Thousands of Americans are currently providing in-home care for an elderly family member, often without being paid for their services. Depending on the circumstances, it may however be beneficial for both parties to enter into a personal care contract wherein the caregiver receives payment for the caregiver services they provide. As often the case under Medicaid, the rules recently adopted by the Department of Human Services (DHS) regarding personal care contracts are very strict and the failure to comply will result in denial of Medicaid benefits.

The in-home care that is provided for a loved one is often just as valuable to them and worthy of payment as the care they would receive in a nursing home or assisted living facility. However, it is extremely important to understand that Medicaid presumes that all care or assistance provided by a relative is done for love and affection. Any compensation received is therefore presumed to be a gift or transfer of assets for less than fair market value which will cause a penalty and ineligibility under the new Medicaid rules. In order to overcome this presumption, the following must be satisfied:

  1. All caregiver services must be performed after a written legal contract has been signed, dated and notarized by the care provider and the client.
  2. The client cannot be a resident of a nursing home, adult foster care home, hospital, etc., nor eligible for the Medicaid waiver, home health or home help programs.
  3. At the time the caregiver services are provided, the services must have been recommended in writing and signed by the client’s physician stating that the caregiver services are necessary to prevent that client from transferring to a residential care or nursing home facility.
  4. The written contract must list the type, frequency and duration of the caregiver services being provided and the amount of consideration (not exceeding fair market value) being paid.
  5. The contract must be signed by the client or the client’s legally authorized representative, such as a power of attorney agent. However, if the representative signs the agreement, the representative cannot also be the caregiver.

Under the right circumstances, a caregiver contract can be a valuable tool in helping loved ones remain in their homes. Also the payments for the caregiver services count as spend down under Medicaid should a nursing home become necessary. If not done correctly however, Medicaid will consider such services as being provided gratultousty (for free) and any payments made will be treated as a gift resulting in a Medicaid penalty. If you are contemplating providing such services, please be sure to consult with an experienced elder law attorney.