On Friday, February 28, 2025, the Department of Health and Human Services (HHS) issued a policy statement announcing changes to rulemaking processes for agencies within HHS. According to the statement, HHS is rescinding a requirement—known as the Richardson Waiver—that agencies under HHS engage in "notice-and-comment" rulemaking for matters otherwise exempted from this process under the Administrative Procedure Act (APA).
- While the APA generally requires agencies to engage in notice-and-comment rulemaking before issuing regulations, there are exceptions for matters related to "agency management or personnel or to public property, loans, grants, benefits, or contracts," or if an agency "for good cause" determines "that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest."
- Since 1971, however, HHS has taken the position that matters within the agency's jurisdiction that are excused from notice-and-comment rulemaking under the APA are nevertheless subject to public comment. This policy, articulated by then-Secretary Elliot Richardson, is colloquially referred to as the "Richardson Waiver." On February 28, 2025, HHS issued a policy announcement to rescind the Richardson Waiver.
- Even absent the Richardson Waiver, CMS must comply with other statutory requirements for notice-and-comment rulemaking, even for APA-exempt matters; specifically, § 1871 of the Social Security Act requires notice-and-comment rulemaking for any proposed policy affecting the Medicare program that establishes or changes a substantive legal standard governing Medicare benefits, payment, or eligibility.
- Because § 1871 does not apply to the Medicaid program, the revocation of the Richardson Waiver may have implications for that program.
- Rescinding the Richardson Waiver may have implications for other agencies under HHS, including the FDA, NIH, HRSA, and SAMHSA, though it remains to be seen how, and in what capacity, agencies will be affected.
Overview on Rulemaking and the Richardson Waiver
The Administrative Procedure Act (APA) establishes federal agency rulemaking procedures governing the issuance of proposed rules. Among other requirements, the APA generally requires federal agencies to seek public comment on proposed rules (known as "notice-and-comment" rulemaking) before finalizing rules and regulations (5 U.S.C. § 553). Under § 553(a)(2) of the APA, however, matters related to "agency management or personnel or to public property, loans, grants, benefits, or contracts" do not require notice-and-comment rulemaking.
Additionally, § 553(b) provides an exception for notice-and-comment rulemaking (unless otherwise required by statute) if the agency "for good cause" determines "that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest." While the APA sets the procedural requirements generally applicable to all federal agencies, Congress may also create agency- or program-specific requirements to engage in notice-and-comment rulemaking.
In 1971, HHS adopted the Richardson Waiver, which requires HHS to engage in notice-and-comment rulemaking for the matters otherwise exempted under § 553 of the APA (36 Fed. Reg. 2532 (Feb. 5, 1971)). According to the Richardson Waiver, "[t]he public benefit from such participation should outweigh any administrative inconvenience or delay which may result from use of the APA procedures in the five exempt categories," and moreover, the "good cause" exception "should be used sparingly," such as during emergencies or circumstances where "public participation would be useless or wasteful because proposed amendments to regulations cover minor technical matters." The Richardson Waiver has been in place for over 50 years.
HHS Policy Statement
On February 28, 2025, HHS issued a policy statement announcing its intent to rescind the Richardson Waiver. In doing so, HHS seeks to eliminate the requirement for HHS, and any agencies within HHS, to engage in notice-and-comment rulemaking for matters exempted under § 553 of the APA—that is, "agency management or personnel or to public property, loans, grants, benefits, or contracts." Per HHS' policy statement:
"Agencies and offices of the Department [of Health and Human Services] have discretion to apply notice and comment procedures to these matters but are not required to do so, except as otherwise required by law. Additionally, the good cause exception should be used in appropriate circumstances in accordance with the requirements of the APA. The Department will continue to follow notice and comment rulemaking procedures in all instances in which it is required to do so by the statutory text of the APA."
Under this new policy, HHS and its agencies have discretion to engage in notice-and-comment rulemaking for these matters unless there are other statutory requirements (i.e., outside of the APA) for notice-and-comment rulemaking. Potential implications of this policy change will likely differ depending on the HHS program subject to the new guidance.
CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS)
Medicare
It appears unlikely that HHS will be able to apply this new policy to rulemaking related to the Medicare program, such as rulemaking for Medicare fee schedules like the Hospital Inpatient Prospective Payment System (IPPS), the Hospital Outpatient Prospective Payment System (OPPS), and the Medicare physician fee schedule (MPFS). Similarly, the new policy would likely be inapplicable to the Medicare Advantage (MA) and Part D policy and technical rule that the agency issues annually.
CMS has its own special APA-like requirements that apply to the Medicare program. Separate and apart from the APA itself, § 1871(a)(2) of the Social Security Act (the Act) requires notice-and-comment rulemaking for any Medicare "rule, requirement, or statement of policy" 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 benefits under" the Medicare program (see 42 U.S.C. § 1395hh(a)(2)). Moreover, the Act's "Medicare APA," under subsection (b)(1), requires 60 days for public comment, whereas the APA only requires 30 days for public comment.
These "Medicare APA" requirements were affirmed in the 2019 Supreme Court case Azar v. Allina Health Services, in which the Court ruled against CMS where the agency ignored this statutory notice-and-comment requirement for Medicare (see Azar v. Allina Health Services, 139 S. Ct. 1804 (2019)). In Allina, the Court concluded that CMS had to go through notice-and-comment rulemaking before the agency could promulgate a policy that retroactively recalculated Disproportionate Share (DSH) payments to hospitals. CMS failed to engage in rulemaking before adopting the policy; therefore, the Court invalidated the DSH policy. Essentially, CMS lost in Allina because the agency ignored the Act's separate APA-type notice-and-comment requirements for the Medicare program.
