Health Care Fraud in the New Administrative State

When the Supreme Court decided Loper Bright Enterprises v. Raimondo in June 2024, health care fraud was not foremost on anyone’s mind. Loper Bright overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, which for 40 years governed judicial review of agency interpretations of silent/ambiguous statutes. Because health care fraud is often derived from violations of administrative regulations and policies, deference to the agency that oversees the federal health care programs, the Department of Health & Human Services (HHS), is key. By overruling Chevron, Loper Bright thus invited challenges to many of the regulatory provisions that govern health care fraud. 

Health care fraud enforcement exists within a complex universe of criminal, civil, and administrative prohibitions enforced by multiple federal agencies, and allegations depend less on explicit statutory prohibitions than on HHS’s interpretation of that language. Faced with more robust court review of traditional regulations, HHS may be tempted to increase reliance on informal, subregulatory forms of fraud guidance rather than traditional notice-and-comment rulemaking under the Administrative Procedure Act (APA). Informal guidance can be created and changed quickly because it is not subject to rulemaking. Yet from the industry’s perspective, there is no guarantee such guidance will survive policy shifts due to changing presidential administrations. 

Moreover, unlike rules that undergo notice-and-comment in the Federal Register and are published in the Code of Federal Regulations, informal guidance may be difficult even to find. These risks were heightened by the Trump Administration’s March 2025 decision to rescind the Richardson Waiver, a 1971 policy requiring HHS to use notice-and-comment rulemaking for provisions related to “public property, loans, grants, benefits, or contracts.” While guidance typically has been available on federal agency websites, the Administration’s decision to remove many government web resources suggests it may become more difficult for the industry to stay abreast of current federal views.

Although attracting far less attention from the health care bar, another decision from the same session, Securities & Exchange Commission v. Jarkesy, may further complicate fraud enforcement by questioning the authority of agencies to impose civil monetary penalties (CMPs) in administrative proceedings — a typical remedy found in nearly all health care fraud statutes. Jarkesy involved alleged misrepresentations to investors, historically handled by Securities and Exchange Commission (SEC) suits for civil penalties in federal court. After the Dodd-Frank Act allowed the imposition of penalties in-house, the SEC instead assessed CMPs against Jarkesy in an administrative proceeding. On appeal, the Supreme Court held the adjudication violated the 7^th Amendment and was not saved by the “public rights” exception to Article III jurisdiction, which permits agencies to decide certain “public” matters without violating the Constitution. While discussing several reasons why the SEC’s action was problematic, the Court failed to identify a concrete test for assessing CMPs.

Why is an SEC case relevant to health care fraud? While massive civil penalties levied under the Civil False Claims Act (FCA) or criminal sanctions available under the Anti-Kickback Statute may make headlines, many health care fraud statutes rely instead on CMPs — including both the Anti-Kickback Statute itself and the prohibition on physician “self-referrals” to entities with which they have financial relationships (Stark Law). CMPs also apply to other federal health care program misconduct, such as submitting claims for items that were not provided or submitting false or fraudulent claims. Similar to Jarkesy, these CMPs are imposed in HHS administrative proceedings.

Yet the factors analyzed in Jarkesy may weigh differently for health care fraud CMPs. The Court focused on two core issues: first, whether the SEC’s procedures implicated the 7th Amendment by replicating “common law fraud claims [that] must be heard by a jury,” and second, whether the public rights exception applied. With regard to common law fraud, the Court focused on both the remedy and cause of action. The SEC had sought monetary damages, “the prototypical common law remedy.” Moreover, the penalties were “designed to punish and deter, not to compensate,” targeted traditional forms of misrepresentation, and used common law definitions of fraud. 

The health care fraud CMPs are less clear, however. The CMP prohibiting “false or fraudulent claims,” for example, contains traditional common law fraud language and may be at risk. But other CMPs are imposed for conduct that has no common law equivalent, such as physician self-referral. 

Moreover, unlike the SEC, OIG does not have the authority to choose between administrative or federal court proceedings. While CMPs for false or fraudulent claims might alternatively be pursued as FCA violations, and Anti-Kickback violations might give rise to criminal prosecution, that choice is made by the Department of Justice (DOJ) rather than OIG. And regulations require health care fraud CMPs to be large enough to compensate the government for its damages and costs, suggesting a more compensatory goal.

Perhaps the strongest argument that Jarkesy should not reach the bulk of health care fraud CMPs is the public rights exception, which sometimes permits Congress to “assign the matter to an agency without a jury consistent with the Seventh Amendment.” Historically, the exception required both the government and a private citizen to be parties, and the action to be related to an executive or legislative function. Jarkesy was thus a weak case: While the SEC oversees the financial market for the benefit of the public, the alleged harm occurred exclusively among private actors. 

In contrast, precedent may support a different answer for the federal health care programs. The federal Treasury itself suffers direct financial injury from fraud in the federal health care programs, making the government the primary victim. CMPs are the government’s mechanism for policing its own harms within a novel system of federal health care benefits created by Congress, not an effort to usurp authority to resolve private disputes. Viewed from that perspective, there is a much stronger argument for the public benefits exception in health care fraud cases. Yet Jarkesy’s narrow reading makes this by no means clear-cut. Together, Loper Bright and Jarkesy may pose significant threats to fraud enforcement.