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Long-Term Care Liability: Past Vs. Present Realities

Explore the evolution of long-term care facility liability from pre-1990 to post-1990, including catalysts of change, reimbursement challenges, government regulations, and legal implications for nursing homes. Gain insights into critical information for actuarial projections.

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Long-Term Care Liability: Past Vs. Present Realities

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  1. Long Term Care Facility Liability Theresa W. Bourdon, FCAS, MAAA Jeffrey Smith

  2. Past Vs. Present • Pre - 1990 • Allegations: limited • Personal injury • Wrongful death • Damages: minimal • Below cost to litigate • Low value attached to elderly life • Causation of injury difficult to identify

  3. Past Vs. Present • Post- 1990 • Allegations: expanded • Intentional fraud • Breach of contract/deceptive trade practices • Negligent hiring • Damages: staggering • Litigation costs reimbursed in some states • Punitive damages • Patient rights emphasis

  4. Change Catalysts • Change to Medicare/Medicaid Reimbursement • Patient advocates • Increased state and federal regulation • Plaintiff lawyers new theories of liability • Bad public image

  5. Reimbursement Changes • Reduced Medicare Reimbursements • Effective July 1998 • Pre 7/98 - Actual cost reimbursement • 7/98 - Transition to prospective pay system

  6. Prospective Pay System • Per diem reimbursement • 44 categories of patients • Drastic underpayment for • respiratory therapy • wound care • prescription drugs • artificial limbs

  7. Medicare & Medicaid in LTC • 2,000,000 Certified beds in U.S. • 53,000 Medicare only reim. • 1,031,000 Medicaid only reim. • 880,000 Both • 1,964,000 Some form of Gov’t aid

  8. Government Regulation • Nursing Home Reform Act • False Claims Act • State laws • Federal reimbursement surveys • General Accounting Office report

  9. Nursing Home Reform Act • 1987 • U.S. Congress • Response to allegations of neglect & abuse • Applies to Medicare & Medicaid participants • Establishes minimum quality of care requirements • Violations apply at state and federal level

  10. False Claims Act • Individuals with knowledge of anyone taking federal money under false pretenses can bring suit on behalf of the government • Plaintiff recovery up to 24-30% of gov’t recovery • Civil cases charging inadequate care

  11. State Laws • Elder laws • Protect against physical & emotional abuse & neglect • Criminal penalties • Imprisonment • Fines • Recoveries • Pain & suffering • Punitive damages • Cost of investigation & attorney’s fees

  12. Florida • Patients Bill of Rights - Statute 400.022 • Guarantees the patients rights to be • informed • provided adequate care • treated with dignity • Violation remedies • actual damages • punitive damages • attorney’s fees

  13. California • Elder Abuse and Dependent Adult Civil Protection Act

  14. Reimbursement Surveys • HCFA cracking down on LTC industry • March 1999 Internet site • 170,000 facilities • Results of surveys required for reimbursement program • 1 in 4 nursing homes tagged with a deficiency

  15. Surveys Change Plaintiffs Strategies • Causation of injury tough to prove • Earnings potential non-existent • Surveys used to allege negligence per se • Evidence of institutional negligence • Support for punitive damages • Plaintiff lawyers now interested

  16. Image Problems • Medicare cuts: denying admissions • Fraud & abuse allegations • Medicare & Medicaid inappropriate billings • Civil & criminal • Violation of patient rights allegations • Multi-million dollar judgements • Focus on inappropriate care

  17. Med Mal vs. LTC Liability

  18. Critical Information for Actuarial Projections • Exposure by state • Historical changes to exposure • Data on sold and acquired operations • Reserving changes • Closed claim development • ALAE changes

  19. Exposure by State • Know about problem areas: Florida, Texas • Severity higher • Frequency higher • Loss development different • ALAE higher • Monitor loss cost trends

  20. Historical Exposure Changes • Active selling/acquiring in problem areas • Need historical data to evaluate • losses • exposures • Impact substantial • Sold operations tend to have bad experience

  21. Reserving Changes • Case reserves dramatically increasing • Reserve strengthening? • Loss trend? • Analysis • Client loss development vs. industry • Current loss development vs. historical • Closed claim development • Loss cost trends (freq., severity, combined)

  22. Closed Claim Development • Size of loss by age closed • To measure trend independent of reserve changes • To estimate severity independent of reserve changes • Rate of closure (closed to ultimate) by age • To determine if claims are closing faster

  23. ALAE • Monitor average ALAE per claim • 50% recovery rate from LTC litigation • New strategies for settling claims • Recognition of cost savings from early settlement • Should impact average ALAE (and indemnity) in the future

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