Congressional Review Act
Applicability to CMS Letter on State Children's Health Insurance Program Gao ID: GAO-08-785T May 15, 2008The State Children's Health Insurance Program (SCHIP) finances health care to low-income, uninsured children whose family incomes exceed the eligibility limits under their state's Medicaid program, but who cannot afford other health insurance coverage. To participate in SCHIP, a state must submit a plan that describes how its program meets applicable requirements and must receive approval of the plan from the Centers for Medicare & Medicaid Services (CMS). On August 17, 2007, CMS issued a letter purporting to clarify statutory and regulatory requirements related to preventing SCHIP substitution for other insurance coverage in states wishing to cover children with effective family incomes in excess of 250 percent of the federal poverty level (FPL). The letter indicates that CMS will apply measures identified in the letter to state proposals to cover these children, as well as to states that already cover them, and may take corrective action against states that fail to adopt the measures within 12 months. In response to a request from the Chairman of the Subcommittee on Health Care, Senate Committee on Finance, and a member of that Subcommittee, GAO considered whether the letter is a rule under the Congressional Review Act (the Review Act). This testimony is based on the resulting opinion, Applicability of the Congressional Review Act to Letter on State Children's Health Insurance Program, B-316048, April 17, 2008.
The definition of "rule" in the Congressional Review Act incorporates by reference the definition of "rule" in the Administrative Procedure Act (APA), with some exceptions. The APA definition of rule includes three elements relevant to GAO's consideration of the SCHIP letter: an agency statement is a rule if it is of general applicability; of future effect; and designed to implement, interpret, or prescribe law or policy. GAO concluded that the letter meets these criteria and that none of the exceptions in the Review Act apply. GAO found the letter to be of general applicability since it extends to all states that seek to enroll children with effective family incomes exceeding 250 percent of the FPL in their SCHIP programs, as well as to states that have already enrolled such children. In addition, GAO found it to be of future effect, that is, concerned with policy considerations for the future rather than the evaluation of past or present conduct. Finally, GAO found that the letter is designed to implement, interpret, or prescribe law or policy since it purports to clarify and explain the manner in which CMS applies statutory and regulatory requirements to states that want to extend coverage under their SCHIP programs to children with effective family incomes above 250 percent of the FPL and seeks to promote the implementation of statutory requirements applicable to state plans. The history of the regulatory provision regarding substitution of coverage supported the view that the August 17 letter is a rule. In issuing the proposed and final rules to implement SCHIP, CMS indicated that it could not require states to adopt any particular measures to prevent substitution of coverage, stating that it did not have a statutory or empirical basis for doing so. In its August 17 letter, however, CMS states that its experience and information derived from the operation of SCHIP programs have made it clear that the potential for substitution is greater at higher income levels, and states seeking to expand their SCHIP populations should implement specific strategies to prevent substitution of coverage. Thus, the letter amounts to a marked departure from the agency's settled interpretation of the regulation regarding substitution of coverage, and case law indicates that such a change may be made only by rule. Moreover, the agency expressly relied on the letter to disapprove a state request to amend its SCHIP plan to cover children with family incomes in excess of 250 percent of the FPL, confirming that the letter has binding effect and is, therefore, a rule. In response to GAO's inquiries, CMS stated that the letter is a general statement of policy announcing the course that the agency intends to follow in adjudications concerning compliance with requirements already set forth in regulations. The GAO opinion explained that statements of policy would appear to fit within the definition of rule in the APA and that courts have referred to them as rules. However, GAO also concluded that the August 17 letter does not have the characteristics of a statement of policy identified in case law. It evidences little, if any, of the tentativeness that is the hallmark of a policy statement, and the agency has relied on the letter to disapprove a state plan amendment, treating the letter as if it were a binding rule.
GAO-08-785T, Congressional Review Act: Applicability to CMS Letter on State Children's Health Insurance Program
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Testimony:
Before the Subcommittee on Health, Committee on Energy and Commerce,
House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, May 15, 2008:
Congressional review act:
Applicability to CMS Letter on State Children's Health Insurance
Program:
Statement of Dayna K. Shah Managing Associate General Counsel Office of
General Counsel:
GAO-08-785T:
GAO Highlights:
Highlights of GAO-08-785T, a testimony before Subcommittee on Health,
Committee on Energy and Commerce, House of Representatives.
