Avoid Medicaid Penalties with a Well-Drafted Personal Care Contract

Did you know that if you are providing care to an older or ailing family member and they are paying you for your services, you could jeopardize their ability to later receive skilled nursing care through Medicaid? Often times, an ailing or older individual would prefer to remain in their private home as long as possible, as opposed to moving to an assisted living facility. When they need help with routine activities, it is frequently the case that a family member or other loved one is willing to fulfill this role and the person receiving the care wishes to pay them for the often demanding work. However, if the level and intensity of care required increases, it may exceed the ability of the family member or loved to provide adequate care. In that circumstance, the individual may have no choice but to seek skilled nursing in a facility and, as is so frequently the case, would need to consider applying for Medicaid to help pay the often-astronomical cost of such care.

Once in this situation, the applicant (or their family member) often discovers to their dismay that Medicaid considers all the payments made to the helpful family member for care in the five years prior to admission to application “divestments.” Under Medicaid rules, a divestment is defined as a transfer of income, assets, or property belonging to the Medicaid applicant and/or his or her spouse for less than fair market value. In essence, the divestment rules are intended to prevent applicants from gifting away their assets to obtain financial eligibility for the benefit. Under Medicaid’s strict rules, payments made to family caregivers under an informal payment arrangement are considered gifts and will trigger a divestment penalty to the Medicaid applicant equal to the total amount of the “gift” payments divided by the average daily nursing home private pay rate. The result is the number of days that Medicaid will not pay for care for an otherwise qualified applicant. Keep in mind that the applicant is otherwise financially eligible at this point and does not have the funds to pay out of pocket for the full cost of their care! This situation can be avoided by preparing a properly drafted personal care contract before paying a family member for care of an older or ailing individual’s care.

To accomplish this, the parties must sign a written agreement to define the relationship between caregiver and care recipient. Of course, there is much more to personal care contracts than simply signing the paperwork. The arrangement must still comply with complex Michigan Medicaid rules. A Michigan long-term care planning lawyer can provide details, but some answers to frequently asked questions may be helpful.

What Should be Included in a Personal Care Agreement?

The contract should be specific in defining the relationship between the caregiver and recipient, especially when outlining the services to be provided and the rate of pay. You may need to address such details as:

  • When and where care services will be provided;
  • Transportation for doctor’s appointments, shopping, and other errands;
  • Housekeeping services the caregiver will provide, if any;
  • Whether the caregiver is responsible for basic medical needs, such as administering medications; and,
  • Any other issues, depending on your circumstances.

What are Some Common Mistakes People Make When Creating a Personal Care Contract?

Even a slight error can result in a denial of Medicaid assistance, such as:

  • Paying the caregiver retroactively instead of advancing amounts for future care;
  • Failing to keep a daily log of services, appointments, and payments;
  • Implementing an unreasonable rate of pay, instead of an amount that would be appropriate in the relevant market; or,
  • Not complying with other Michigan laws that pertain to personal care agreements and their impact on Medicaid eligibility.

Our Team at Cooper & Riesterer can Provide More Details

Hopefully, these answers to common questions about personal care contracts are helpful, but you may need additional information regarding your specific situation. Plus, it is important to get legal help when it comes to drafting an agreement that complies with Michigan Medicaid requirements. To learn more about our services, please contact Jennifer Gross at jennifer@crlaw.biz or any of the attorneys at Cooper & Riesterer, PLC.

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