Let’s say your elderly parent was neglected or abused in a nursing home. In the past, your only recourse might have been arbitration, rather than going to court.
But thanks to a rule put in place last fall by the Centers for Medicare and Medicaid Services, nursing homes that receive federal funding – which is most of them – could no longer include mandatory arbitration clauses in their contracts. In other words, residents and their family members were given back the right to sue.
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Now the Trump administration is trying to get rid of that protection.
Under-new-management CMS released a proposed rule this month that would rescind the earlier rule and once again make forced arbitration the industry standard.
Rob Weissman, president of the advocacy group Public Citizen, described the move to me as “a heartless and vile act.”
“The Trump administration apparently thinks it is OK for nursing homes to force seniors into signing contract terms that give up their right to sue in court if they are subsequently victimized by neglect or abuse,” he said. “It’s hard to imagine a more callous policy.”
Be that as it may, Pat McGinnis, executive director of California Advocates for Nursing Home Reform, said the proposed regulatory step backward is hardly a surprise.
“The nursing-home industry has lobbied very hard for this,” she said.
Fighting lawsuits with a lawsuit
With delicious irony, the American Health Care Association, a leading nursing-home industry group, filed a lawsuit last fall challenging the federal government’s authority to tell the industry it can’t block people from filing lawsuits.
The head of the association, Mark Parkinson, said when the suit was filed that CMS’ crackdown on forced arbitration was “clear overreach” by the agency.
It wasn’t. It was a reasonable response to an unfair practice that favors the interests of businesses over those of consumers – and in the case of nursing homes, involves some of the most vulnerable members of society.
The nursing-home industry, like other businesses, has experienced hefty court verdicts in the past that made it gun-shy about the legal system. Mandatory arbitration is seen by many businesses as a way to keep legal costs in check.
It’s almost a sure thing that your phone company, your cable provider, your credit card issuer or any number of other companies you do business with have included such a provision in their take-it-or-leave-it terms of service.
Such clauses require that any dispute be resolved in private by an arbitrator rather than in a courtroom. They often also prohibit customers from joining class-action lawsuits brought by others.
Businesses routinely insist that arbitration is best.
As Parkinson said last week in welcoming the now-Trump-run CMS’ proposed rule change: “Arbitration produces swifter resolution to disputes, compensates residents without undue litigation expense for either party, and reduces the funding burden on the Medicare and Medicaid programs.”
The reality is that mandatory arbitration requires people to give a professional arbitrator sole discretion over a dispute, and the arbitrator’s fee almost always is paid by the business involved. That gives the arbitrator a clear financial incentive to favor the side signing his or her check.
Arbitrators aren’t consumer friendly
It’s also well-documented that arbitration is seldom in consumers’ best interest.
A 2007 report by Public Citizen found that over a four-year period, arbitrators ruled in favor of banks and credit card companies 94 percent of the time in disputes with California consumers.
A 2015 study by the Consumer Financial Protection Bureau concluded that “class actions provide a more effective means for consumers to challenge problematic practices” by banks and other financial-services companies.
In fact, a 2009 study commissioned by the American Health Care Association – the nursing-home industry group – found that average awards from arbitration in nursing-home cases were about 35 percent lower than what could have been expected if the cases had gone to trial.
I asked an association spokeswoman about that. She downplayed her own organization’s finding by saying that “the cases litigated in court included many more very large claims than the cases that were arbitrated,” which skewed the average numbers. If so, it’s odd they didn’t say that in the original study.
CMS stepped up with its rule change last year. It prohibited “the use of pre-dispute binding arbitration agreements,” which means a nursing home couldn’t include a mandatory arbitration clause as part of its contract for admitting a new resident.
The agency said at the time that this “will give residents and families greater assurances of the care they receive.”
The nursing-home industry filed suit several weeks later, arguing that opening up the industry to lawsuits was “arbitrary and capricious.”
The Trump administration didn’t require much arm-twisting. The newly Republican-led CMS said that restoring forced arbitration would “reduce unnecessary provider burden.”
It’s all about the bottom line
Because that’s what this is about – the legal and financial “burden” on nursing homes rather than the well-being of senior citizens in their care.
I asked CMS to comment but no one got back to me.
Here’s the thing about arbitration: No one’s saying it shouldn’t be part of the dispute-resolution equation. The choice of avoiding the court system certainly should be available to consumers.
And if arbitration is as effective and fair as businesses keep saying, people undoubtedly would choose the process over litigation.
The fact that businesses want to force people to arbitrate and to give up their constitutional right to a trial indicates that the arbitration system isn’t as fair as claimed, and that it favors one side over the other.
“To get into a nursing home, you shouldn’t have to give up your civil rights,” said McGinnis of California Advocates for Nursing Home Reform.
Indeed, that’s a time in a person’s life when you need more protection than ever. And family members need the peace of mind of knowing that their loved ones are being looked after.
If a nursing home is operating safely and responsibly, what does it have to worry about?