Long Term Planning: Care Contracts for In-Home Caregivers
Article by Lindsay Cummings
With the Baby Boomer generation aging and requiring some level of in-home assistance, their children, now more than ever, are bearing the burden of providing some level of care for their aging parents. AARP has estimated there are 34.2 million adults in the United States who have been a caregiver to an adult age 50 or older in the prior 12 months, meaning roughly 14.3% of all American adults are a caregiver to someone age 50 or older. This may vary from a simple weekly grocery trip to around-the-clock care. These grateful parents want to pay their children for the burden of having to provide the assistance they need at this time in their life, and most often, the children accept the money as an exchange for the work. And why wouldn’t they? If they weren’t providing the care someone else would, and the cost to their parents would be higher than the parents pays the child. So what is the problem? Are there repercussions for this type of arrangement under Michigan Medicaid? The simple answer is YES.
It has been almost a year since the Michigan Court of Appeals interpreted Medicaid’s BEM 405 provision relating to home caretaker/personal care contracts in the unpublished decision Jensen v. DHS case. Mrs. Jensen’s story is one of the most common fact scenarios for someone applying for Medicaid. Mrs. Jensen was an elderly woman with dementia and before she had applied for Medicaid she paid her grandson for the in-home care he was providing for her, including reimbursement for mileage and expenses. Mrs. Jensen also paid a non-family member bi-weekly for 10 months totaling $19,000, for in-home health assistance. Her application was denied because these two expenditures were considered a divestment, which deemed her ineligible for Medicaid.
In Mrs. Jensen’s case the Court of Appeals did not consider her hiring these individuals unreasonable, but rather stated that an elder person may not “fritter away his or her money for unnecessary services simply in order to become eligible for Medicaid.” The Court found that had Mrs. Jensen provided proof from a doctor that these services were necessary and a contract had been in place for those services the court would not have found it to be a divestment.
When applying for Medicaid there is a five-year look back period. In Mrs. Jensen’s case, the DHS worker determined and the Court of Appeals agreed that the money paid to her grandson and the non-family member were both “divestments” under the law. A divestment is giving away your resources, such as income, for less than fair market value. Since this decision in early 2015, estate planning and elder law attorneys have needed to discuss long term planning with their clients as part of the estate planning process in order to protect clients that may need in-home care assistance from a family member.
Over the past year, we have learned several things about divestments and how we can protect families, like the Jensens, from running into the same obstacles when planning for their future, especially long-term care and Medicaid. For example, if your doctor recommends that in-home services are necessary and you choose to pay a family member or a non-family member for services, it is now recommended that you have a Care Contract in place and treat that individual as your “employee.” This can protect you and your family members from having the payment made to these individuals for justified care considered as a divestment under Medicaid. Talk to your attorney regarding your specific needs and be aware that Medicaid will look back up to five years at financials for eligibility issues.
- AARP, 2015 Caregiving in the United States, http://www.aarp.org/content/dam/aarp/ppi/2015/caregiving-in-the-united-states-2015-report-revised.pdf
Posted on February 03, 2016
Tagged as Elder Law