NCPA - National Center for Policy Analysis

Liability Crisis for Long-Term Care Providers

April 21, 2003

Nonprofit and faith-based long-term care providers in Texas and throughout the country are facing a crisis of runaway litigation and spiraling liability insurance costs. Like for-profit nursing homes, the nonprofits have become defendants in an increasing number of lawsuits, with severe financial consequences.

For example, for the Sears Methodist Retirement System, based in Abilene, Texas, provides care for more 1,300 residents. Its annual liability insurance premiums increased from $17,000 in 1998 to $865,000 in 2003.

  • More than half of Texas' approximately 330 nonprofit long-term care providers are going "bare" -- making the conscious decision to carry no liability insurance because the costs are too prohibitive.
  • And about 30 percent of Texas' nursing homes have declared bankruptcy and ceased their operations.

The Texas Legislature is working on an omnibus tort reform bill that could help limit frivolous litigation and outlandish jury awards. Among the provisions supported by nonprofit nursing home providers:

  • Set a $250,000 punitive damage cap in jury verdicts against providers, plus two times economic damages.
  • Require proof of criminal action by providers through court decisions before proceeding with lawsuits against nursing homes.
  • Limit contingency fees that personal injury lawyers may collect, setting up a diminishing sliding scale for fees according to the amount of the recovery, judgment or settlement.
  • Require that exemplary damages awarded in Medicaid cases go toward reimbursing the Medicaid system.
  • Bar the use of state survey reports as evidence in lawsuits against nursing care providers.

Even if those measures are signed into law, state regulators and insurers must establish a system of fair and reasonable underwriting practices for long-term care insurance providers. About 80 million Americans will enter retirement age in 10 to 15 years. The number of Texans 75 years and older are projected to increase from 930,000 in 2000 to 3.1 million by 2030.

Source: D. Keith Perry (president, Sears Methodist Retirement System), "Nonprofit caregiving is in crisis," Legislative Watch, Dallas Morning News, April 21, 2003. Browse Sears Catalogue.


Browse more articles on Government Issues