Why GAO Did This Study:
The State Children‘s Health Insurance Program (SCHIP) finances health
care to low-income, uninsured children whose family incomes exceed the
eligibility limits under their state‘s Medicaid program, but who cannot
afford other health insurance coverage. To participate in SCHIP, a
state must submit a plan that describes how its program meets
applicable requirements and must receive approval of the plan from the
Centers for Medicare & Medicaid Services (CMS).
On August 17, 2007, CMS issued a letter purporting to clarify statutory
and regulatory requirements related to preventing SCHIP substitution
for other insurance coverage in states wishing to cover children with
effective family incomes in excess of 250 percent of the federal
poverty level (FPL). The letter indicates that CMS will apply measures
identified in the letter to state proposals to cover these children, as
well as to states that already cover them, and may take corrective
action against states that fail to adopt the measures within 12 months.
In response to a request from the Chairman of the Subcommittee on
Health Care, Senate Committee on Finance, and a member of that
Subcommittee, GAO considered whether the letter is a rule under the
Congressional Review Act (the Review Act). This testimony is based on
the resulting opinion, Applicability of the Congressional Review Act to
Letter on State Children‘s Health Insurance Program, B-316048, April
17, 2008.
What GAO Found:
The definition of ’rule“ in the Congressional Review Act incorporates
by reference the definition of ’rule“ in the Administrative Procedure
Act (APA), with some exceptions. The APA definition of rule includes
three elements relevant to GAO‘s consideration of the SCHIP letter: an
agency statement is a rule if it is of general applicability; of future
effect; and designed to implement, interpret, or prescribe law or
policy. GAO concluded that the letter meets these criteria and that
none of the exceptions in the Review Act apply. GAO found the letter to
be of general applicability since it extends to all states that seek to
enroll children with effective family incomes exceeding 250 percent of
the FPL in their SCHIP programs, as well as to states that have already
enrolled such children. In addition, GAO found it to be of future
effect, that is, concerned with policy considerations for the future
rather than the evaluation of past or present conduct. Finally, GAO
found that the letter is designed to implement, interpret, or prescribe
law or policy since it purports to clarify and explain the manner in
which CMS applies statutory and regulatory requirements to states that
want to extend coverage under their SCHIP programs to children with
effective family incomes above 250 percent of the FPL and seeks to
promote the implementation of statutory requirements applicable to
state plans.
The history of the regulatory provision regarding substitution of
coverage supported the view that the August 17 letter is a rule. In
issuing the proposed and final rules to implement SCHIP, CMS indicated
that it could not require states to adopt any particular measures to
prevent substitution of coverage, stating that it did not have a
statutory or empirical basis for doing so. In its August 17 letter,
however, CMS states that its experience and information derived from
the operation of SCHIP programs have made it clear that the potential
for substitution is greater at higher income levels, and states seeking
to expand their SCHIP populations should implement specific strategies
to prevent substitution of coverage. Thus, the letter amounts to a
marked departure from the agency‘s settled interpretation of the
regulation regarding substitution of coverage, and case law indicates
that such a change may be made only by rule. Moreover, the agency
expressly relied on the letter to disapprove a state request to amend
its SCHIP plan to cover children with family incomes in excess of 250
percent of the FPL, confirming that the letter has binding effect and
is, therefore, a rule.
In response to GAO‘s inquiries, CMS stated that the letter is a general
statement of policy announcing the course that the agency intends to
follow in adjudications concerning compliance with requirements already
set forth in regulations. The GAO opinion explained that statements of
policy would appear to fit within the definition of rule in the APA and
that courts have referred to them as rules. However, GAO also concluded
that the August 17 letter does not have the characteristics of a
statement of policy identified in case law. It evidences little, if
any, of the tentativeness that is the hallmark of a policy statement,
and the agency has relied on the letter to disapprove a state plan
amendment, treating the letter as if it were a binding rule.
