Yesterday, the Department of Health and Human Services’ Centers for Medicare and Medicaid Services published a regulation that bans federally funded long-term care facilities such as nursing homes from using pre-dispute binding arbitration agreements. Under the new rule, long-term care facilities and residents may still enter into an agreement to arbitrate after a dispute arises. The final rule is scheduled to become effective on November 28, 2016.
The Centers for Medicare and Medicaid Services currently controls approximately $1 trillion in federal funds. In July 2015, the agency initially proposed a rule that was focused on improving nursing home disclosure and limiting how binding arbitration may be used in such facilities. The new rule was reportedly expanded to include the withholding of federal funds from nursing homes that require residents to sign mandatory arbitration agreements as a condition for admission at the urging of 16 states and Washington, DC. As written, the rule states residents at long-term care facilities that receive Medicare or Medicaid funds may no longer be required to relinquish their right to sue nursing homes in court.
The new rule is one of the biggest changes to the governing of federal funding for long-term care facilities in over two decades. The change will reportedly affect about 1.5 million Americans residing in more than 15,000 skilled nursing facilities across the nation.
Some commentators have argued the new rule goes against the federal policy favoring arbitration enumerated in the Federal Arbitration Act (“FAA”). For example, the United States Supreme Court refused to consider whether the heirs of a deceased nursing home resident were bound by an arbitral agreement that was signed prior to the resident’s admission in both 2014 and 2015 despite a split among at least 16 states. The nation’s high court also declined to hear a challenge to a 2015 Supreme Court of Texas ruling stating the FAA preempts Texas law in a nursing home dispute.