LTC Bullet:  Sue or Be Sued

Friday, October 10, 2014

Seattle— test

LTC Comment:  If lawyers can sue nursing homes for poor care, shouldn’t nursing homes be able to sue Medicaid for adequate reimbursement so they can provide good care?  How should SCOTUS rule, after the ***news.***

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LTC Comment:  We highlighted two articles about nursing-home litigation for our LTC Clippings subscribers last week.  The first article was about tort liability suits against nursing homes.  Here’s the clipping:

10/3/2014, “
Lawsuits Rattle Nursing-Home Chains,” by Jennifer Smith, Wall Street Journal

Quote:  “Major nursing-home operators and industry groups say many of the lawsuits line attorneys’ pockets while doing little to improve the quality of care. They cite aggressive tactics by some law firms, such as drumming up clients by blanketing areas with ads citing health violations at individual nursing homes, and say a handful of recent landmark verdicts are driving up the cost of settling other suits that may have little merit.”

LTC Comment:  I’ve consulted on a number of lawsuits against nursing homes and can vouch for the profession’s complaints against aggressive tort lawyers.  Seeing the same horrific accusations in boilerplate language across several different suits sows doubt. 

The second article was about the right of nursing homes to sue Medicaid for adequate reimbursement.  Here’s the clipping:

10/6/2014, “
Supreme Court to rule on whether providers can sue states over inadequate Medicaid rates,” by Tim Mullaney, McKnight's LTC News

Quote:  “At issue is the Supremacy Clause of the U.S. Constitution. Idaho officials [representing Medicaid] argue that it prohibits private legal actions like the one brought by the providers. The providers say they have no other recourse to ensure they receive adequate reimbursements to keep offering services under Medicaid. By law, Medicaid funding must attract enough providers so that beneficiaries have roughly the same access to services as the ‘general population.’”

LTC Comment:  The “Boren Amendment,” part of the Omnibus Budget Reconciliation Act of 1981, ensured at least minimally adequate Medicaid reimbursement rates for nursing homes.  Congress repealed Boren in the Balanced Budget Act of 1997 leaving no floor under Medicaid rates.  Experts believe this latest challenge by Idaho LTC providers will fail in the Supreme Court.

Sue or Be Sued

What’s going on?  Why are nursing homes being sued for providing poor care?  Why do nursing homes need to be able to sue Medicaid?  The answer is a sad story about unintended consequences of well-intentioned, but poorly conceived public policy.

Medicaid came along in 1965 and made nursing home care virtually free.  Without asset transfer penalties or estate recoveries in the beginning, costs quickly exploded.  In response, government capped Medicaid nursing home reimbursements which caused cost shifting to private payers.  High private-pay charges and easy Medicaid eligibility led to a rapid and catastrophic decline of private payers and a corresponding increase in Medicaid recipients. 

A vicious downward spiral ensued.  Clever lawyers found more and more inventive ways to qualify affluent clients for “free” Medicaid-financed long-term care.  With fewer private patients paying market rates and most of their residents depending on Medicaid at reimbursement rates lower than the cost of providing the care, nursing homes cut financial corners wherever they could.  Care quality suffered.

Re-enter the lawyers.  Having raked in big fees putting people on Medicaid who should have and could have paid privately, they sued the nursing homes for providing poor care to the same previously affluent Medicaid patients.  Back in 2011, we summed up the story in
LTC Bullet:  Working Both Ends:

If elder law attorneys diligently warned their affluent clients to avoid Medicaid instead of charging large fees to trap them on welfare, far fewer people would depend on publicly financed long-term care.  With many fewer recipients, Medicaid could afford quality care for the genuinely indigent and lawsuits against nursing homes for deficient care would be far less common.  But this kind of ethical behavior would destroy both ends of the lawyers' profit stream--the old-faithful Medicaid planning and the promising new field of nursing home litigation.  So, don't hold your breath.

Turnabout is Fair Play

Prov. It is fair for one to suffer whatever one has caused others to suffer.

If nursing homes can be sued for providing poor care, then nursing homes should be able to sue their principal funder—Medicaid—for reimbursement levels adequate to provide quality care.  But Medicaid will never have enough resources to pay market rates for long-term care, whether the care is provided in a nursing home, an assisted living facility or in recipients’ homes.  Both the problem and the solution are more basic than money.  They go to incentives.

No system that rewards failure to plan responsibly for long-term care risks and costs can survive indefinitely.  Easy access to Medicaid nursing home benefits prevented the development of a privately financed home and community-based care market resulting in the much-maligned institutional bias in the current system.  Making Medicaid LTC available after the insurable event occurs crowded out a market for private financing alternatives like home equity conversion and long-term care insurance.

The end result is the Rube Goldberg arrangement we have today:  a nursing-home based, welfare-financed long-term care system providing low cost care of uncertain quality in the wealthiest country in the world where no one wishes or intends to be institutionalized in old age, yet too many are.  Instead of lawyers and nursing homes suing each other and Medicaid, a much better answer is to give Medicaid back to the poor, incentivize early and responsible LTC planning, and let private payers vote with their feet instead of litigating if they don’t like the care they receive.