1. TITLE: Addressing Liability Issues in Consumer-Directed Personal Assistance Services: (it says ‘Secretary’ but I think it should be ‘services’) The National Cash and Counseling Demonstration and Selected Other Models, January 2004 http://aspe.hhs.gov/daltcp/reports/cdliab.htm
2. Authors: Charles P. Sabatino, J.D., and Sandra L. Hughes, J.D., Commission on Law and Aging, American Bar -Association. Funded by the U.S. Department of Health and Human Services (Katherine Cargill-Willis 5/26/04)
3. Cash and Counseling Demonstration: The Cash and Counseling Demonstration delivers consumer-directed personal assistance services (CDPAS), where the consumers have the ultimate decision-making authority in supportive services. The consumer's allowance typically is used to pay wages to CDPAS workers, but consumers can spend part of their allowance on goods and services to make them more independent. Cash and Counseling programs have the following elements:
• All participants are Medicaid recipients determined to be eligible for a specific number of hours of home care services and their long term care benefits are converted into a cash benefit amount or "allowance": equal to the cost of agency care;
• Consumers who elect CDPAS are assigned to consultants;
• The state contracts with one or more fiscal intermediary agencies (fiscal agents) to perform bookkeeping functions.
4. Potential Liability arising from the Relationship between Consumers and Workers: The most likely claims between the consumer and worker are personal injury claims based on the alleged negligence of either party. Workers may injure consumers as they provide personal assistance services (PAS) or by creating hazards in the home. Third parties may also assert personal injury claims against consumers and workers.

Malpractice versus Ordinary Negligence: The threshold question is whether claims against PAS workers must be based on a breach of professional standards (which requires testimony by expert witnesses) or merely ordinary negligence (which can be determined by a jury without such testimony). Case law typically suggests that the majority of these cases involves ordinary negligence and does not require testimony by a professional.

Abuse or Neglect: Under limited circumstances, personal assistance workers also face the risk of liability under state adult protective services (APS) laws. These laws provide the framework for government intervention in cases of suspected abuse, neglect or financial exploitation of vulnerable adults. There are two ways CDPAS workers may become liable under such laws:

1. If they are mandatory reporters and they fail to report suspected abuse or neglect; or
2. If they provide substandard care which constitutes abuse or neglect.

Consumer Liability Risk: Since Medicaid recipients must meet certain income and asset limitations, it unlikely that a worker would pursue a potential claim against a consumer. But the worker might pursue a claim, if the consumer is a homeowner or renter, or resides with a homeowner or renter, who may have an insurance policy on the house or rental unit or be covered by a separate "umbrella" liability policy.

Injuries Caused by the Consumer's Mental Impairment: Many CDPAS consumers have a variety of mental disabilities resulting from dementia, developmental disabilities, and other conditions. When people live in residential care facilities, the courts have generally concluded that they should not be held responsible for negligent or intentional tort causing harm to care providers. This rationale clearly does not apply to a patient with dementia or other mental disability who has elected, or whose family or authorized representative has elected, to have care provided in the home. But it is unclear whether or not a care worker is an "innocent" member of the public, or instead, has knowingly taken on the risks and responsibilities associated with caring for potentially violent people.

Wrongful Discharge and Other Employment Law Claims: In most situations the consumer can lawfully discharge the worker at will, unless:

1. The employee has a contract or some other evidence of a guarantee of continued employment; or
2. The employer's reason for the discharge is unlawful.

Duty of Parent to Control Conduct of Child: A parent is responsible for preventing his or her minor child from intentionally harming others if:

1. The parent knows or has reason to know that he has the ability to control his child, and
2. Knows or should know of the necessity and opportunity for exercising such control.

In the context of consumer-directed care, this means that a parent who is his or her child's authorized representative and who has knowledge (or should have knowledge) that the child is likely to cause injury or damage must exercise reasonable care in hiring a worker.

5. Potential Liability of Authorized Representatives: Authorized representatives may be liable as the joint employer, or even the sole employer, of the worker. This can include liability for on the job injuries, as well as claims by third parties injured. In states that provide for a civil cause of action for abuse of a vulnerable adult, the representative may also be liable to the consumer if the representative abuses, neglects or exploits the consumer.

