A Win For Nursing Home Residents And Consumers

Nurse and patientThe Centers for Medicare and Medicaid Services, an agency under the federal Department of Health and Human Services, has issued a rule prohibiting most nursing homes from forcing residents to resolve disputes using arbitration.

The rule came after officials from 16 states and the District of Columbia urged the federal government to take action against arbitration clauses.

What's Wrong with Arbitration?

As I blogged about previously, many people have "agreed" to arbitrate their disputes (including claims of sexual harassment) without even realizing it.

In 2015, the New York Times did a series of stories on the use (and misuse) of arbitration clauses.

Arbitration is a form of "alternative dispute resolution." It's an "alternative" in that arbitration is not traditional courtroom litigation, where disputes are resolved before a judge and sometimes a jury.

On its face, the concept of arbitration seems reasonable. Court cases are expensive and can drag on for years. What's not to like about a more informal, and theoretically cheaper, way of resolving a dispute?

Class Actions

As the Times explains, one problem is that

By inserting individual arbitration clauses into a soaring number of consumer and employment contracts, companies like American Express devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices.

But concerns also extend to cases that aren't class actions.

As the Times explained in another article in the series,

Over the last 10 years, thousands of businesses across the country — from big corporations to storefront shops — have used arbitration to create an alternate system of justice. There, rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients...

Arbitration can be just as expensive as litigation. One plaintiff — an emergency room doctor who alleged that she was the victim of sex discrimination — was still paying off $200,000 in legal costs seven years after an arbitrator ruled against her.

If her case had been brought in court, she could have appealed an unfavorable verdict. Not so with arbitration.

Arbitrating Murder

As the Times reports,

any nursing home that receives federal funding will not be allowed to force residents into arbitration. 1.5 million nursing home residents will be affected by the change.

The new rules will only affect people newly admitted to nursing homes who have not yet signed contracts with arbitration clauses.

According to the Times, the system of forced arbitration

has helped the nursing home industry reduce its legal costs, but it has stymied the families of nursing home residents from getting justice, even in the case of murder.

The murder involved a 100-year-old nursing home resident who was strangled by her roommate.

The tide seems to be turning against arbitration. In May, the federal Consumer Financial Protection Bureau announced a rule that would prohibit credit card companies and other financial firms from using arbitration clauses to bar class-action lawsuits.

That's good news for consumers, but it may be bad news for companies that have benefited from the use of arbitration clauses.

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