Mayo Foundation v. U.S.: Supreme Court Brushes Off Medical Residents, Unsettles Agency Deference Law
Becoming a doctor is not easy, cheap or quick. Work hard in college, four years of medical school, and then you’re shuttled through a blatantly illegal* residency matching program into an apprenticeship with long hours and low pay. If you’re lucky, three years of that apprenticeship and you’re out. If you’re not, hang on for four, five, six, seven, or eight more years.
(* Why “blatantly illegal?” Because the residency matching program is a flagrant violation of antitrust laws. Once trial lawyers realized that and started suing on behalf of medical students and residents, hospitals had Congress pass a specific antitrust exemption for residency programs.)
Unlike law school — increasingly revealed to be a losing proposition for most, with exploding admissions and imploding jobs — slogging it through seven to twelve years of medical school and residency tends to work out in the end. As the Bureau of Labor Statistics notes, “physicians practicing primary care had total median annual compensation of $186,044, and physicians practicing in medical specialties earned total median annual compensation of $339,738.” That latter number is so high because of “cartel barriers” imposed by the specialists’ organizations; it’s good to be self-regulating.
But it’s still a tough slog getting there, and a poorly paying one, too. Medical residents earn $30k–$60k annually. That’s not poverty (statistically it’s middle class, since the median household income for the United States is around $50k), but it’s also a bruising job: 60 to 80 hours (often more, though the hospitals fudge the records to deny it) a week, often on irregular schedules, and always at the whim of notoriously unsympathetic attending physicians and hospital administrators.
Hospitals, though, can’t get enough of them. Medical residents are like legal associates: cash cows which, through the joys of leverage, permit a single attending/partner to delegate profitable work for a half-dozen or more residents/associates. The best part for hospitals? Medicaid pays hospitals $9.5 billion annually to train residents. Free labor that can be billed at premium prices.
But nobody, not the hospital, the attending physicians, or the resident thinks of them as being “employees” but rather “students,” or more properly apprentices. They’re supervised at all times and are deliberately rotated through unusual tasks for the purpose of training.
Which raises a question: should medical residents pay payroll taxes like “employees” or should they be exempt like “students?” As the Supreme Court described on Monday in Mayo Foundation for Medical Education and Research v. United States:
It’s unfortunately a truism that, when Congress passes a law, that law will raise more questions than it answers. Medical residents are nominally in their jobs for educational, not employment, reasons — which is why we pay hospitals $9.5 billion a year to educate them, right? — and it sure seems that medical residents are “enrolled and regularly” attending their residency programs and that they are paid for a “service performed in the employ of . . . a school, college, or university.” If they’re not they’re to learn, why are we paying for them to be there?
The Department of the Treasury disagreed:
Medical residents typically “work 40 hours or more per week,” but the very nature of what they do is — at least according to residents themselves, the hospitals which use them, and the government which subsidies them — more “educational” than it is “service.”
In any event, it sure seems like an issue worth investigating. The Treasury Department didn’t care; 40 hours a week and you’re an “employee,” regardless of the nature of the work, no apprenticeship about it.
The Mayo Clinic sued, arguing:
And that’s where the Supreme Court has a chance to teach the Mayo Clinic something.
See, non-lawyers, law students, and even some lawyers are under the misapprehension that a court, particularly the Supreme Court, is under some obligation to care about the cases that come before it, that, if presented with a compelling enough argument, those courts will at least consider the argument and respond in depth.
Litigators, appellate lawyers, and trial lawyers have all been there. You spend a lot of time thinking through and researching an issue, spend years fighting the case up and down on an issue that not only seems simple, but obvious — after all, other than medical residents, what category of students work 40 hours or more per week for their schools? It seems like a “rule” designed solely to tax medical residents — just to have a court, sometimes a Supreme Court, brush you aside in a paragraph brimming with ponderous assertions like “The Department thus did not distinguish classroom education from clinical training but rather education from service” that mask the real complexity of the underlying issues and the disparate nature of the rule.
Plenty of humanities and science PhD students spend more than 40 hours a week as workhorses filling in the teaching and publishing duties of their tenured advisers, but there aren’t any customers around to see it, so it’s never considered “work” even though much of it has less educational value than a medical residency.
I thought the Mayo v. U.S. opinion might some value to lawyers going forward, since it purports to clarify that court deference to an agency interpretation of a statute is governed by Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) rather than National Muffler Dealers Assn., Inc. v. United States, 440 U.S. 472 (1979). In short, under National Muffler, it matters when and why an agency interpreted the statute a particular way (and if the agency had been taking inconsistent positions in the past), whereas under Chevron neither of those issues matter. But the Supreme Court didn’t even squarely say which one was right, it just implied that Chevron seemed closer to the mark:
Under Chevron, in contrast, deference to an agency’s interpretation of an ambiguous statute does not turn on such considerations. We have repeatedly held that “[a]gency inconsistency is not a basis for declining to analyze the agency’s interpretation under the Chevron framework.” National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 981 (2005); accord, Eurodif S. A., supra, at ___ (slip op., at 10). We have instructed that “neither antiquity nor contemporaneity with [a] statute is a condition of [a regulation’s] validity.” Smiley v. Citibank (South Dakota), N. A., 517 U. S. 735, 740 (1996). And we have found it immaterial to our analysis that a “regulation was prompted by litigation.” Id., at 741. Indeed, in United Dominion Industries, Inc. v. United States, 532 U. S. 822, 838 (2001), we expressly invited the Treasury Department to “amend itsregulations” if troubled by the consequences of our resolution of the case.
None of that, though, is inconsistent with the actual analysis National Muffler:
Which makes me wonder why the Supreme Court considered the case at all. The government had won in the Court of Appeals on the exact same grounds, grounds the Supreme Court merely affirmed 8–0 in a terse, uninformative opinion that unsettled a largely settled question about agency deference. Like I asked before, Do Lawyers And Judges Still Look To The Supreme Court For Guidance?
It seems like Supreme Court is trying to make the answer “no.”