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Are you a responsible party?

Closing Thoughts by Jim Young
Sponsored by Andrews & Young, PC
December 19, 2014

view pdf here

We are taught from an early age to “act responsibly.” A responsible person generally takes care of their personal and financial affairs in a mature way and honors their obligations.

When a person is considered irresponsible, we see them as immature, selfish, unconcerned with the consequences of their actions, and possibly untrustworthy. If you need something important done, you would never ask an irresponsible person to undertake the task. We especially want to be seen as responsible when it comes to the care of our loved ones.

So it may come as a surprise that when it comes to the care of your loved ones, there is a time when you need to be ready to turn down the invitation to declare yourself a “responsible party.” That time is when they are entering a nursing home or other rehabilitation care facility.

Helping a loved one make the transition to a long term care nursing facility, when there is little or no expectation of a return home, is a time fraught with emotional difficulty and stress for all involved. There are many pressures and those involved may not be thinking as clearly as they might in other circumstances, and all may be in an emotionally fragile condition. A son or daughter who is trying to help their parent transition to a nursing facility may be willing to sign nearly anything asked of them without asking many (if any) questions about what they are signing, and therein lies an underappreciated danger.

Upon admission to a nursing facility it is common for the facility to prepare many documents and present them to be signed; some are of real importance, others more mundane and administrative. One package I looked at recently had over 30 pages and at least 11 places for the soon to be resident to sign, not including initialing the bottom of many more pages. As in mortgage closings, the sheer number of documents may have the effect of numbing those involved to what the documents say, especially if the sheaf of documents is handed over by a friendly and helpful staff person in a “here are the standard documents you have to sign” type of manner.

What should you do if you are asked to sign documents as a “responsible party,” perhaps because you hold a power of attorney given to you by a parent or other loved one, or because your are the spouse of the person to be admitted? Do you have to sign them?

Well, increasingly lawyers who speak at seminars on this topic are saying that you should be very, very careful when asked to sign documents related to the admission of a loved one to a nursing facility, and if possible not agree to sign as a responsible party. This advice is given because the obligations of a responsible party as described in the nursing facility’s documents are often open-ended, vague, ill-defined, and hard to perform even with diligence. And if the nursing facility is not paid for its services, you may be on the unpleasant end of a lawsuit for a hundred thousand dollars or more.

It is clear that many people who sign as responsible party are not meaningfully informed of the full extent of the potential liability they are taking on. I suspect that if meaningful disclosure were given to these well-meaning loved ones and relatives, more and more of them would say “no thanks” to the request that they sign as responsible party.

You might take some comfort from statements in the documents that say things like “the responsible party is not a guarantor.” Here it should be noted that this is not a grand gesture on the part of the nursing facility, but rather an acknowledgment of federal law which prohibits a nursing facility from requiring a guaranty of payment as a condition of admitting a person to a facility, or requiring a guaranty as a condition of continued residency.

However, if you were to read about the disturbing number of lawsuits filed by nursing homes against responsible parties, sometimes for six figures, you might begin to feel less comfortable.

Let me digress for a moment about the difference between a “guarantor” and a “responsible party.” A guarantor is one who agrees to be personally responsible for the debts or obligations of another person. The working definition of “guarantor” in legal circles is “an idiot with a pen.” We must, however, except parents from this definition since parents often do things that may well be foolish to help their children.

I recall my mother signing as a guarantor for me when I bought my first new car, which as I recall cost around $2,000 in 1971 – remember those days? And when gas cost only…oh, never mind. There was good reason for her to have doubts about whether I would make the monthly payments of $75. But that is the kind of thing mothers do for their children, foolish or not.

What it means to be a responsible party will vary from one facility to another, depending upon the language of the admission agreement. This is a contract between the facility and whoever might agree to sign as a responsible party.

Nursing homes are allowed to require “an individual who has access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from the resident’s income or resources for such care.” For more information on this requirement, see 42 USC 1396r(c)(5)(B)(ii).

This sounds reasonable. However, the obligations heaped on the responsible party under the language of many admission agreements go far beyond this. In many ways, these obligations approach those of a guarantor. As a responsible party, you may well be incurring personal liability for the costs of the services provided, even if you are not a guarantor of payment.

How, you might ask, does that happen? Well, the lawsuits that are brought against the responsible parties by nursing facilities are based not on any guaranty. Instead, they are based on claims of breach of contract for alleged failure of the responsible party to perform the obligations they agreed to when declaring themselves the responsible party for the loved one.

The duties that a responsible party might fail to perform typically include failing to act promptly and expeditiously to establish and maintain eligibility for Medicaid assistance, including but not limited to taking any and all necessary action to ensure that the resident’s assets are appropriately reduced to remain within allowable limits for Medicaid. Responsible parties have been sued by nursing facilities where, for one reason or another, Medicaid benefits have not been obtained and the nursing facility suffers a loss.

Another duty found in some admission agreements provides that if the responsible party has control of or access to or knowledge of the control, use, or access of the resident’s income and assets, the responsible party agrees that these funds will be used for the resident’s welfare, including paying the nursing home, and obtaining Medicaid benefits. So the responsible party may have liability if funds of the resident, not in the control of the responsible party but of which the responsible party “has knowledge,” are used for some purpose other than what is required under the admission agreement.

It is a surprise that the government has not stepped into this area and required meaningful written disclosures to be given to the parties involved and a three-day right of rescission as to any agreement signed, similar to many other consumer transactions where the liability involved is not nearly as great. I am not suggesting that it is always foolish to agree to serve as a responsible party.

I am suggesting that if you are ever asked to be a responsible party, you should thoroughly and carefully read the document you are being asked to sign and become fully informed as to all of your obligations and legal exposure. You should review the situation with an attorney who is experienced in matters of this nature before you sign the documents.

If someone tells you the documents “have to be signed” or “must be signed,” ask them why, since sometimes such a statement is simply untrue. Find out what the consequences will be if you refuse to sign as responsible party, and make a record of what you are told. Also, it may be that you can negotiate with the facility as to what obligations you are willing to accept, and say no to others.


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