How a Justice Neil Gorsuch May Benefit Long Term Care Facilities

As the world knows, Tenth Circuit Court of Appeals Judge Neil Gorsuch is being considered for the vacancy on the United States Supreme Court created by the death of Justice Antonin Scalia.  Judge Gorsuch is a conservative jurist who has opined on federal agencies overstepping their mandates.  That perspective may be very helpful to an over-regulated industry, such as long term care.  In October 2016, the long term care industry saw the Centers for Medicare and Medicaid Services (“CMS”) squeeze in a re-write of its regulations just before a change in administration.  Some of those new regulations can be considered of questionable relevance to the mission of CMS, particularly the prohibition on pre-dispute arbitration.

In the 1935 Social Security Act (“Act”), the Social Security Administration (“SSA”) was established to administer the old-age, survivors and disability insurance program.  Under the Social Security and the Administrative Procedures Acts, the Secretary of the Department of Health and Human Services has the authority to promulgate regulations for the purpose of administering the Act.  That charge includes enforcement of standards for services provided by long term care facilities receiving Medicare or Medicaid funding, or both. The only provisions of the Act that address remedies for noncompliance involve agency-administered remedial programs, fines paid to the agencies and denial of federal funding.  No lawsuit option or private right of action is included in the remedial measures. Facility residents can file complaints with their facilities or an agency ombudsperson. So how does this framework permit CMS to regulate arbitration agreements entered into at admission?  It does not.  

The standards to be applied when asserting nursing home malpractice are different from the standards applied when asserting failure to comply with CMS regulations.  The general malpractice standard is what a reasonably prudent nursing home would do in the same or similar circumstances, which is different from an assertion of failure to follow a regulatory scheme.  This distinction cannot be more important because CMS’ rationale for the arbitration agreement ban is funding.  The assertion is that since CMS provides and oversees federal funds, it can make any rules.  This assertion violates CMS’ enforcement charge.  CMS is to enforce the standards and remedial measures Congress enacted.  Those standards are not nursing home malpractice standards.  The remedial measures are not private rights of action.

So how does Judge Gorsuch figure into the mix?  On August 23, 2016, Judge Gorsuch wrote a concurring opinion in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016).  The case involved apparent over-reaching by the Board of Immigration Appeals, which insisted on its interpretation of a statute over the court’s interpretation.  In his remarks on the roles of each branch of government, he noted that the executive agencies were created to ensure execution of legislation.  The agencies neither legislate nor adjudicate.  When the court renders a decision that the agencies believe to be a misinterpretation of a statute, it is the legislature’s role to make any necessary adjustments.  Permitting an executive agency to change the interpretation of statutes or to create new law is essentially casting our system of laws into the political fray with interpretations dependent on the political climate.

Judge Gorsuch stated that the regulatory agencies have been allowed to “swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.  Maybe the time has come to face the behemoth.”  Indeed.

The October 2016 CMS regulations prohibiting pre-dispute arbitration tramples Section 2 of the Federal Arbitration Act (“FAA”), which mandates that arbitration agreements shall be “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. §2.  The Social Security Act is silent on dispute resolution, arbitration and private rights of action.  Further, the regulations ignore decades of United States Supreme Court precedent on enforcement of the FAA, including Marmet Health Care Center, Inc. v. Brown, 132 S.Ct. 1201 (2012), in which the United States Supreme Court struck down statutes prohibiting pre-dispute arbitration contracts.  The similarities with the CMS regulations cannot be more apparent, requiring that they also be struck down.

The nomination of Judge Neil Gorsuch to the U.S. Supreme Court may be just what the long term care industry needs.

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