New regulations issued by the Department of Health and Human Services on Wednesday will protect millions of seniors from a legal tactic often used by businesses to shield themselves from scrutiny and from liability for illegal conduct. Under the new rules, Medicare and Medicaid will cut off payments to nursing homes that require new residents to sign forced arbitration agreements, a contract that takes away the resident’s right to sue the home in a real court and instead shunts them into a privatized justice system.
Forced arbitration agreements proliferated after the Supreme Court interpreted an obscure 1925 law to enable businesses to immunize themselves from suits in the public court system. Congress enacted the Federal Arbitration Act so that, as Justice Ginsburg once explained, “merchants with relatively equal bargaining power” could agree to resolve disputes through arbitration rather than through potentially more costly litigation. Beginning in the 1980s, however, the Court began to read this law more expansively, permitting ordinary consumers and even employees to be forced into arbitration as a condition of doing business with a company.
As a result, even the most egregious cases can be locked out of court. The New York Times reported that “a 94-year-old woman at a nursing home in Murrysville, Pa., who died from a head wound that had been left to fester, was ordered to go to arbitration.” The family of another woman, who experienced “two spine fractures from serious falls, a large, infected ulcer on her heel that prevented her from walking, incontinence from not being able to get to the bathroom, receding gums from poor hygiene assistance, and a dramatic weigh loss from not being given her dentures,” was also diverted into arbitration after they sued the nursing home for neglect.
In case there is any doubt, arbitration is a less favorable venue for parties pushed into arbitration agreements than the ordinary court system. An Economic Policy Institute study, for example, compared arbitration in employment cases to similar court cases. It found that employees were significantly less likely to prevail in arbitration, and that they received significantly less money when they did prevail:
Additionally, while court records are typically public, arbitration can often be secretive. Accordingly, forced arbitration clauses enable nursing homes with a pattern of abuse to hide their illegal practices from public scrutiny.
Because the new rule only applies to people newly admitted into nursing homes, forced arbitration clauses may still impact current nursing home residents (as well as those admitted before the rule takes effect this November). Nevertheless, the rule will eventually phase out forced arbitration in the nursing home context, ensuring that residents will be able to assert their rights in court once again.