What the Proposed “SUNSET” Regulation Means for Medicaid and CHIP

On November 4, the Department of Health and Human Services proposed  to require itself to review almost every regulation it has ever issued, including those affecting Medicaid and CHIP. It did so by proposing a new regulation, which has the misleading acronym “SUNSET” (Securing Updated and Necessary Statutory Evaluations Timely). A more appropriate acronym would be “JAMS” (Just Another Means of Sabotage). It’s a thinly-veiled effort to put the Department in a procedural straight jacket and “JAM” up the works just in time for the onboarding of a new Administration.

Under this proposal, almost all regulations that the Department does not review within certain periods of time will automatically expire. The public has until December 4 to comment (in the case of Medicare regulations, until January 4).

This proposal is not subtle. Nor is it random. It pairs nicely with the ironically-captioned “Good Guidance” proposal the Department published on August 20 targeting subregulatory guidance like State Medicaid Director letters. Under that proposal, SMDs would not “have the force and effect of law” because they are not issued using notice-and-comment rulemaking process that produces regulations.  Under last week’s proposal, regulations that have been issued through the notice-and-comment process would automatically expire unless the Department reviews the regulation before the expiration date.

What’s going on here? Let’s take a step back.

The Department is the Executive Branch agency responsible for implementing the Medicaid and CHIP statutes that Congress has enacted. To carry out this responsibility, the Department has, since the creation of these programs, relied on regulations and subregulatory guidance to inform states, providers, managed care plans, and beneficiaries about their duties and opportunities under these laws. Over the past three and a half years, the Department has used these same communications  tools, along with section 1115 waiver authority, to try to “transform” Medicaid. Having failed to do so, the Trump Administration is now trying to undercut the ability of the incoming Biden Administration to make the Department, and the programs it administers, work.

The proposal  would require the Department to conduct a retrospective review of almost all of its regulations, including those for Medicaid and CHIP, under penalty of expiration. It provides that Medicaid and CHIP regulations will expire at the later of: (1) two years after the proposal takes effect, (2) ten years after the regulation was originally promulgated (following notice-and-comment rulemaking procedures), or (3) ten years after the Department “assesses” and, if necessary, “reviews,” the regulation.

For example, assume that the Department publishes the proposals as a final regulation  in mid-January, and makes it effective 30 days later.  Two years from that date would be January 2023.  Ten years before that date is January 2013.  Thus, any Medicaid or CHIP regulation issued before January 2013 will expire on January 2023 unless the Department “assesses” and, if necessary, “reviews” the regulation.  That would give the regulation another ten years before the next cycle begins.

How can a regulation that has been in effect for decades qualify for a ten-year reprieve?  First the Department would have to conduct an “assessment” to determine whether the regulation “currently has a significant economic impact upon a substantial number of small entities.” If the Department determines there is such an impact, it would have to “review” the regulation to determine whether it should be “continued without change, or should be amended or rescinded.”  If the Department determines the regulation should remain in place without any change, the regulation would continue. If the Department determines the regulation should be amended or rescinded, it has two years to do so (this can be extended one year at a time for up to five years). The proposal exempts some regulations, including itself, but few if any Medicaid or CHIP regulations would qualify.

By now, you’re probably thinking to yourself, “this is crazy.” You’re right, it is.  But here’s the best part.

Under this proposal, a “regulation” is not what most people think of as a “regulation”—i.e., the Access Rule or the Managed Care Rule. Instead, it’s defined as a section of the Code of Federal Regulations (CFR). For example, in the Managed Care Rule, at 42 CFR Part 438, there are 91 different sections of the CFR.  When its time comes, each section of the Managed Care Rule will need to be “assessed” and, if that section is found to have a significant economic impact upon a substantial number of small entities, it will need to be “reviewed.” This is true even though the Department has just amended the Rule.

Part 438 of Title 42 of the Code of Federal Regulations is just one Part of the regulations implementing the Medicaid statute. There are currently 14 different Parts, each with many sections. Most of those sections are at least ten years old—Medicaid was enacted in 1965—which means that they would each have to be “assessed” and if necessary, “reviewed” before 2023, or they would expire. (The EPSDT regulation, promulgated in 1984, comprises eight different non-sequential sections, 42 CFR 441.50 – 441.61.) In other words, this proposal would require that, over the next two years, the Department reconsider literally thousands of Medicaid “regulations.” By the same measure, the CHIP program, in Part 457 of Title 42, has 128 different “regulations”

Eat, sleep, review, repeat.

Of course, if the Department didn’t have the bandwidth to conduct these “assessments” and “reviews” for each “regulation” every 10 years, it could simply pick and choose which “regulations” it didn’t like and allow them to expire automatically. Easy peasy.

The Department argues that its proposal is authorized by the Regulatory Flexibility Act (RFA), which has been on the books since 1980. Now, forty years later—and three years and nine months into the Trump Administration’s term in office—the Department has discovered that the RFA requires that almost all of its regulations be put on an expiration clock.

Who knew?

It turns out that the provision the Department cites—5 U.S.C. 610(a)—says no such thing. Instead, it requires each federal agency to “publish a plan for the periodic review of the rules issued by the agency which have or will have a significant economic impact upon a substantial number of small entities.” “Periodic” means a review every 10 years unless that is not feasible, in which case the review period can extend up to five more years.  The purpose of the review is “to determine whether such rules should be continued without change, or should be amended or rescinded, consistent with the stated objectives of the applicable statutes, to minimize any significant economic impact of the rules upon a substantial number of such small entities.”

The RFA does not provide for regulations to automatically expire if the issuing agency does not review them. Nor does it authorize agencies to impose such a regime on themselves. Nor does it even suggest that the Department can compress the “review” process for most Medicaid and CHIP regulations (as well as most other regulations issued by the Department) into the next two years.

Video games have time systems to force action. For example, the day and night cycle in Minecraft lasts 20 real-time minutes. But administering the Medicaid and CHIP programs, which provide health insurance for over 35 million children, is not a game. To make these programs work, states and providers and managed care plans need stability and predictability from CMS, not continual self-imposed regulatory turmoil.

As it happens, if this proposal goes final, the Administration that issued it will not be around after January 20 to implement it. Instead, that burden will fall on the new leaders at the Center for Medicaid and CHIP Services (CMCS). Rather than address real problems, like the increase in uninsured low-income children in the midst of a pandemic, CMCS will be forced to divert resources to “assessing” and “reviewing” most of its long-standing Medicaid and CHIP regulations.

This is how to jam up government, not how to make it work efficiently. And perhaps that’s exactly the point.

[Editor’s Note: The Georgetown University Center for Children and Families submitted comments to HHS regarding the proposed SUNSET rule on December 3, 2020.]

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.