The great American singer Wilson Pickett probably was not thinking of the SUNSET rule when he wrote his soul anthem, “In the Midnight Hour.”  But Secretary Azar waited ‘til the midnight hour, and there it is, in the January 19, 2021 Federal Register: “Securing Updated and Necessary Statutory Evaluations Timely,” a final rule issued by the Department of Health and Human Services (HHS).

Midnight regulations—those published by an outgoing Administration between the Presidential election and inauguration day—are not unique to the Trump Administration.  Both Democratic and Republican administrations have issued them. But generally, midnight regulations have been substantive. The SUNSET rule—and its sister “Good Guidance” rule—are procedural.  They are designed to impose maximum administrative burden and additional litigation risk on HHS and its operating agencies, including Centers for Medicare & Medicaid Services (CMS).

The notion that federal bureaucracies could be subject to administrative burden may seem incongruous. After all, aren’t they in the business of creating administrative burden for others?  The fact is that red tape is not only bad for Medicaid beneficiaries; it can also disrupt the ability of federal (or state and local) agencies to do their jobs. That will certainly be the case with the SUNSET rule, in tandem with the “Good Guidance” rule, which may in turn explain why Secretary Azar waited until the last month of his tenure at the helm of HHS to impose these new procedures on his successor.

The SUNSET rule was proposed on November 4; comments on all but the Medicare sections were due December 4. The agency received 532 comments, which it acknowledges “generally opposed the proposed rule….” (The comments included this masterpiece by the Institute for Policy Integrity at NYU Law School).  Undaunted, HHS announced the final rule on January 8. It is now final, effective March 22.

In brief, the final rule requires HHS to “assess” and, if necessary, “review” almost every regulation every 10 years. The purpose of the “assessment” is to determine whether the regulation has “a significant economic impact upon a substantial number of small entities.”  If it does, then the agency must conduct a “review” to determine whether the regulation should be rescinded, amended, or preserved. If a regulation is not “assessed” or, if necessary, “reviewed” every 10 years, it automatically expires. The rule gives the agency five years from enactment to complete the first cycle “assessments” and “reviews.”

For purposes of this drill, a regulation is a section of the Code of Federal Regulations; for example, the Medicaid program has over 1,000 “regulations,” the CHIP program over 150. As Allison Orris and Julian Polaris of Manatt Health point out, many Medicaid regulations could avoid being “reviewed”  because for technical reasons they may not affect a “substantial number of small entities.” But under the rule, they would still need to be “assessed.”  CMS staff have more important things to do.

In its January 8, 2021 press release, the Department announced that the purpose of the rule is “to further democratic values of accountability and transparency.”  (You can’t make this stuff up).  It also provides 17 Qs and As. While not all of the As are entirely candid, they do speak volumes. Here are some excerpts, along with color commentary (CC):

Q: Why take this action now, while much of the administration and HHS are engaged in fighting COVID-19?

A: While many HHS employees are focusing on the COVID-19 response full- or part-time, the Department has also been able to continue moving forward on a range of priorities to enhance and protect the health and well-being of the American people.

CC:  As my colleague Joan Alker has explained, this rule is part of a three-pronged effort by the Trump administration to knock the legs out from under Medicaid on the way out the door.

Q: Why is HHS publishing this rule now?

A: The Department has been working for a long time to determine ways to better institutionalize retrospective review. After receiving public comments on the proposed rule, HHS has decided to finalize it with some amendments based on the comments.

CC:  Evidently it took the Trump Administration 3 years and 11 months to find its way to solve the problem of retrospective review—just in time for the Biden Administration.

Q: How many regulations will the rule initially apply to during the five-year window? Would the proposed rule apply to every regulation issued by any HHS entity that is 10 years or older—except the regulations already identified as exempted? If so, how many is that?

A: Rules issued by an HHS component that are more than ten years old would need to be reviewed within five years. The rule explains how this can be done and the resources required for this effort.

CC: Excellent question.  What was the answer again?

Q: Is this being done to hurt the next administration?

A: No. Regulatory experts across the spectrum have long called for institutionalizing retrospective review. Moreover, the first reviews are not due for five years, to allow the agency ample time to do them robustly.

CC:  Really???

HHS did not include the most important question about the sunset rule in its press release so we’ll ask it and answer it ourselves now:

Q: Can the “SUNSET” rule be sunset?

A: Yes it can. HHS could go through a notice-and-comment rulemaking to rescind the rule, suspending implementation while that rulemaking is underway. Or Congress can rescind the rule by inserting in any piece of legislation a provision declaring the rule null and void and directing the Secretary to rescind it  Congressional Review Act procedures are another potential tool.

CC:  These same solutions could be used to sunset the “Good Guidance” rule—well before the next midnight hour.