The New York Times announced last night that the federal government is banning arbitration clauses in nursing homes that receive Medicare and Medicaid funding, which is pretty much all of them.

It’s nice to see that the nursing home industry isn’t happy, since they are lying about arbitration:

The nursing home industry has said that arbitration offers a less costly alternative to court. Allowing more lawsuits, the industry has said, could drive up costs and force some homes to close.

It’s a lie. Arbitration isn’t less costly than court. It’s more costly. The parties don’t pay the judge in court. In arbitration they do. Otherwise, the costs are the same. How are the parties saving money forking over $15,000 or $20,000 to the arbitrator?

Why can’t they just tell the truth? “We like arbitration because it scares off some lawyers and arbitrators aren’t going to light us up like a jury might. Some arbitrators might even shade it in our favor to try to get some repeat business.”  That would be a crappy thing to say, but people hate getting lied to more.

This is a great first step to the eventual ban of pre-dispute arbitration clauses in all consumer contracts. When it will be really good is when banks, car dealerships, credit card companies and the like can’t escape accountability with arbitration clauses buried in terms of service or contracts that no one reads and has no choice but to sign even if they do. That day is coming.

As for nursing home litigation in Mississippi, I don’t see it changing much in the current environment. Nursing home cases don’t work well for plaintiffs in Mississippi because of:

  1. the $500,000 non-economic damages cap;
  2. nursing home cases are expensive and labor intensive–much more so than a med-mal case;
  3. most nursing homes carry little or no insurance as a defense strategy; and
  4. medicare and medicaid liens eat up a lot of any recovery.

Add all that together and you can’t get much of a recovery for a client. The biggest problem for plaintiffs in nursing home cases in Mississippi is the math. Plaintiff lawyers look at it and think:

  • if we win or settle I will get a nice fee, but after the fee, expenses and liens, the client will get little money–a fraction of the recovery. Is the client going to be happy? Probably not. I think I’ll pass.

Plaintiff lawyers have to worry about unhappy clients in a different way than defense lawyers. Unhappy defense clients switch lawyers on the next case. Unhappy plaintiff clients file bar complaints and fish around for a lawyer to file a legal malpractice case.

The Mississippi Supreme Court already wasn’t a fan of arbitration clauses in nursing home contracts anyway. Half the time they weren’t enforceable because the nursing home would size the family up and get someone to sign who they could sue to collect the bill after the patient died instead of the actual patient (who was sick but not incompetent).

For things to get really better we’d need to see the caps thrown out or raised to at least $1 million and a law passed requiring nursing homes to carry a decent sized amount of insurance. It would also help if Medicare and Medicaid would reduce their liens more.

At one time nursing home cases were my biggest practice area. At the moment the only case I have is one where I am local counsel for an out of state firm. While I am happy to see this change in the law, it’s not enough to make me start marketing for nursing home cases again.

Hopefully, I’m wrong. But another lawyer who I worked with a lot on nursing home cases forwarded me news of the law’s passage in an email that said: “Too late but good.”  So I don’t think my reaction is off base.