMS chooses to exercise this discretion will determine the extent of future legal and political battles.
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CMS RULES SEPARATE FROM THE APA 1946
OK, so "Benefits" really was interpreted to me "Medicaid and Medicare," which is why the Richardson Waiver appeared a few years after the creation of those programs. Wow.
Tell me more about today's ongoing statutory rules and requirements for CMS, separate from 1946 APA. These laws are said to impose requirements on CMS outside of the 1946 APA - (Sidley FN7) See, e.g., 42 U.S.C. §§ 1395y(l), 1395hh(a)(2), 1395hh(b)(1). Can you comment?
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Yes, these statutory provisions in the Social Security Act (SSA) impose rulemaking requirements on CMS that go beyond the 1946 Administrative Procedure Act (APA), meaning that CMS must still follow notice-and-comment rulemaking for certain regulations, even after the repeal of the Richardson Waiver. Let’s break this down.
1. The APA’s Exemption vs. Medicare-Specific Rulemaking Requirements
The APA (5 U.S.C. § 553(a)(2)) exempts certain types of rules from notice-and-comment requirements, including those related to “public property, loans, grants, benefits, or contracts.” Because Medicare and Medicaid are benefit programs, CMS could theoretically skip formal rulemaking under the APA for certain decisions if the APA were the only applicable law.
However, Congress has enacted separate laws—particularly in the Social Security Act—that impose additional procedural requirements on CMS. These laws override the APA’s exemption for specific types of Medicare and Medicaid rulemaking.
2. Key Laws That Require Rulemaking Beyond the APA
Here’s what each of the referenced statutes does:
✅ 42 U.S.C. § 1395hh(a)(2) – Requires Rulemaking for “Substantive Legal Standards”
This law explicitly requires CMS to use notice-and-comment rulemaking when it is:
“establishing or changing a substantive legal standard governing the scope of benefits, payment for services, or eligibility to furnish or receive services.”
Why This Matters:
- This prevents CMS from bypassing rulemaking for major Medicare policy changes, such as reimbursement models, coverage criteria, and eligibility rules.
- Even though the APA allows benefit-related rules to be exempt, this law ensures that CMS must still follow notice-and-comment procedures for any rule that significantly affects Medicare beneficiaries or providers.
Example:
- If CMS wants to change how Medicare pays for telehealth services, it must use notice-and-comment rulemaking, regardless of the APA exemption.
✅ 42 U.S.C. § 1395hh(b)(1) – Requires Public Comment on Medicare Rules
This provision expands on the previous one and says:
“No rule, requirement, or other statement of policy that establishes or changes a substantive legal standard governing the scope of benefits, payment for services, or eligibility to furnish or receive services under this subchapter shall take effect unless it is promulgated by the Secretary by regulation under paragraph (1).”
Why This Matters:
- This ensures that CMS cannot change Medicare rules through informal guidance or sub-regulatory policies alone.
- Even if the APA does not require rulemaking, this law forces CMS to go through the full process when setting substantive policies.
Example:
- CMS cannot simply issue a policy memo declaring that a new drug will no longer be covered by Medicare—it must go through formal rulemaking.
✅ 42 U.S.C. § 1395y(l) – Specific Requirements for Medicare Coverage Determinations
This section of the Social Security Act imposes procedural requirements on coverage determinations for items and services under Medicare.
Why This Matters:
- CMS cannot make arbitrary changes to what Medicare covers without public notice.
- This protects Medicare providers and beneficiaries from sudden shifts in coverage rules.
Example:
- If CMS wants to change how it covers genetic testing for cancer, it must follow specific rulemaking procedures outlined in this law.
3. How These Laws Affect the Richardson Waiver Repeal
The repeal of the Richardson Waiver does not eliminate these requirements. Here’s how things change:
The APA exemption still exists, but these Medicare-specific laws override it.
- CMS must still use notice-and-comment rulemaking for changes to Medicare benefits, provider payment rules, and eligibility.
CMS now has more flexibility in certain areas, but it cannot ignore formal rulemaking for major Medicare policies.
- Example: CMS could update certain administrative procedures (e.g., minor reporting rules) without rulemaking, but it cannot change payment rates or coverage rules without following these laws.
