To sue or not to sue — Fight playing out in America’s nursing homes

A debate is swirling around what kind of contracts nursing homes are allowed to use and what rights patients have when they receive care. This debate centers on the use of pre-dispute arbitration agreements, contracts signed before any issue arises.

An Obama administration rule banned most nursing homes from settling conflicts with residents through a third party — instead of going through the courts. The ban applied to nursing homes that accept Medicare or Medicaid — almost all nursing homes, in effect — no longer allowing language in facility admission contracts forgoing the option to sue. 

{mosads}Nursing homes sued the administration arguing this rule exceeded the government’s regulatory power, and violated the Federal Arbitration Act’s (FAA) clear statement of congressional favor for third party resolutions.

The litigation was put on hold by the Trump administration, which is now seeking to revise the rule — permitting such agreements so long as they are plainly-written and explained to prospective residents or their representatives when they are admitted to a nursing home. The patient or representative must then confirm they understand what they are agreeing to. But self-styled consumer advocates are still wary of what it could mean for patients rights. 

Some background is helpful.

In May, the U.S. Supreme Court, in a 7-1 opinion written by Associate Justice Elena Kagan, overruled a Kentucky Supreme Court decision that had invalidated the application of arbitration agreements in litigation brought by family members of two nursing home residents. The Kentucky Supreme Court deemed that those exercising the power of attorney on behalf of the two residents could not waive their right to a jury trial. 

Justice Kagan, an Obama appointee, noted that the FAA requires that arbitration agreements be placed on an equal footing with all other contracts, and Kentucky’s ruling disfavoring entering into them in certain circumstances might mean “[s]tates could just as easily declare everyone incompetent to sign arbitration agreements. “ The FAA, favoring arbitration, “would then mean nothing at all — its provisions rendered helpless to prevent even the most blatant discrimination against arbitration.”

As an attorney, I’m not personally fond of pre-dispute arbitration agreements. The members of my long-term care association do not use them. My personal views, however, cannot interfere with the right of others to enter into a contract. As a society, we have the freedom to contract for almost anything. Some deem it reasonable to contract for a more certain, swifter outcome through arbitration than through the costly litigation process. That is their choice. Why would we presume the elderly are incompetent to knowingly enter into pre-dispute arbitration agreements, when they are free to enter into such agreements for other weighty transactions? 

According to the Consumer Financial Protection Bureau, most consumer contracts contain arbitration clauses. Just to give a few examples I can think of: an elderly consumer might sign away his or her right to a jury trial in obtaining a reverse mortgage; in entering into a viatical settlement for a fraction of the value of his or her life insurance; undergoing a hospital surgical procedure; or in purchasing pricey health insurance through one of the “consumer” groups fighting against the change to the nursing home arbitration rule. With respect to any contract, we must always consider one’s capacity to contract – but we do not presume incompetence. 

Consider also another factor: More than 60 percent of those being cared for in nursing homes are on Medicaid — and Medicaid is not meeting the costs of their care.

The Medicare Payment Advisory Commission, tasked with making payment recommendations to Congress, has complained that Medicare, in effect, must cross-subsidize “the low payments made by states and private payers.” I’m surprised groups now purporting to speak out on behalf of residents aren’t vocal about the immorality of Medicaid underfunding — it has a severe impact upon continuity of care, as most of the costs being ignored are staff wages (nationally, 85 percent of nursing home staff are women). New Hampshire’s reimbursement, for example, keeps licensed nursing assistant wages below what the state pays toll collectors. This makes it very hard to recruit, and retain, caregivers. 

If we want the federal government to ignore the FAA, and make it harder for consumers to knowingly waive their rights to a jury trial, we should also require that all states knowingly underfunding Medicaid be jointly-liable for any alleged harms in a Medicaid-contracting nursing home. Such a requirement would go a long way toward improving care throughout the United States.  

Brendan Williams is the president and CEO of the New Hampshire Health Care Association, which represents 90 long-term care facilities. Williams is also an attorney, former Washington state deputy insurance commissioner and former Washington state representative. 

The views expressed by contributors are their own and are not the views of The Hill.