To view the full product, click on [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-785T]. For more information, contact Dayna K. Shah at
(202) 512-8208 or shahd@gao.gov
[End of section]
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to participate in today's hearing on the
August 17, 2007, letter issued by the Centers for Medicare & Medicaid
Services (CMS) on the State Children's Health Insurance Program
(SCHIP). My testimony focuses on GAO's April 17, 2008, opinion, which
addressed whether the CMS letter is a rule for purposes of section 251
of the Contract with America Advancement Act of 1996,[Footnote 1]
commonly referred to as the Congressional Review Act (the Review
Act).[Footnote 2] In that opinion, we concluded that the letter is a
rule under the Review Act, which, consistent with the Act's
requirements, must be submitted to Congress and the Comptroller General
before it can take effect.
Background:
SCHIP finances health care to low-income, uninsured children whose
family incomes exceed the eligibility limits under their state's
Medicaid program, but who cannot afford other health insurance
coverage.[Footnote 3] To participate in SCHIP, a state must submit a
plan that describes how its program meets applicable requirements and
must receive approval of the plan from CMS.[Footnote 4] States are
required to amend their plans to reflect changes in federal law,
regulation, or policy, and changes in the operation of their programs,
including, for example, changes in eligibility criteria or
benefits.[Footnote 5]
State SCHIP programs are subject to a number of statutory provisions
that are designed to ensure that SCHIP coverage does not become a
substitute for other public or private coverage. For example, a state
plan must describe the procedures used to ensure that coverage under
the plan does not substitute for coverage under group health plans,
generally referred to as "crowd out."[Footnote 6] Regulations
promulgated by CMS require states to adopt "reasonable procedures" to
prevent crowd out.[Footnote 7] Since CMS promulgated the regulations in
2001, states have adopted a number of different measures to prevent
crowd out, which CMS has approved.
In its August 17 letter, CMS purports to clarify the statutory and
regulatory requirements concerning prevention of crowd out for states
wishing to provide SCHIP coverage to children with effective family
incomes in excess of 250 percent of the federal poverty level (FPL) and
identifies a number of particular measures that these states should
adopt. For example, according to the letter, states should impose cost
sharing in approximation to the cost of private coverage and establish
a minimum of a 1-year period of uninsurance for individuals prior to
receiving coverage. In addition, the letter states that CMS will seek a
number of assurances from states, including an assurance that the state
has enrolled at least 95 percent of the children in the state with
family incomes below 200 percent of the FPL who are eligible for SCHIP
or Medicaid. The letter indicates that CMS will apply the measures to
states' proposals to cover children with effective family incomes in
excess of 250 percent of the FPL, as well as to states that already
cover such children. According to the letter, CMS may take corrective
action against states that fail to adopt the identified measures within
12 months.
Discussion:
The definition of "rule" in the Review Act incorporates by reference
the definition of "rule" in the Administrative Procedure Act (APA),
with some exceptions. To determine whether the August 17 letter is a
rule under the Review Act, we thus considered whether the letter is a
rule under the APA and whether it falls within any of the exceptions
contained in the Review Act.[Footnote 8] Section 551(4) of the APA
defines the term rule in pertinent part as "[t]he whole or a part of an
agency statement of general or particular applicability and future
effect designed to implement, interpret, or prescribe law or policy or
describing the organization, procedure, or practice requirements of an
agency . . . ."[Footnote 9] This definition of rule has been said to
include "nearly every statement an agency may make."[Footnote 10]
Agency statements that create binding legal norms--those that, for
example, grant rights, impose obligations, or affect private interests-
-are rules under the APA.[Footnote 11] These rules--usually called
legislative rules--generally must be promulgated through notice and
comment rulemaking procedures under 5 U.S.C. § 553. Courts have found
that other agency pronouncements also are rules as defined in 5 U.S.C.