CMS might try to use “good cause” exceptions more aggressively.
- With the Richardson Waiver rescinded, CMS might claim “good cause” to skip rulemaking more often, arguing that delays would harm the Medicare program.
Litigation risk remains high.
- If CMS fails to use rulemaking where required, stakeholders (hospitals, insurers, patient groups) could sue, arguing that CMS violated 42 U.S.C. §§ 1395hh(a)(2) or 1395hh(b)(1).
4. Key Takeaways
✅ CMS still must follow notice-and-comment rulemaking for major Medicare rules—because of statutory requirements in the Social Security Act, even if the APA exemption suggests otherwise.
✅ Medicare-specific laws, including 42 U.S.C. §§ 1395hh(a)(2) and 1395hh(b)(1), override the APA’s exemption for "benefits" and impose rulemaking requirements on CMS.
✅ CMS cannot implement substantive Medicare policy changes through informal guidance alone—formal rulemaking is required.
✅ CMS may still try to use “good cause” exceptions to bypass rulemaking more often, but this could lead to lawsuits challenging its authority.
✅ The repeal of the Richardson Waiver affects CMS rulemaking flexibility, but it does not eliminate the fundamental procedural safeguards Congress imposed on Medicare policies.
In summary, Medicare rulemaking is still heavily regulated, and while the Richardson Waiver’s repeal gives HHS some leeway, it does not eliminate CMS’s core rulemaking obligations under the Social Security Act.
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SO WHAT'S A "SUBSTANTIVE LEGAL STANDARD?"
Regarding statute section 1395, there must be some case law or other policy, making our legal thinking about what the term of our substantive legal standard means, with regard to things that the Medicare agency does? This phrase is now brought into the center of the policy spotlight.
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The term "substantive legal standard" in 42 U.S.C. § 1395hh(a)(2) has been pivotal in determining the procedural obligations of the Centers for Medicare & Medicaid Services (CMS) when implementing policies affecting Medicare. This statute mandates that any "rule, requirement, or other statement of policy" establishing or modifying a substantive legal standard related to benefits, payment, or eligibility under Medicare must undergo formal notice-and-comment rulemaking.
The Supreme Court's decision in Azar v. Allina Health Services, 587 U.S. ___ (2019), offers critical insight into this term's interpretation. In this case, CMS had altered the calculation methodology for Medicare Disproportionate Share Hospital (DSH) payments by including Medicare Part C (Medicare Advantage) patient days, which effectively reduced payments to hospitals serving low-income patients. CMS implemented this change via a website posting without engaging in the notice-and-comment process.Supreme Court of the United States+2DWT+2casetext.com+2casetext.com+1DWT+1
The hospitals affected challenged this approach, asserting that CMS's policy change constituted a "substantive legal standard" under § 1395hh(a)(2) and thus required formal rulemaking procedures. The Supreme Court agreed, emphasizing that the Medicare Act's use of "substantive legal standard" is broader than the Administrative Procedure Act's (APA) distinction between substantive and interpretive rules. The Court noted that under the APA, interpretive rules and policy statements are generally exempt from notice-and-comment requirements. However, the Medicare Act specifically includes "statements of policy" within the scope of actions that can establish or change a "substantive legal standard," thereby necessitating formal rulemaking. Supreme Court of the United States+1ebglaw.com+1
This interpretation underscores that CMS cannot bypass the notice-and-comment process by labeling significant policy changes as interpretive rules or policy statements. Any action that effectively establishes or alters the rights, obligations, or benefits under Medicare is considered a change to a "substantive legal standard" and must adhere to the procedural requirements outlined in § 1395hh(a)(2). ebglaw.com
In summary, the term "substantive legal standard" within 42 U.S.C. § 1395hh(a)(2) encompasses any CMS action that substantively affects Medicare benefits, payments, or eligibility. Such actions require adherence to formal notice-and-comment rulemaking procedures, ensuring transparency and public participation in the development of significant Medicare policies.
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IS 1395 REPETITIVE?
1395 hh (a) 1 and hh (b) seem to be redundant to one another, by the use of the same term substantive legal standard in both places. Isn’t there a principle of statutory interpretation that laws are not redundant?
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