On September 28, 2016, the Center for Medicare and Medicaid Services (CMS) within Health and Human Services, controlling more than $1 trillion in Medicare and Medicaid funding, has moved to prevent nursing homes from forcing arbitration clauses into nursing home contracts.
The agency’s decision, which is the most significant overhaul of its rules governing federal funding of long-term care facilities in more than two decades, bars any nursing home that receives federal funding from inserting arbitration clauses into the contracts its residents must sign.
Now nursing home residents in situations of abuse and neglect will get their day in court, and disputes about safety and quality of care will no longer be confidential and out of public view. The ruling, first proposed in July 2015 following pressure from patient groups, came after officials in sixteen states and the District of Columbia urged the government to cut off funding from nursing homes that use the clauses. While efforts through legislation to eliminate arbitration have been unsuccessful, the decision of Health and Human Services did not require congressional approval.
Arbitration Gets Supreme Court Blessing
Two Supreme Court rulings in 2011 and 2013 effectively banned consumers from getting legal recourse through class action lawsuits by permitted businesses to insert clauses into the contracts their customers must sign that require all disputes to be settled in arbitration rather than taken to court.
The Federal Arbitration Act of 1925 formalized the use of arbitration for disagreements between businesses. Since the mid-1980s, the court has expanded the scope of the law to cover disputes between companies and their employees and customers. Arbitration is now the most commonly used method of alternative dispute resolution.
Buried as fine print in tens of millions of contracts, arbitration clauses deprive Americans of one of their most fundamental constitutional rights to bring disputes to court. With arbitration, a dispute is put before an arbitrator, who may be a judge or lawyer. With no jury present, the arbitrator makes a decision after both sides have had a chance to present their versions of the conflict. Arbitrators are not required to follow the law or the reasoning of earlier case decisions, and are free to base their decisions on their own ideas of what is fair and just.
While generally quicker and less costly than formal litigation, arbitration proceedings are generally held in private rather than an open courtroom, with the final resolution confidential. Arbitration decisions are usually regarded as final and difficult to overturn, though an arbitrator’s decision can be appealed if there is proof that corruption, fraud, or undue influence was used in securing the award.