Government Relations/LegislativeHealthcare

President Trump Issues Regulatory Reform Impacting Health Care Industry

By February 24, 2017No Comments

Since taking office, President Trump has issued measures to roll back the economic burdens associated with federal regulatory compliance.  These regulatory reform measures include the following:

  1. A January 20th Executive Order directing the heads of all federal departments and agencies with authorities and responsibilities under the Patient Protection and Affordable Care Act, as amended, (“ACA”) to exercise, to the maximum extent permitted by law, all authority and discretion to waive, defer, grant exemptions from, or delay the implementation of certain ACA requirements and provisions.
  2. A January 20th letter to all federal agencies from White House Chief of Staff, Reince Priebus (i.e., commonly known as a Presidential Memo) directing the heads of the departments and agencies to (1) stop sending regulations to the Office of the Federal Register (“OFR”) until an appointed or designated department or agency head reviews and approves the regulation; (2) withdraw regulations sent to OFR but not published in the Federal Register, for review and approval; and (3) temporarily postpone (for 60 days from January 20th) the effective dates of regulations that have been published in the Federal Register but have not taken effect, for the review of questions of fact, law, and policy.
  3. A January 30th Executive Order directing departments and agencies to identify for elimination at least two prior regulations for every one new regulation issued and to offset the incremental costs related to new regulations by eliminating existing costs related to at least two prior regulations (i.e. budget neutrality).

Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal (“ACA Executive Order”)

In President Trump’s first executive order, the Administration reiterates its policy to seek the expeditious repeal of the ACA.  Pending the legislative repeal being promoted by the President, the ACA Executive Order directs executive departments and agencies with authorities and responsibilities under the ACA (e.g. the Department of Health and Human Services (“HHS”), the Department of Labor (“DOL”), and the Department of the Treasury (“Treasury”)), to exercise, to the maximum extent permitted by law, all authority and discretion to waive, defer, grant exemptions from, or delay the implementation of any ACA requirement or provision that would levy a fiscal burden on a state or a cost, fee, tax, penalty, or regulatory burden on an individual, family, provider, insurer, patient, recipient of healthcare services, purchaser of health insurance, or a maker of medical products, devices, or medicines.

The ACA Executive Order also directs these departments and agencies to exercise, to the maximum extent permitted by law, all authority and discretion to provide more flexibility to states and cooperate with states in implementing healthcare programs.  Lastly, the ACA Executive Order calls for each department or agency with responsibilities concerning healthcare or health insurance to encourage the development of a free and open healthcare market in interstate commerce, to the maximum extent permitted by law, with the purpose of attaining and preserving maximum options for consumers and patients.

Notably, the ACA Executive Order does not allow departments or agencies to contravene the ACA’s statutory directives, absent an amendment to or repeal of the ACA.  Similarly, to the extent that departments and agencies seek to revise or rescind existing regulations issued through notice-and-comment rulemaking under the Obama Administration, they must adhere to applicable statutes, including the Administrative Procedures Act (“APA”), which governs when notice-and-comment rulemaking is required.  Finally, the political leadership positions at these federal departments and agencies are only slowly being filled.  In fact, the Acting Director of the Office of Management and Budget (“OMB”), Mark Sandy, predicted that implementing the ACA Executive Order “would have a de minimis impact on costs and revenues” to the U.S. Government “in the 5-fiscal year period beginning in fiscal year 2017.”

It is, therefore, unclear how much impact this Executive Order will have on the current implementation of the ACA.  However, the uncertainly surrounding the implementation of the ACA Executive Order has caused some commenters to speculate on the order’s potential impact on various provisions of the ACA, including the individual mandate.  Some commenters have expressed concerns that if the order is implemented aggressively without congressional involvement, it could trigger market forces that lead to a rapid unraveling of the private individual insurance market.

Memorandum for the Heads of Executive Departments and Agencies (“Presidential Memo”)

On January 20th, Reince Priebus, Assistant to the President and Chief of Staff, issued a Presidential Memo to the heads of the executive departments and agencies calling for a prohibition against sending regulations to OFR until the regulation is reviewed and approved by an agency or department head appointed or designated by the President after noon on the day of inauguration.  The Presidential Memo also calls for the immediate withdrawal, for review and approval, of all regulations that have been sent to OFR but have not yet been published in the Federal Register.¹ The withdrawal of regulations must be consistent with OFR procedures.