§ 551, even if they do not create binding legal norms and are not
subject to notice and comment rulemaking requirements under section
553. For example, agency guidance documents and manuals have been held
to be rules.[Footnote 12] Agency documents that clarify or explain
existing legal requirements also have been held to be rules.[Footnote
13] Whether a particular agency pronouncement is a rule under section
551, therefore, does not turn on whether the rule is subject to notice
and comment rulemaking requirements under section 553. Legislative
history of the Review Act confirms that it is intended to include
almost all rules that an agency issues and reaches far more than those
that must be promulgated according to the notice and comment
requirements of section 553.[Footnote 14]
The APA definition of rule includes three elements relevant to our
consideration of the SCHIP letter: an agency statement is a rule if it
is of general applicability; of future effect; and designed to
implement, interpret, or prescribe law or policy. We concluded that the
August 17 letter meets these criteria. We found the letter to be of
general, rather than particular, applicability since it extends to all
states that seek to enroll children with effective family incomes
exceeding 250 percent of the FPL in their SCHIP programs, as well as to
all states that have already enrolled such children.[Footnote 15] In
addition, we found it to be of future effect, that is, concerned with
policy considerations for the future rather than the evaluation of past
or present conduct.[Footnote 16] Finally, the letter purports to
clarify and explain the manner in which CMS applies statutory and
regulatory requirements to states that want to extend coverage under
their SCHIP programs to children with effective family incomes above
250 percent of the FPL and seeks to promote the implementation of
statutory requirements applicable to state plans. Accordingly, we found
that the letter is designed to implement, interpret, or prescribe law
or policy.[Footnote 17]
The history of the regulatory provision regarding substitution of
coverage supported our view that the August 17 letter is a rule. In the
preamble to the proposed rule to implement SCHIP, CMS indicated that it
could not require states to adopt any particular measures to prevent
substitution of coverage, stating that it did not have a statutory or
empirical basis for doing so.[Footnote 18] CMS confirmed this
interpretation in a final rule.[Footnote 19] In its August 17 letter,
however, CMS states that its experience and information derived from
the operation of SCHIP programs have made it clear that the potential
for substitution is greater at higher income levels, and states seeking
to expand their SCHIP populations should implement specific strategies
as "reasonable procedures" to prevent substitution of coverage (for
example, a minimum 1-year period of uninsurance before receiving SCHIP
coverage). Thus, the letter amounts to a marked departure from the
agency's settled interpretation of the regulation regarding
substitution of coverage, and case law indicates that such a change may
be made only by rule.[Footnote 20]
We also found it significant that CMS had expressly relied on the
letter to disapprove a state's request to amend its SCHIP plan to cover
children with family incomes above 250 percent of the FPL.
Specifically, in April 2007, the state of New York requested permission
from CMS to amend its SCHIP plan to provide coverage to children with
family incomes up to 400 percent of the FPL. CMS denied New York's
request with specific reliance on the terms of the August 17 letter.
For example, CMS indicated that the state failed to provide assurances
that it had enrolled at least 95 percent of the children with family
incomes below 200 percent of the FPL and that "as outlined in an August
17, 2007, letter, . . . such assurances are necessary to ensure that
expansion to higher income populations does not interfere with the
effective and efficient provision of child health assistance." CMS also
cited the fact that the state's proposal did not include a 1-year
period of uninsurance for populations over 250 percent of the FPL. CMS
concluded stating that its disapproval was "consistent with the August
17, 2007, letter to State Health Officials discussing how . . .
existing statutory and regulatory requirements should be applied to all
States expanding SCHIP effective eligibility levels above 250 percent
of the FPL." This application of the letter to deny New York's proposed
plan amendment served to confirm that the letter has binding effect and
is, therefore, a rule.[Footnote 21]
During the course of our work, we requested the views of the General
Counsel of the Department of Health and Human Services on whether the
August 17 letter is a rule for purposes of the Review Act.[Footnote 22]
The response from the Director of the Center for Medicaid and State
Operations within CMS did not directly address that issue. CMS
indicated, however, that the letter is a "general statement of policy
that announces the course which the agency intends to follow in
adjudications concerning compliance with requirements already set forth
in regulations." The agency also referred us to a document prepared by
the Department of Justice, which asserted that the August 17 letter was
a general statement of policy.
As discussed in our opinion, general statements of policy would appear
to fit squarely within the definition of rule in the APA since they
advise the public prospectively of the manner in which an agency
proposes to exercise a discretionary power or what the agency will
propose as policy.[Footnote 23] Further, courts have referred to them
as rules.[Footnote 24] While some cases seem to suggest that general
statements of policy are not rules under the APA,[Footnote 25] the
better reading of these cases, in our view, is that statements of
policy are rules under section 551 of the APA but not the type of rules
for which the APA requires notice and comment procedures because they
are tentative statements of future intent and by their nature do not
have the force of law.
