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Federal government moves against arbitration clauses

Arbitration clauses are agreements signed by tenants of nursing homes that they won't sue in case of a dispute, but will instead use private arbitration to solve matters. The Centers for Medicare and Medicaid Services, a branch of the Health and Human Services agency, recently ruled that no federal funds will go to nursing homes who use the clauses for new patients. This is a huge shift to ensure a tenant's right to the judicial system.

Why arbitration?

Nursing homes have preferred arbitration clauses because it keeps costs down, settling matters in-house instead of through legal matters. On the flipside, nursing home residents have felt this arrangement was biased. Arbitration is often handled internally instead of with third party facilitators.

The New York Times notes that arbitration is a common business practice in part because it's confidential. Because of this, statistics are unavailable to compare the fairness of settlements and how they might compare to courtroom decisions. Another benefit for nursing homes is that the confidentiality keeps complaints private and off the public record. Serious charges -- even murders, The Times reports -- have been kept out of court because of arbitration clauses.

Arbitration clauses aren't unique to nursing homes

Credit card companies, banks and student loans also use similar clauses to limit action against their companies, forbidding class action lawsuits and limiting resolution to internal measures. Supreme Court cases in 2011 and 2013 have decided in favor of such clauses in a signed contract.

The Centers for Medicare and Medicaid Services is acting to protect vulnerable nursing home residents who enter into their contracts during a time of need and are likely to sign without full recourse. What many residents and concerned family members often learn later is that they have no legal complaint in court if something is handled improperly. Banning arbitration clauses (for homes that receive federal money) opens another avenue of citizen protection and allows full transparency. Residents will regain their right to sue and prospective residents will have access to a public list of complaints against a company.

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