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 Long Term Care Loss Rates On The Rise

Long term care liability loss rates are on the rise, reportedly increasing by 4 percent annually per bed, according to a recent report from Aon Global Risk Consulting (Aon).  The report, commissioned by the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), examines and analyzes the trends in cost of general and professional liability (GL/PL) claims for long term care both statewide and nationally.

A loss rate represents the annual amount, per occupied bed, expected to be paid to defend, settle, and/or litigate GL/PL claims arising from incidents occurring during a given year.

The countrywide annual loss rate has been on the rise since 2009, though the frequency of claims has remained stable since 2008. The severity of these claims, however, has grown to an average $168,000 per claim, a startling jump from a low $109,000 per claim reported in 2005. 

Tort rules differ from state to state, causing the projected loss rates to greatly differ. Nationwide, the loss rate hovers around $1,540 per bed. Texas has the lowest loss rate at $330 per bed, while Kentucky claims the highest at $5,350 per bed.

The analysis also cites liability reform as a significant component behind this disparity.

Arbitration should be encouraged as an effective cost-limiting strategy for long term care providers, the report suggests. Claims settled using alternative dispute resolution agreements are 21 percent less costly than other claims.

Moves to outlaw pre-dispute arbitration agreements in long term care environments arose in 2008, and the issue has stayed in the forefront ever since. Congress and state governments have considered the issue repeatedly, though no laws have yet been enacted.

“Rising liability costs add to the many challenges already facing our profession,” said Gov. Mark Parkinson, president and chief executive officer of AHCA/NCAL. “Lengthy, costly litigation drives up costs for our residents, long term care facilities, and, ultimately, taxpayers. This analysis shows costs exploding in states without meaningful, effective medical liability reform. As state and federal governments search for ways to contain health care costs, this is one area that warrants close examination.”

The analysis concludes that states with medical liability reform, like Texas, have seen a dramatic decline in medical liability costs. At the same time, liability expenses in states without reform or where reforms have been challenged, like Kentucky and West Virginia, are rising.

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