Azar v. Allina Health Services
The Court ruled that the government violated a Medicare-specific notice-and-comment law when it posted a new payment policy on its website in 2014 without giving hospitals advance notice or a chance to weigh in.
Because the policy retroactively cut payments to hospitals serving low-income patients by billions of dollars, the decision reinforces that agencies administering Medicare must follow public notice-and-comment procedures whenever they change substantive payment standards, even when they think doing so would be burdensome.
“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 statutory notice-and-comment obligations, we agree with the court of appeals that the new policy cannot stand.”
The majority's core holding that the government's unannounced 2014 policy change was unlawful.
How it got here: A federal trial court and the D.C. Circuit both ruled against the government; the government asked the Supreme Court to resolve a circuit split over whether notice and comment was required.
The Case in Depth
What happened
Medicare pays extra money to hospitals that treat a disproportionate share of low-income patients, using a formula called the Medicare fraction. After Congress created Medicare Part C in 1997, the agency overseeing Medicare struggled with whether to count Part C patients in that formula, adopting and then losing several rules. In 2014, the agency posted 2012 payment fractions online that counted Part C patients, cutting payments to a group of hospitals, who then sued.
The question before the Court
Did the government have to give hospitals notice and a chance to comment before announcing a policy that cut their Medicare payments?
The Court's answer
Yes — the government violated its statutory duty under the Medicare Act to provide public notice and a 60-day comment period before adopting the 2014 policy. The Medicare Act's own notice-and-comment provision, not the Administrative Procedure Act's narrower rule, controlled here, and the government's 2014 website announcement changed a "substantive legal standard" governing hospital payments within the meaning of that provision.
The Court rejected the government's argument that the Medicare Act's notice requirement tracks the APA's distinction between substantive and merely interpretive rules, finding that reading textually incoherent given how the Medicare Act itself uses the words "substantive" and "statement of policy." Because the government could not show a lawful excuse for skipping notice and comment, its 2014 policy could not stand.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Hospitals that serve low-income patients avoid having major payment changes imposed on them without warning, and the ruling means the Medicare agency must give hospitals notice and a chance to comment before changing standards that affect billions of dollars in payments, potentially slowing future policy shifts.
What changes now
This is a final decision on the merits affirming the D.C. Circuit's judgment, so the government's 2014 policy cannot take effect without notice and comment. The Court expressly limited its holding to the interpretive-rule argument the government pressed, leaving open other questions about the statute's scope, including whether a separate subsection independently required notice and comment and whether the statute itself already dictated the Part C counting rule.
What this does not decide
The Court did not decide the outer boundary of what counts as a "substantive legal standard" under the Medicare Act, nor whether a separate provision (subsection (a)(4)) independently required notice and comment. It also expressed no view on whether the Medicare statute itself already required counting Part C patients, since the government did not raise that argument.
Concurrences and dissents
Dissent — Justice Breyer
“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).”Breyer's proposed alternative outcome based on distinguishing substantive from interpretive rules.
Justice Breyer argued the Medicare Act's notice-and-comment requirement, like the APA, applies only to substantive (legislative) rules and not to interpretive rules, based on the statute's text, its 1980s drafting history, and the practical burden of requiring notice and comment for thousands of pages of Medicare guidance manuals. He would have remanded to let the Court of Appeals decide whether the 2014 policy was substantive or merely interpretive, rather than deciding the case outright.
How the Court got there
The legal reasoning, step by step
- The Court first identified the operative statutory phrase: the Medicare Act requires notice and a 60-day comment period for any rule, requirement, or statement of policy that 'establishes or changes a substantive legal standard' governing payment for services, and asked whether the government's 2014 announcement met that description.
- The Court compared two possible readings: the hospitals' view that 'substantive' meant creating rights and duties (as opposed to merely procedural rules), versus the government's view that it tracked the APA's distinction between binding 'substantive rules' and merely explanatory 'interpretive rules.'
- The Court found several textual clues showing the Medicare Act does not use 'substantive' the way the APA does: the Act treats 'statements of policy' as capable of being substantive, while the APA treats policy statements as inherently non-substantive and groups them with interpretive rules.
- The Court noted that a separate provision allowing retroactive 'substantive changes' to interpretive rules and policy statements would make no sense under the APA's definitions, since those categories are never substantive under the APA — reinforcing that the Medicare Act uses a broader meaning of 'substantive.'
- The Court also reasoned that Congress had cross-referenced one APA exemption (the good-cause exemption) but not the interpretive-rule exemption, suggesting a deliberate choice not to import the APA's interpretive-rule carve-out into the Medicare Act.
- Having concluded the government's reading could not survive text and structure, the Court found the government's legislative-history and policy arguments insufficient to overcome the statute's plain requirements, since courts may not rewrite a statute based on policy convenience.