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Why Your Caretaker Agreement Should Be Medicaid-Compliant, Even If You’re Not on Medicaid

Under current Medicaid policy, what you don’t know about care contracts might actually hurt you.  The definition of what is considered a care contract under Medicaid policy is broad.  Currently, any arrangement under which an individual is paying for health […]


Trusts & Estates - Fraser TrebilcockUnder current Medicaid policy, what you don’t know about care contracts might actually hurt you.  The definition of what is considered a care contract under Medicaid policy is broad.  Currently, any arrangement under which an individual is paying for health care monitoring, medical treatment, securing hospitalization, visitation, entertainment, shopping, home help or other assistance with activities of daily living is considered a personal care contract.  Further, any arrangement which pays for expenses such as home/cottage/car repairs, property maintenance, property taxes, homeowner’s insurance, heat and utilities for the homestead or other real property of the client’s is considered a home care contract.  These are the types of things that allow individuals to age in place and remain in their homes as long as possible, as opposed to entering a nursing home.

The reason Medicaid’s care contract policy will harm those who don’t know about it is all payments made to caregivers for any of these types of services within 5 years of applying for Medicaid benefits will be considered a divestment for purposes of Medicaid eligibility unless a Medicaid-compliant caregiver contract was in place.  Divestments are defined as transfers for less than fair market value.  Divestments result in a penalty period during which Medicaid will not pay for an individual’s costs for long-term care services, home and community-based services, home help, and home health.

Most people do not anticipate entering a nursing home or needing long-term care Medicaid benefits.  Even so, they are expected to know when and if this will occur, and they need to know at least 5 years in advance so that they can take the necessary precautions with respect to personal care and home care contracts, or face penalty.  No one has a crystal ball that views 5 years out; therefore, the best practice is to establish Medicaid-compliant caretaker contracts for all personal care and home care contracts to ensure no penalty is assessed in the event that long-term care Medicaid is needed in the future.

Additionally, this policy applies equally to arrangements with both relatives (anyone related by blood, marriage or adoption) and non-relatives (including third-party commercial providers).

For a personal or home care agreement to be considered Medicaid-compliant (i.e. not be considered a transfer for less than fair market value [i.e. divestment] for purposes of Medicaid), each of the following must be met:

  1. The services must only be performed after a written legal contract/agreement has been executed between the client and provider.
  2. The contract/agreement must be dated, notarized, and signed by the provider and the client, either individually or by the client’s agent under a power of attorney, guardian, or conservator, provided that the person signing for the client is not the provider or the beneficiary of services.
  3. No services may be paid for until the services have been provided (there cannot be prospective payment for future expenses or services).
  4. At the time that services are received, the client cannot be residing in a nursing facility, adult foster care home (license or unlicensed), institution for mental diseases, inpatient hospital, or intermediate care facility for individuals with intellectual disabilities.
  5. At the time that services are received, the client cannot be eligible for home and community based wavier, home health, or home help.
  6. The contract/agreement must show the type, frequency and duration of such services being provided to the client and the amount of compensation being paid to the provider.
  7. Payment for companionship services is prohibited.
  8. At the time services are received, the services must have been recommended in writing and signed by the client’s physician as necessary to prevent the transfer of the client to a residential care or nursing facility.

Note, also, that there is a presumption that relatives who provide home and personal care services do so for love and affection only.  Payment for home and personal care services to relatives creates a rebuttable presumption that the payment was a transfer for less than fair market value (i.e. a divestment).  Therefore, even if a Medicaid-compliant caregiver contract is in place for services provided by a relative, if and when Medicaid is applied for, the Department of Health and Human Services will determine fair market value for such services by comparing the contract price to other area businesses which provide such services.  If the relative’s rate was greater, it will very likely be considered a divestment.  For this reason, it would be wise to compare a relative caretaker’s cost of services to other providers in the area in advance to be sure the rate is similar.  Additionally, it is recommended that the documentation gathered is retained in case fair market value is contested in the future.

Questions? Contact us to learn more.Mysliwiec, Melisa

Fraser Trebilcock provides counsel on all matters relating to the legal planning for care and support of those needing Medicare and Medicaid. Attorney Melisa M. W. Mysliwiec focuses her work in the areas of Elder Law and Medicaid planning, estate planning, and trust and estate administration. She can be reached at mmysliwiec@fraserlawfirm.com or 616-301-0800. You can also click here to learn more about our Trusts & Estates practice.