CAREGIVER AGREEMENTS AND MEDICAID

CAREGIVER AGREEMENTS AND MEDICAID
As our elders begin to need assistance with activities of daily living, usually it is a family member that helps provide these services. Generally, the family member assumes the responsibility of taking care of the aging parent or grandparent out of love or a sense familial responsibility. As such, generally no financial arrangement is in place and the adult child or family member provides these services for free.


THE ‘LOOK BACK’ RULE FOR MEDICAID

The Deficit Reduction Act of 2005 changed the Medicaid “look back” on all gifts from 3 years to 5 years. As a result, individuals concerned about Medicaid eligibility, personal service contracts where a “caregiver” charges for the services provided to their elderly family member have grown in popularity. Payments to family members for services provided are not considered gifts subject to a transfer penalty or the ‘Look Back Rule’ in determining Medicaid eligibility. Services provided can be, but are not limited to:

· paying bills

· shopping

· preparing meals

· making sure the proper medication is taken at the appropriate time

· arranging doctors visits

· accompanying to doctor visits

· transportation

· household chores

· personal hygiene and dressing assistance



THE CONTRACT MUST STATE FAIR LABOR RATES In order for a Personal Services Contract to be accepted by the local Medicaid office it must include certain safeguards:

· Fair Market Compensation must be charged and stated in the contract. So that Medicaid can confirm what services will be provided, credible documentation must be maintained. The service provider, usually a relative, should keep a log of dates, times and services provided.



· The service provider may research the U.S. Department of Labor, Bureau of Labor Statistics, and Occupational Outlook Handbook to assist them in determining the fair market value of services provided. The latest edition can be found online at http://www.bls.gov/oco/ . Personal care services rates can range from $18-$22 an hour and geriatric-care management services from $60-$150 an hour.

· The service provider can either be paid (1) in a lump sum transfer in exchange for services to be provided to the family member for the lifetime of the applicant, or (2) on an hourly or weekly salary rate.

· If the personal services contract is paid by lump sum in advance, the contract must have a provision that provides for the return of any prepaid monies if the caregiver becomes unable to perform the specified duties or the elderly individual passes away prior to the calculated life expectancy in arriving at the lump sum amount.

· The personal services contract cannot state services will be provided on an “as needed basis” because there is no way to validate the fair market value of such services. As stated previously, the services to be provided should be clearly identified, and the amount of days and hours clearly stated.

· No services can be provided while the individual is under the care of a nursing home. Additionally, there can be no duplication of services should a home health aide or other care provider be hired.


INCOME TO THE PROVIDER Caregivers/Service Providers must pay applicable federal, state and employment taxes on the income earned.


CONCLUSION Personal Service Contracts can be a valuable tool in minimizing an aging family member’s estate. Strict formalities must be met, and the service contract cannot be for past services already rendered. A detailed written agreement must be in place before the services start. For assistance in drafting a caregiver agreement and determining a fair market rate of services either weekly or lump sum, please contact this office.



For informational purposes only. Be sure to check with your attorney or financial advisor as well as your state’s Medicaid rules.