Breach of Fiduciary Duty: The representative owes a duty of care to the consumer in carrying out his or her functions as a representative and creates the potential for liability to the consumer if the representative is negligent in performing those duties. Most courts recognize both "formal" fiduciary relationships, relationships such as trustee-beneficiary, guardian-ward, partner-partner, director-shareholder, and attorney-client; and "informal" fiduciary relationships or confidential relationships, those in which the court imposes fiduciary duties based on a qualitative evaluation of the relationship. The most obvious example of a potential breach of fiduciary duty by a representative is "unjust enrichment" -- that is, use of the consumer's Medicaid benefits or personal assistance services for the representative's own benefit.

6. Liability Risk of Fiscal Agents: The role of fiscal agents (or fiscal intermediaries) is limited. The primary function of a fiscal agent (FA) is to issue paychecks to workers based on time sheets prepared and submitted by the consumer, and to calculate all required payroll deductions. The consumer (or the representative) is clearly the managing employer of the worker, and it is unlikely that any other person or entity would be found to be the employer for purposes of tort liability.

Potential Liability to Consumers for Breach of Contract: If a worker terminates services because a fiscal agent fails to issue payment to a worker or underpays a worker and the loss of services results in serious injury to the consumer, the consumer may bring a breach of contract action against the fiscal agent. However, it must be proven that the breach caused damages and the harm to the plaintiff must be "shown to be within in the contemplation of the parties at the time the contract was made." Since consumers are required to have "back-up" plans, it would be difficult to prove negligence.

Potential Liability to Consumers for Failure to Monitor Expenses and/or Detect Problems: In two of the three Cash and Counseling states, fiscal agents have some responsibility for monitoring expenses and detecting problems. If the fiscal agent has responsibility for monitoring the consumer's expenditures, the courts are likely to find that the consumer is owed a duty of care. But establishing a duty of care is not the same as establishing liability. It is very difficult to recover damages in these cases because the fiscal agent could argue that the consumer was responsible for the overspending.

7. Liability Risk of Consultants: Consultants are responsible for advising and guiding the consumer through the process of developing a spending plan and hiring, training and supervising CDPAS workers. They also have primary responsibility for monitoring the consumer's experience in consumer-directed care. The consultants face the greatest liability risk of any of the individuals and entities involved in consumer-directed care. The risk of liability is higher because their duties include:

Helping to determine whether an authorized representative is needed, and participating to varying degrees in selecting an authorized representative, when the consumer is unable to direct the consumer's care or if the consumer elects not to do so. If the consultant fails to obtain the consumer's designation of a representative where one is needed, or if the representative fails to act in the consumer's interest, and injury to the consumer results, the consumer may consider a damage action alleging that the consultant was negligent. The consumer may seek compensation from the consultant, if the consultant is employed by an agency that is perceived as a "deeper pocket" than the representative.

Helping the consumer develop an acceptable written plan, including a back-up plan. If an injury results from a defect in the spending plan or the back-up plan, the consumer may sue for negligence in authorizing a spending plan that provides for inadequate care or services; failing to include in the plan services that the consumer contended were necessary; or failing to help the consumer develop an adequate back-up plan. Since he or she is the ultimate decision-maker, a consumer would have trouble proving that liability.

Consultants are also responsible for assisting consumers in the hiring, training and supervision of workers. In CDPAS most workers are family and friends, reducing the negligence or financial exploitation by the worker. Again the consumer is the ultimate decision-maker, so he or she would have difficulty proving that it was the consultant's negligence.

Consultants are responsible for monitoring consumer satisfaction, safety, and spending through initial home visits, telephone calls, reviews of receipts and worker's time sheets. If consumers have physical and/or mental disabilities diminishing their capacity to self-advocate regarding inadequate care, the consultant's failure to make these contacts or to detect and correct problems may result in liability. Since consultants have frequent contact with consumers, they can easily detect abuse of the consumer by a worker, consumer's representative, family member, or anyone else who has regular contact with the consumer. Depending on the state, consultants may be a mandatory reporter under either the state APS law or the consultant's contract with the state, or both, and failure to report can result in liability.

Training manuals for consultants and contractual agreements between the states and consultants contain statements that can be cited as evidence of the standard of care. Program documents may also contain statements that can be helpful to a consultant in defending a claim of negligence.

8. Liability Risk for States and other Government Entities: In programs like CDPAS, states have limited liability since the consumers, fiscal agents and consultants perform many of the traditional functions. Three functions performed by the state, or by contractors for the state, present some risk of liability to the state itself:

   If the state fails to obtain the consumer's (or a legal surrogate, or authorized representative) consent to participate in the program, and the consumer suffers injury, the state may be liable for negligence.