Further, even if these cases are read to mean that general statements
of policy are not rules under the APA, we found that the August 17
letter does not have the characteristics of a general statement of
policy identified in case law. One case provided a particularly useful
explanation of the type of language typically found in an agency
general statement of policy. In Pacific Gas and Electric Co. v. Federal
Power Commission,[Footnote 26] the United States Court of Appeals for
the District of Columbia Circuit considered a pronouncement, styled a
"statement of policy," that expressed the Federal Power Commission's
(Commission) view of how deliveries of natural gas should be
prioritized during periods of shortage. The court held that the
pronouncement was a general statement of policy, noting the tentative
nature of the statement and the Commission's acknowledgment that any
particular decisions on curtailment could only be made in further
proceedings. Among other things, the court found it significant that
the statement indicated it was the curtailment policy that the
Commission "proposes to implement" and the "plan preferred by the
Commission," which "will serve as a guide in other proceedings." In
addition, the Commission itself intended the statement only "to state
initial guidelines as a means of facilitating curtailment planning and
the adjudication of curtailment cases." In effect, the Commission
statement was a starting point to frame consideration of future
proposals.
We analyzed CMS's August 17 letter under the criteria used by the court
to determine that the Commission's pronouncement was simply a statement
of policy and concluded that the letter does not meet the criteria. The
specific measures identified in the letter are not characterized as
"proposals" or measures that are under development or to be implemented
or adopted by later action; on the contrary, the letter sets forth
specific strategies that states seeking to expand their SCHIP
populations should implement as "reasonable procedures" to prevent
substitution of coverage. In addition, the letter contains no
indication that the strategies are only guidelines that may or may not
be applied in subsequent proceedings or express reference to exceptions
in particular instances. Finally, the time frame specified in the
letter for states to conform to the CMS "review strategy" evidences the
agency's intention to give the letter present and binding effect; if
the letter were simply precatory or tentative in nature, then there
would be no need to establish a deadline by which states would need to
implement the measures in the letter or face the possibility of a
corrective action by the agency.[Footnote 27] Because the letter
establishes a deadline by which "affected States" need to implement its
measures or face the possibility of corrective action, we found that it
evidences little, if any, of the tentativeness that is the hallmark of
a policy statement.
In addition to the particular language of a statement, courts look to
an agency's actions in relation to the statement to determine whether
it is a general statement of policy. As a number of courts have noted,
a critical test of whether a rule is a general statement of policy is
its practical effect in subsequent administrative proceedings. If the
agency relies solely on the pronouncement itself to determine rights
and obligations of others, the agency has treated the policy statement
as if it were a binding rule, not a general statement of
policy.[Footnote 28] CMS's express reliance on the August 17 letter to
deny the state of New York's request to amend its SCHIP plan led us to
conclude that the letter is not a policy statement. This conclusion was
reinforced by our observation that the August 17 letter reflects a
significant change in the agency's settled interpretation of 42 C.F.R.
§ 457.805, which policy statements by their nature do not do.[Footnote
29]
Conclusion:
We concluded that the August 17, 2007, letter to state health officials
is a rule for the purpose of the Review Act on the grounds that it is a
statement of general applicability and future effect designed to
implement, interpret, or prescribe law or policy with regard to SCHIP.
Furthermore, we found that the letter does not come within any of the
exceptions to the definition of rule contained in the Review Act. We
expressed no opinion on the applicability of any other legal
requirements, including, but not limited to, notice and comment
rulemaking requirements under the APA, or whether the August 17 letter
would be a valid interpretation of statutes or regulations.
Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions that you or other Members of the Subcommittee
may have.
Contacts and Acknowledgments:
For further information regarding this testimony, please contact Dayna
Shah at (202) 512-8208 or shahd@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this statement. Major contributors to this testimony were Helen
Desaulniers and Kevin Milne.
[End of section]
Footnotes:
[1] Pub. L. No. 104-121, § 251, 110 Stat. 847, 868-74, codified at 5
U.S.C. §§ 801-808.
