Taking care of an elderly parent – even providing necessary supervision – can be the only thing keeping Mom or Dad out of assisted living or a nursing home. But providing that care can be a full-time endeavor for the caretaker, often requiring significant, life-changing decisions about their own income and living arrangements. The Medicaid rules are set up to encourage family members to take care of their loved ones in the community if possible (thus preventing Medicaid from paying for nursing home care). To that end, Medicaid permits caretaker children to be compensated for taking care of Mom or Dad in two ways.
Medicaid considers any transfer of money for less than fair market value to be an “improper transfer,” or a gift. This means if Mom gives $10,000 to Daughter without getting anything in return, and then Mom needs to apply for Medicaid, a penalty period will be assessed because of the gift. But if Mom and Daughter enter into a Care Contract together, where it is agreed that Daughter will provide certain personal care services to Mom, such as general transportation, scheduling, housecleaning, laundry, cooking, shopping, and bathing, Mom can pay for these services without penalty because Mom is receiving value in return for the payment. How much Daughter is to be paid on an hourly basis depends on the level of care Mom requires, and some consideration ought to be given to the fact that there is a family relationship and that some of the care comes from love and affection – which means that the hourly rate may be discounted from what an average third-party care provider might charge. And during the course of providing the care, all payments should be made pursuant to documented services in a care log or other formal tracking mechanism.
The second way to “compensate” a caretaker child is through a statutory exception to the improper transfer rules talked about above. If Mom transfers her house to Daughter within five years of applying for Medicaid, that will be considered an improper transfer, unless Daughter provided care to Mom that allowed Mom to live at home rather than in a nursing home, and Daughter actually lived in the home for at least two years immediately prior to Mom going into the nursing home. Daughter would need to provide a statement of the date that she moved into the home, a level of care assessment of Mom showing that Mom would have needed nursing home care earlier without care provided by Daughter, and a written statement from Mom’s attending physician stating the kind and duration of care that Mom required. Daughter would also need to provide a written statement of the number of hours per day that she took care of Mom and what specific types of care she provided. There are other requirements for documentation of care. All this demonstrates that the transfer of the home was not a gift, but instead a transfer of an asset in exchange for care that prevented a nursing home stay for at least two years.
These two ways of being paid for taking care of an elderly parent illuminate two core policy goals of the Medicaid Act: 1. Transfers of assets for less than fair market value will be penalized, but 2. Medicaid wants you to use your own assets to take care of yourself before asking Medicaid to pay for a nursing home stay.
Understanding how a caretaker may be compensated for taking care of an elderly parent can ease the burden families face in taking care of each other, especially in already difficult circumstances.