   If the consultant designates or recognizes a representative who fails to provide adequate care, and the consumer is injured as a result, the consumer could file a claim.

   The state usually has some responsibility for resolving serious problems that arise in CDPAS. To the extent that the state itself gets involved in monitoring and problem resolution, it could be held directly liable if it fails to take appropriate action and the consumer is injured.

   The rules regarding governmental immunity vary from state to state and even within a state depending on whether the defendant is the state itself, a unit of local government, or a government employee or official, making it impossible to address if a claim would be barred by the governmental immunity law of a particular state.

   Liability as Alleged Employer: Claims of liability on the grounds that the state is the employer of the CDPAS worker can take two forms. The state is liable for on the job injuries to the worker, usually in a workers’ compensation claim. Also, if the state exercises sufficient control over the independent contractor, the state can be found to be the employer of that contractor and will be vicariously liable for the contractor's negligence and other tortuous conduct, but in CDPAS, the state typically does not exercise such control.

   Liability for Torts of Consultant or Fiscal Agent: There are two situations where the state might be found liable for the negligent acts of consultants and fiscal agents, one based on vicarious liability and the other based on the concept of non-delegable duty. Vicarious liability would apply where the state contracts with a consultant or fiscal agent, and the individual is found to be a state employee, not an independent contractor. The issue is whether the state exercises "a right of control over the manner, means, and details of the work" of the consultant or fiscal agent. The state can protect itself from vicarious liability by carefully drafting its contracts.

   The state could also be liable if the consultant or the fiscal agent while executing a "nondelegable duty" of the state commits a tortuous act. For example, if the state had a nondelegable duty to ensure the safety or welfare of a beneficiary, then the state could not escape that duty by transferring that function to an independent contractor. It is possible that the state could be found to have certain nondelegable duties to consumers, such as a duty to monitor the quality of their care.

   Back-up Care: Although CDPAS does not require states to provide an emergency back-up plan, CMS requires that state programs have "a viable system in place for assuring emergency backup and emergency response when services and supports essential to the individual's health and welfare are not available." It is important to note that although the method the state chooses to fulfill this requirement may affect the likelihood that emergency back-up will succeed or fail, and affects liability. It is clear that this requirement creates the potential for liability for the states if back-up fails and injury to a consumer results.

   Failure to Adopt Adequate Criteria and Procedures to select Authorized Representatives: If the consumer can not designate a representative and the representative who is designated mismanages the consumer's care, a state can be found to be liable if failed to adopt more formal criteria and safeguards ensuring appropriate representatives.

   Negligent Response to Problem or Complaint Regarding Consumer's Care: Although in each of the three CDPAS consultants have the primary responsibility for monitoring the quality of consumer care, the state may become involved with serious allegations of abuse, exploitation, inadequate care or other problems. These oversight procedures can result in liability if the state does not take prompt and effective action whenever a problem occurs.

9. Options to Address Liability Risks:

Inform consumers, workers, authorized representatives and fiscal agents of liability risks documenting the process.

Require workers' compensation coverage for all workers.

Make available optional training programs for workers.

Inform the consumer and the authorized representatives of the possible need for liability insurance coverage if the consumer has assets at risk.

Provide workers' compensation coverage for all individual providers.

Offer provider background checks to consumers.

Advise the consumer to enter into a written employment agreement with the worker allowing termination at will.

Provide information and training regarding employment laws.

Fiscal Agents: Implement a quality management plan; utilize liability insurance; seek assurances from the state regarding the adequacy of back-up plans and check applicability of the state APS law.

Consultants: Implement a quality management plan; utilize liability insurance; clearly communicate and document the consultant's role; ensure that important decisions are made by the consumer; adopt clear criteria for the approval of spending plans and back-up plans; and check applicability of the state APS law.

States: Institute procedures to verify the consumer's voluntary choice; consider adopting more formal criteria and procedures to select authorized representatives; adopt a quality management plan in connection with consultant monitoring and the state's response to problems that are reported by consultants; avoid vicarious liability as the employer of workers by following the Cash and Counseling model; minimize the risk of vicarious liability for the torts of consultants and fiscal agents by avoiding an employment relationship; take care to avoid assumption of additional potential liability risks when drafting regulations relating to the CDPAS; negotiate an indemnity clause in contracts with consultants and fiscal agents and enact legislation limiting liability in connection with CDPAS

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