CMS may evade Trump's sweeping deregulation order

President Donald Trump’s government-wide directive to slash regulations doesn't appear likely to hamstring day-to-day operations for companies that do business with programs such as Medicare and Medicaid.

Trump’s executive order requires federal agencies to cut 10 regulations for each new one proposed. But its impact seems poised to be minimal at the Centers for Medicare and Medicaid Services, largely because most of the rules it issues are mandatory under statute.

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The executive order might, however, lead CMS to compile multiple policies into broader rules and issue fewer guidance documents that help regulated companies understand how to adhere to federal regulations.

“Regulation can impede progress, but it also can provide much-needed direction for mandatory programs that providers and plans are participating in, so trying to balance that is going to be important,” said Claire Ernst, director of government relations and public policy for the law and lobbying firm Hooper Lundy & Bookman.

The cost of any new regulation should be “significantly less than zero,” according to the executive order. That essentially means agencies must scrap 10 regulations and collectively reduce spending by at least as much as the new rule would increase it, said Susan Dudley, a George Washington University professor and former director of the school's Regulatory Studies Center.

That could apply to policies as big as a full rule, as small as single-line policy tweaks or technical updates, or anywhere in between, such as guidance documents, said Judy Waltz, chair of the law firm Foley & Lardner’s healthcare practice group.

But many of the regulations governing healthcare stem from congressional mandates, such as annual Medicare payment updates and the myriad rules CMS implemented to carry out the Affordable Care Act of 2010 and the Inflation Reduction Act of 2022.

As a result, the 10-1 policy is more likely to play out as an "accounting exercise” than anything else, said Dudley, who ran the Office of Information and Regulatory Affairs at the White House Office of Management and Budget under President George W. Bush.

There's recent historical precedent to support this view. During Trump's first term, he issued a similar executive order instructing agencies to eliminate two rules for every new one. This had such a meager effect on healthcare regulation that it's been largely forgotten, Waltz said.

Yet Trump may choose to be more aggressive this time, and his prior efforts laid the groundwork for deeper deregulation, said Kevin Kosar, a senior fellow at the conservative American Enterprise Institute.

A clearer picture will emerge when the White House digs in further. Trump tasked Office of Management and Budget Director Russell Vought to provide agencies with more specific directives. Additional HHS-specific details are forthcoming, including clarification on what counts as a "regulation" under the executive order, Waltz said.

Trump will also face legal hurdles. Public Citizen plans to challenge deregulatory actions that are “not supported by a record,” said Robert Weissman, co-president of the progressive consumer rights advocacy group. Public Citizen challenged Trump’s 2-1 executive order in 2017, but the case was dismissed two years later for a lack of standing.

If CMS does have to pare down its output, the healthcare sector may have to adapt to the agency's new way of doing business.

The Trump administration will probably focus on more recent regulations and proposals, such as the nursing home staffing mandate CMS issued last year, rather than eliminating rules related to matters such as Medicare reimbursements or scrapping basic standards governing healthcare providers, Weissman said. CMS won't want to disrupt business operations, he said.

It’s likely the process of drafting and finalizing rules will slow down, and regulators could choose to compile various policies into omnibus rules, Waltz said. One big rule including multiple proposals would only need to be offset by 10 eliminations, she said.

“They could just structure it so we get longer rules,” Waltz said. “There wouldn't be so many standalones. They'd likely be more consolidated, and maybe that's not a bad thing, if they're consolidated appropriately.”

Eliminating sub-regulatory guidance and memos might complicate how the healthcare industry complies with policies such as mandatory Medicare payment models, which are often established in larger rules and later explained in guidance documents, Ernst said.