[2] Applicability of the Congressional Review Act to Letter on State
Children's Health Insurance Program, B-316048, April 17, 2008. The
opinion is available at [hyperlink,
http://gao.gov/decisions/other/other.htm].
[3] See 42 U.S.C. § 1397aa.
[4] 42 U.S.C. § 1397aa(b). The authority vested in the Secretary of
Health and Human Services to approve and disapprove SCHIP state plans
and plan amendments has been delegated to the Administrator of CMS.
State Child Health; Implementing Regulations for the State Children's
Health Insurance Program, 64 Fed. Reg. 60882, 60895 (Nov. 8, 1999)
(proposed rule).
[5] 42 C.F.R. § 457.60.
[6] 42 U.S.C. § 1397bb(b)(3)(C).
[7] 42 C.F.R. § 457.805.
[8] The Review Act excepts the following from its definition of rule:
(1) rules of particular applicability, including a rule that approves
or prescribes for future application rates, wages, prices, services, or
allowances therefor, corporate or financial structures,
reorganizations, mergers, or acquisitions thereof, or accounting
practices or disclosures bearing on any of the foregoing; (2) rules
relating to agency management or personnel; and (3) rules of agency
organization, procedure, or practice that do not substantially affect
the rights or obligations of non-agency parties. 5 U.S.C. § 804(3). As
discussed below, the letter is not a statement of particular
applicability; rather, it substantially affects all states that seek to
cover children with effective family incomes in excess of 250 percent
of the FPL, as well as those states that already cover these children.
The letter does not relate to agency management or personnel, and it
does not relate to "agency organization, procedure, or practice" with
no substantial effect on non-agency parties. Accordingly, we concluded
that none of these three exceptions apply to the August 17 letter.
[9] 5 U.S.C. § 551(4).
[10] Batterton v. Marshall, 648 F.2d 694, 700 (D.C. Cir. 1980) (citing
5 U.S.C. § 551(4)).
[11] Id. at 700-02.
[12] See Reno v. Koray, 515 U.S. 50, 60-61 (1995) (internal agency
guideline was a rule under the APA); Shalala v. Guernsey Memorial
Hospital, 514 U.S. 87, 99-100 (1995) (provision of the Medicare
Provider Reimbursement Manual was a rule under the APA); Appalachian
Power Co. v. Environmental Protection Agency, 208 F.3d 1015, 1021-22
(D.C. Cir. 2000) (agency guidance document can be rule under the APA);
Professionals and Patients for Customized Care v. Shalala, 56 F.3d 592,
601-02 (5th Cir. 1995) (FDA Compliance Policy Guide was a rule, but was
exempt from notice and comment procedures as a statement of policy or
interpretative rule).
[13] See, e.g., A.D. Transport Express, Inc. v. United States, 290 F.3d
761, 768 (6th Cir. 2002) (order explaining agency regulation is an
interpretative rule under the APA); Guardian Federal Savings and Loan
Ass'n v. Federal Savings and Loan Insurance Corp., 589 F.2d 658, 664
(D.C. Cir. 1978) (agency statements that clarify laws or regulations
are rules under the APA).
[14] 142 Cong. Rec. H3005 (daily ed. Mar. 28, 1996) (statement of Rep.
McIntosh) (noting that although agency interpretive rules, general
statements of policy, guideline documents, and agency policy and
procedure manuals may not be subject to notice and comment
requirements, they are covered under the congressional review
provisions of the new chapter 8 of title 5).
[15] Cf. U.S. Dep't of Justice, Attorney General's Manual on the
Administrative Procedure Act 13 (1947) (the term rule includes
statements of particular applicability applying either to a class or to
a single person).
[16] See Bowen v. Georgetown University Hospital, 488 U.S. 204, 216
(1988) (Scalia, J., concurring) ("future effect" means that agency
statement will have legal consequences for the future); see also U.S.
Dep't of Justice, Attorney General's Manual on the Administrative
Procedure Act at 14 (rulemaking regulates the future conduct of either
groups of persons or a single person and is essentially legislative in
nature because it operates in the future and is primarily concerned
with policy considerations, while adjudication is concerned with the
determination of past and present rights and liabilities).