While § 533 of the APA provides an exception from notice-and-comment rulemaking for "benefits" (an exception that could be read in isolation to implicate Medicare), CMS is likely still required to engage in notice-and-comment rulemaking for the Medicare program, even without the Richardson Waiver, due to the Act's separate "Medicare APA" requirements. We note, however, that the February 28, 2025 notice was silent on the requirements of § 1871; it remains to be seen, therefore, whether CMS believes that it may exempt some Medicare policy changes from notice-and-comment rulemaking. The Allina decision suggests that any CMS attempts to do so may be vulnerable to legal challenge.
Medicaid
The Act's § 1871 requirements for notice-and-comment rulemaking for the Medicare program do not apply to the Medicaid program, which is funded via Federal-state partnership (e.g., the Federal government pays states a percentage of program costs, called the Federal Medicaid Assistance Percentage, or FMAP). States have authority to manage their own Medicaid programs, in accordance with the Act's requirements, and pursuant to CMS approval of a state plan for medical assistance (SPA).
It remains to be seen whether the withdrawal of the Richardson Waiver will exempt key federal policy activity regulating the Medicaid program from notice-and-comment rulemaking. For example, CMS might take the position that the federal share of payments to states for the operation of their Medicaid programs are "grants," and that any changes to the calculation of a state's FMAP are therefore exempt from public comment. CMS may also take the position that adding further requirements to Medicaid eligibility (for example, the imposition of work requirements or the eligibility of non-US citizens for Medicaid) constitute a change to Medicaid's "benefit" design that would be similarly exempt from public comment.
Additionally, some courts have concluded that an SPA is "in the nature of a contract" between CMS and the State; although the courts are split on this question (see Westside Mothers v. Haveman, 133 F. Supp. 2d 549, 553 (E.D. Mich. 2001), rev'd 289 F.3d 852 (6th Cir. 2002)), CMS might nevertheless take the position that a change to a Medicaid state plan may be exempt from public comment because the state plan is a "contract." Similarly, the Medicaid Drug Rebate Program (MDRP), which is authorized under § 1927 of the Act, relies on a contract involving CMS, state Medicaid agencies, and drug manufacturers.1 It is also unclear how the guidance would apply to waivers that are granted under § 1115 of the Social Security Act; § 1115(d)(2)(C) of the Act specifically requires public comment on waiver requests submitted by a state to CMS.
For all these reasons, we think that it is highly possible that changes to HHS rulemaking processes could impact the Medicaid program.
Food and Drug Administration (FDA)
At first glance, it appears unlikely that HHS' new policy will significantly impact the Food and Drug Administration's (FDA) policymaking activities. The FDA has increasingly relied on guidance documents, rather than notice-and-comment rulemaking, to enact policy changes. The new HHS policy pertains to notice-and-comment rulemaking, not guidance; therefore, rescinding the Richardson Waiver is not expected to significantly affect FDA guidance documents.
The Federal Food, Drug & Cosmetic Act (FDCA) authorizes the FDA to regulate drugs, medical devices, food (including dietary supplements), and cosmetics, in addition to inspecting manufacturing and processing facilities and regulating advertisements for prescription drugs and devices, among other activities. Section 701(a) of the FDCA authorizes the FDA to issue regulations to enforce the law (see 21 U.S.C. 371(a)). Historically, these regulations have not related to the § 553-exempt matters of "public property, loans, grants, benefits, or contracts." The FDA may interpret future policies in a manner that implicates these matters and could consider broadly interpreting the "good cause" exception in future policymaking where public participation is strongly encouraged or advised but ultimately not subject to the notice-and-comment requirement under the APA; however, this remains to be seen.
ADDITIONAL AGENCY CONSIDERATIONS
National Institutes of Health (NIH)
While it may take some time to realize the full effect of HHS' policy announcement, changes to rulemaking processes for these § 553-exempt matters may have implications for the National Institutes of Health (NIH) because a significant component of the NIH's activities is grantmaking.
The NIH is presently engaged in legal proceedings related to cuts in research funding. In response to the Trump administration's proposed funding cuts, 22 states and organizations representing hospitals, research centers, and universities filed suit. On March 5, 2025, U.S. District Court Judge Angel Kelley in Boston, Massachusetts, issued a preliminary injunction to pause the cuts while the lawsuit proceeds.
Health Resources Services Administration (HRSA) and Substance Abuse and Mental Health Services Administration (SAMHSA)
HHS' new policy could have implications for other agencies. For example, changes to rulemaking processes related to grants could impact the Health Resources Services Administration (HRSA), which provides grants to specific health providers, and the Substance Abuse and Mental Health Services Administration (SAMHSA), which provides support for behavioral-health services. As noted above, the 340B program relies on a contract with HRSA, pharmaceutical manufacturers, and covered entities; that program may also be affected by the new HHS policy.
Conclusion
HHS published its policy announcement in the Federal Register on March 3, 2025. It is likely this policy change will be challenged, which may lead to litigation. In the interim, the upcoming fiscal year (FY) IPPS proposed rule, which is currently under review at the Office of Management and Budget (OMB) and is expected to publish sometime in April, is unlikely to be affected by this change in HHS policy, due to the Act's § 1871 notice-and-comment requirements.
Footnote
1 Similarly, the 340B program, authorized under section 340B of the Public Health Service Act (PHSA), relies on a contract with HRSA, pharmaceutical manufacturers, and covered entities.
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