In addition, as permitted by applicable law, the Presidential Memo directs a postponement of the effective date of regulations that have been published in the Federal Register but have not yet taken effect, for the review of questions of fact, law, and policy by the new administration.  The temporary postponement is in effect for 60 days from the date of the Presidential Memo.  Acting OMB Director Mark Sandy recognized that the APA provides procedural requirements for the promulgation of regulations.  Further, department and agency heads should consider, as allowed by applicable law and where appropriate, proposing for notice and comment a rule delaying effective dates beyond the 60-day period.  OMB clarified, however, that for “guidance documents,”—which are common in the Food and Drug Administration, for instance—it may not be appropriate to engage in notice and comment for the postponement.  Additionally, the departments and agencies may consider seeking public comment on the regulation itself.  Following the effective dates’ delay, no further action is necessary for regulations that raise no substantial questions of fact, law, or policy, and these regulations will presumably be formally published in the Federal Register.  However, for regulations that raise a substantial question of fact, law, or policy, agencies are instructed to promptly notify the Office of Information and Regulatory Affairs (“OIRA”) Desk Officer and take “further appropriate action in consultation with the OMB Director.”

The Presidential Memo broadly defines the term “regulation” to include final rules, notices of proposed rulemaking, advance notices of proposed rulemaking, notices of inquiry, and guidance documents (as defined in the Presidential Memo).  However, these directives are subject to exceptions the Director or Acting Director of OMB permits for emergencies or other urgent circumstances concerning “health, safety, financial, or national security matters, or otherwise.”  These directives also do not apply to regulations with statutory or judicial deadlines.

As a result of this Presidential Memo, HHS has been forced to withdraw or postpone various health care rules and guidance, pending further review.  HHS has already delayed the effective dates of several final rules without opportunity for public comment, citing the APA’s exemptions.  For instance, the effective date of the Substance Abuse and Mental Health Services Administration’s Confidentiality of Substance Use Disorder Patient Records final rule has been delayed until March 21, 2017.  Given the uncertainty surrounding these withdrawn and postponed regulations, stakeholders with an interest in these regulations will have to closely monitor agency activity in order to be ready to comment on any agency action or comply with approved regulations.  Once additional HHS leadership positions have been filled, additional details should be forthcoming on the implementation of this memorandum.  It remains to be seen how departments and agencies will review regulations for substantial questions of fact, law, or policy, or determine what constitutes “further appropriate action.”

Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs (“Executive Order”)

Regulatory Cap for Fiscal Year 2017 (“Section 2”)

On January 30th, President Trump issued an Executive Order directing federal departments and agencies to identify two or more existing regulations to be repealed when they propose a new regulation for notice and comment, unless prohibited by law.  To the extent permitted by law, incremental costs of new regulations must be offset by eliminating existing costs related to at least two prior regulations, in accordance with the APA and other applicable laws.  For fiscal year 2017, the total incremental cost of all new regulations (factoring in repealed regulations) cannot be greater than zero, unless otherwise mandated by law or consistent with the OMB Director’s written advice.  In early February, OIRA issued guidance on the implementation of section 2’s requirements for fiscal year 2017 (“Interim Guidance”). ²

Annual Regulatory Costs Submissions to the OMB (“Section 3”)

Beginning fiscal year 2018, heads of departments and agencies must identify the offsetting regulations for every regulation that increases incremental costs and provide an approximation of the total costs/savings associated with every new or repealed regulation.  Unless otherwise required by law or approved in writing in advance by the OMB Director, the Executive Order prohibits the issuance of regulations not included on the most recent update or version of the Unified Regulatory Agenda.  The OMB Director must identify to departments and agencies, during the Presidential budget process, a total amount of incremental costs that will be permitted in issuing and repealing regulations for the next fiscal year.  Unless approved in writing by the OMB Director or required by law, regulations exceeding this total incremental cost allowance will not be allowed in that fiscal year.


