Betty Jensen was an elderly woman with dementia, who resided in her home in Muskegon, Michigan. In May 2011, when she needed assistance, her concerned grandson, Jason, acted on her behalf and hired a non-relative, Teresa Alexander, to serve as her Caregiver.
Hiring a Caregiver
When hiring the Caregiver, Jason entered into an informal agreement with her and no written contract was signed. Between May 2011 and March 21, 2012, Jason paid the Caregiver biweekly for her time, using nearly $19,000 of Betty’s assets.
By March 21, 2012, Betty’s dementia had worsened and she entered a nursing home.
Applying for Medicaid
On April 30, 2012, Jason applied for Medicaid benefits on Betty’s behalf. While Betty was eligible, the Department of Human Services (DHS) penalized her for “divesting” funds. Specifically, the DHS found that the payments to the Caregiver (along with some other gifts made by Betty) were “divestments.” As a result of these divestments, the DHS delayed Jensen’s Medicaid benefits for 7 months and 2 days. Unfortunately, Betty passed away on August 28, 2012, before Medicaid began covering her nursing home expenses.
Medicaid Appeals
Jason appealed the DHS ruling to an administrative law judge (ALJ) and lost, because the ALJ agreed with DHS that the payments made to the caregiver were not proper because they were not made pursuant to a written agreement that was put into place prior to the care beginning. Jason then appealed he case to the Circuit Court, again arguing that the payments that were made to the Caregiver for Betty’s care should not be treated as divestments, since they were for a home caregiver needed for his mother’s care. The Circuit Court reversed the ruling in relation to the payments to the Caregiver. However, DHS appealed this ruling the the higher Court of Appeals, and the Court of Appeals reversed the Circuit Court and upheld the ALJ decision upholding the original DHS opinion.
Caregiver Agreements in Virginia and other States
Medicaid rules change frequently, and the rules also vary from state to state. Please note, however, that the law in Virginia and in many other states is essentially the same as the law in Michigan that is cited by the Court of Appeals, as follows:
Relatives who provide assistance or services are presumed to do so for love and affection, and compensation for past assistance or services shall create a rebuttable presumption of a transfer for less than fair market value . . . Such contracts/agreements shall be considered a transfer for less than fair market value unless the compensation is in accordance with all of the following:
– The services must be performed AFTER a written legal contract/agreement has been executed between the client and provider.
It seems clear that Jason was trying to do the right thing by hiring a caregiver for his mother, but Jason had no awareness of the critical Medicaid laws involved for situations such as these, and Jason made the common mistake of failing to consult with an experienced Elder Law Attorney prior to paying the Caregiver.
We learn from this case that if personal services are going to be rendered by a family member or someone unrelated, there needs to be a written agreement in advance of the services, and the services must be needed. It would have been much easier in Jason’s situation if he consulted with a Certified Elder Law Attorney that specialized in Medicaid Asset Protection, in advance.
Medicaid Complexity in Virginia and other States
The Medicaid program is our country’s largest health and long-term care benefits program, covering one in six Americans, including 70% of nursing home residents and 20% of persons under age 65 with chronic disabilities. Medicaid laws are the most complex and confusing laws in existence, and impossible to understand without highly experienced legal assistance. Without proper planning and legal advice from an experienced Elder Law attorney, many people spend much more than they should on long-term care, and unnecessarily jeopardize their future care and well-being, as well as the security of their family. Please read the Medicaid Complexity page on our Website for more details.
Medicaid Planning in Virginia and other States.
Medicaid planning can be started while you are still able to make legal and financial decisions, or can be initiated by an adult child acting as agent under a properly-drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care. In fact, the majority of our Life Care Planning and Medicaid Asset Protection clients come to us when nursing home care is already in place or is imminent.
Nursing homes in Metro DC area cost $10,000- $12,000 a month. To protect your family’s hard-earned assets from these catastrophic costs, the best time to create your own long-term care strategy is NOW. Generally, the earlier someone plans for long-term care needs, the better. But it is never too late to begin the process of Long-term Care Planning, also called Lifecare Planning and Medicaid Asset Protection Planning.
If you have a family member nearing the need for long-term care or already getting long-term care or if you have not done Long-Term Care Planning, Estate Planning, or Incapacity Planning (or had your Planning documents reviewed in the past several years), please call us as soon as possible to make an appointment for a consultation:
Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797
About Evan H Farr, CELA, CAP
