I find that most people are already aware of the five year look back period that impacts Medicaid benefits to cover expenses for in-home care, assisted living, or nursing home care. The Department of Health and Human Services (“DHHS”) must be told about all transfers within five years of applying for benefits that were for less than fair market value. For example, if someone gave $15,000 away to a child before filing for Medicaid then the DHHS will impose a penalty in the form of not covering services for a certain time. Giving away assets in this way is referred to as divestment. This rule is necessary to discourage people from just giving away their assets and then seeking government assistance. But families with the best intentions are facing divestment penalties for in-home care giving by individuals. This is how it is happening.
A husband hires a neighbor to help with the caregiving needs of his wife who has dementia. She needs help with bathing and dressing each morning and night and someone to stay with her when he runs errands. He pays her $10 per hour to come 2 hours each day. This arrangement continues for three years. His wife then develops some complicated medical issues that require care and expertise that neither he nor the caregiver can adequately provide for.
He finds a skilled nursing facility that is close to his home and even though it is hard to be apart from his wife he knows that is where she needs to be. The cost is $9,000 per month. He consults with an attorney who specializes in elder law to find out the rules for Medicaid eligibility as he knows that his funds won’t last long with this large monthly expense.
After describing his financial situation and the care he and the neighbor have provided to his wife over the past year, the elder law attorney sadly tells him that the DHHS will assess a divestment penalty on the payments that were made to the neighbor. Specifically, for every $8,469 (2019 figure) that he has paid to the neighbor, the DHHS will not cover 1 month of nursing home care. If he has paid the neighbor $20 a day for three years, then he has spent $21,900 on caregiving. The DHHS divides $21,900 by $8,469 to determine that it will not pay for nursing home care for 2 ½ months. This will cost him about $22,500 out of the funds that Medicaid lets a spouse keep (called the Community Spouse Resources Allowance). Why is this and how could this have been avoided?
When someone has paid a caregiver (that is not working for a company) and then files for Medicaid benefits, the DHHS will treat the payments as divestment EVEN THOUGH the care recipient was receiving services in exchange for payment. The only way the payments will not be treated as divestment is adherence to some very specific rules. Rules that the husband in this situation had no idea about. He was just doing what was best for his wife and trying to keep her out of a nursing home for as long as possible. Here is what is required to avoid a situation like this.
- The care services must have been recommended in writing (and signed) by the care recipient’s physician.
- A written legal contract must be signed by the care recipient (or their power of attorney) and the caregiver.
- The contract must specify the services that are going to be provided, the frequency, duration, and consideration (how much the caregiver will be paid).
- The signature of the care recipient (or their power of attorney) and the caregiver must be notarized.
- The services can be performed only after the contract was signed. Services rendered prior to the contract cannot be paid for after the contract is in place.
Although these rules aren’t difficult to comply with – the fact is that many people just don’t know about them until it’s too late. In this scenario, the husband has funds to pay the penalty. But in the case of a single person that spends down all assets to $2,000, the divestment penalty can be impossible to pay. Further, if a caregiving situation has gone on for several years the penalty could be staggering. I had a family face a $150,000 penalty for caregiving.
Please help spread the word that getting a contract in place is critical before hiring an individual to provide care. The rules are broad enough so that a caregiving company is not specifically excluded from these requirements, but we currently are not seeing those types of caregiving situations evaluated for divestment by the DHHS. Please also note that this article shall not be construed as legal advice. There are some other details and factors that need to be considered when putting a contract like this in place so you should seek the advice of an elder law attorney rather than attempting a contract on your own.
I am happy to report that people who care about this issue and want to fight for families that this policy has harmed and will harm in the future are doing good work. There have been meetings with DHHS staff, legislators, and other folks to see if there is a way to make the rules less punishing for those who didn’t know of the requirements. After all, those who choose to find ways to keep their loved ones at home are doing so with no expense to the state and should be encouraged rather than punished.