Although the Executive Order broadly defines the term “regulation,” the Interim Guidance clarifies that section 2’s requirements only apply to “new significant regulatory actions,” as defined in Executive Order 12866.  This means that the order’s requirements for fiscal year 2017 apply only to regulatory action that is likely to result in a rule that may materially alter the budgetary impact on Medicare and Medicaid, have an annual effect on the economy of at least $100 million, or otherwise qualify as “significant regulatory action” under the Executive Order 12866.  Further, the Interim Guidance indicates that the application of these requirements on new significant interpretive documents or guidance will be assessed on a case-by-case basis.  As such, it is unclear whether the Executive Order would apply to FDA guidance.  In addition, an existing regulatory action that “imposes costs and the repeal or revision of which will produce verifiable savings” may qualify for savings.  Similarly, “meaningful burden reduction through the repeal or streamlining of mandatory reporting, recordkeeping or disclosure requirements may also qualify.”  Furthermore, regulatory actions overturned by enacted laws generally qualify for savings.  This guidance significantly loosens the original text of the Executive Order.

The Executive Order and the Interim Guidance also carve out certain regulations from these directives.  The Executive Order excludes from the definition of “regulation” those rules related to agency organization, management, or personnel; regulations issued with respect to a military, national security, or foreign affairs function of the U.S.; and other categories of regulations exempted by the OMB Director.  The Interim Guidance also states that, in general, the Executive Order does not cover federal spending rules that “primarily cause income transfers” to program beneficiaries from the taxpayers (e.g. regulations relating to Medicare spending).  However, “in cases where these rules impose requirements on non-Federal entities, such as reporting or recordkeeping, agencies would need to account for these costs.”

In addition, “[e]mergencies addressing critical health, safety, or financial matters, or for some other compelling reason, may qualify for a waiver” of section 2’s requirements.  Furthermore, prior regulatory actions that a court vacates or remands after January 20, 2017, generally do not qualify for savings, although some exceptions may apply.  Although savings can be transferred within a department/agency, departments and agencies must seek OMB approval before transferring savings from other departments or agencies.

This Executive Order will impact the healthcare community as the Executive Order may reduce burdensome regulations.  In 2016, according to the American Hospital Association, the U.S. government “added 23,531 pages to the stack of existing regulations affecting hospitals and health systems.”  However, given the complexity of the regulatory process, the Executive Order may create barriers to promulgating or maintaining favorable regulations.  To keep up with the changing regulatory landscape, stakeholders will need to vigilantly monitor agency activity.

Furthermore, departments and agencies seeking to repeal an existing regulation must comply with the APA’s rulemaking process, or potentially face a legal challenge against the agency action.  This process places an administrative burden on departments and agencies, which may be exacerbated by the temporary federal civilian hiring freeze imposed by the Trump Administration.  The Interim Guidance indicates that if feasible, the offsetting regulatory actions should be terminated prior to or on the same schedule as the new regulatory action.  The Interim Guidance notes, however, that under certain circumstances, regulatory and deregulatory actions may be bundled together in the same regulatory action.  The Interim Guidance also clarifies that departments and agencies are permitted to proceed with significant regulatory action that requires finalization in order to adhere to an imminent statutory or judicial deadline, even if, at the time of issuance, the departments or agencies are unable to identify the offsetting regulatory actions.

Some stakeholders have raised concerns that this Executive Order prompts departments and agencies to make decisions purely based on costs, as opposed to the effectiveness of the regulation.  The Interim Guidance addresses accounting questions and states, among other things, that costs are measured “as the opportunity cost to society,” as defined in OMB Circular A-4.


The Trump Administration’s initiatives comport with campaign promises to reduce regulatory burdens on businesses in order to stimulate economic activity; however, it is unclear whether these new requirements will have their intended effect or significantly impact the health care industry.  Stakeholders should continue to monitor agency action in the coming months, as the regulatory landscape may shift dramatically with little notice when HHS leadership positions are filled.


¹ The Acting OMB Director also directed agencies to withdraw regulations currently at the Office of Information and Regulatory Affairs.
² OMB intends to issue guidance on the application of the Executive Order for years commencing fiscal year 2018.

For more information about President Trump’s executive orders and other measures, contact Principal Peter Thomas at Peter.Thomas@PowersLaw.com or Associate Leela Baggett at Leela.Baggett@PowersLaw.com.

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