[17] See A.D. Transport Express, Inc., 290 F.3d at 768 (order
explaining agency regulation is an interpretative rule under the APA);
Guardian Federal Savings and Loan Ass'n, 589 F.2d at 664 (agency
statements that clarify laws or regulations are rules under the APA).
[18] 64 Fed. Reg. at 60921-22.
[19] See State Child Health; Implementing Regulations for the State
Children's Health Insurance Program, 66 Fed. Reg. 2490, 2601-05 (Jan.
11, 2001) (final rule).
[20] See SBC Inc. v. Federal Communications Commission, 414 F.3d 486,
498 (3d Cir. 2005) (if agency's present interpretation of regulation is
a fundamental modification of previous interpretation, the modification
can only be accomplished through notice and comment rulemaking); Shell
Offshore Inc. v. Babbitt, 238 F.3d 622, 629 (5th Cir. 2001) (settled
policy of an agency is binding on the agency and may be changed only
through a rule); Alaska Professional Hunters Ass'n v. Federal Aviation
Administration, 177 F.3d 1030, 1033-34 (D.C. Cir. 1999) (an agency is
bound by settled interpretation given to its own regulation that agency
can change only by rulemaking).
[21] See Appalachian Power Co., 208 F.3d at 1020-21 (if an agency
treats a pronouncement as if it were controlling, if it bases
enforcement actions on the policies in the document, and if it leads
private parties or states to believe they must comply with the
pronouncement's terms, it is a rule); McLouth Steel Products Corp. v.
Thomas, 838 F.2d 1317, 1321 (D.C. Cir. 1988) (because agency used
policy statement to determine regulated entities' obligations, policy
statement is, therefore, a rule).
[22] In documents filed in related litigation, the Department of
Justice has characterized the August 17 letter as a rule. See New York
v. United States Dep't of Health and Human Services, No. 07 Civ. 08621
(S.D.N.Y. filed Oct. 4, 2007) (Def's Mem. Supp. Mot. Dismiss, p. 33).
[23] See U.S. Dep't of Justice, Attorney General's Manual on the
Administrative Procedure Act at 30, n. 3.
[24] See, e.g., Chrysler v. Brown, 441 U.S. 281, 301 (1979) ("the
central distinction among agency regulations found in the APA is that
between 'substantive rules' on the one hand and 'interpretive rules,
general statements of policy, or rules of agency organization,
procedure, or practice' on the other"); Noel v. Chapman, 508 F.2d 1023,
1030 (2d Cir. 1975) (general statement of policy is a rule directed at
agency staff on how it will perform discretionary function); Guardian
Federal Savings and Loan Ass'n, 589 F.2d at 666 (describing test for
determining whether "a rule is a general statement of policy").
[25] See, e.g., Sugar Cane Growers Cooperative of Florida v. Veneman,
289 F.3d 89, 95 (D.C. Cir. 2002) (some agency pronouncements lack the
firmness of a prescribed standard to be considered rules); Syncor
International Corp. v. Shalala, 127 F.3d 90, 94 (D.C. Cir. 1997) (the
primary distinction between a rule and a general statement of policy is
whether the agency intends to bind itself to a legal position); Pacific
Gas and Electric Co. v. Federal Power Commission, 506 F.2d 33, 37 (D.C.
Cir. 1974) (suggesting that policy statements are not rules under the
APA).
[26] 506 F.2d 33 (D.C. Cir. 1974).
[27] Cf. Community Nutrition Institute v. Young, 818 F.2d 943, 947
(D.C. Cir. 1987) (agency pronouncement instructing regulated entities
to obtain "exception" from standard in announcement indicated
pronouncement was intended to be binding).
[28] See Public Citizen, Inc. v. United States Nuclear Regulatory
Commission, 940 F.2d 679, 682-83 (D.C. Cir. 1991) (courts look to
agency's actual application of statement to determine its nature if
language and context of agency statement are not conclusive); Guardian
Federal Savings and Loan Ass'n, 589 F.2d at 666 (in subsequent
administrative proceeding, agency cannot claim that prior statement of
policy itself resolves contested issues).
[29] See Syncor International Corp., 127 F.3d at 94 (a general
statement of policy does not impose, elaborate, or interpret a legal
norm, but explains the agency's manner of enforcing the existing legal
norm).
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