CMS should prohibit binding arbitration clauses in contracts, say 16 AG's
Providence, Rhode Island (October 14, 2015) -- Attorney General Peter F. Kilmartin today expressed his strong opposition to pre-dispute arbitration clauses in long-term care facility contracts, saying their use erodes the rights of families at a sensitive time and gives consumers little bargaining power when disputes occur. Attorney General Kilmartin and counterparts from 14 other states and the District of Columbia urged stronger consumer protections in comments submitted to the Centers for Medicare and Medicaid Services (CMS), which solicited feedback on whether binding arbitration agreements should be prohibited in long-term care contracts.
In the comments, the Attorneys General contend that an individual entering a nursing home or other long-term care facility, or family members acting on their behalf, are often making a health care choice under stressful circumstances, and are unlikely to make a rational or informed decision about the resolution of future disputes.
"Pre-dispute binding arbitration agreements in general can be procedurally unfair to consumers, and can jeopardize one of the fundamental rights of Americans: the right to be heard and seek judicial redress for our claims," the Attorneys General wrote. "This is especially true when consumers are making the difficult decisions regarding the long-term care of loved ones. These contractual provisions may be neither voluntary nor readily understandable for most consumers."
In many instances, a resident or family member only discovers the existence of a binding arbitration clause after a dispute arises or a tragic event happens. It typically requires that claims against the business – even for cases of abuse or neglect – must be brought before a private arbitration provider chosen by the facility, prohibiting consumers from filing a lawsuit.
The position of the Attorneys General is consistent with that of the American Arbitration Association, which determined in 2003 that it would not administer healthcare arbitrations between patients and service providers that related to medical services, unless all parties agreed to arbitration after the dispute occurred.
"Pre-dispute binding arbitration can result in long-term care facilities taking advantage of some of our most vulnerable citizens when families are making emotional and difficult decisions about the care of a family member," said Attorney General Kilmartin. "Most consumers are not aware of the fine print in a contract that can severely limit their rights as a consumer when their priorities are rightfully on the health and well-being of their loved one."
The use of binding arbitration agreements has other negative consequences for consumers: less accountability of the long-term care industry; lower awards when an arbitrator finds in the consumer's favor, including in cases of severe negligence or mistreatment; and a reduced incentive to change unlawful or harmful practices.
A Consumer Financial Protection Bureau study of arbitration agreements in financial services contracts found that consumers were largely unaware about whether their contracts contained an arbitration clause and that it restricted their ability to sue in court.
Maryland Attorney General Brian E. Frosh drafted the comments that were submitted to CMS, with assistance from other State Attorneys General. Other states that signed on are California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington and the District of Columbia.