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Michigan recently changed its Medicaid eligibility rules regarding the treatment of payments made to family members for personal care and home maintenance. These changes should be a concern for anyone who is compensating a family member for taking care of them or their home and who may need to apply for Medicaid assistance.
Prior to the recent rule changes, a person could compensate a family member for providing personal care and home maintenance without it being considered a “gift” or causing Medicaid ineligibility.
Personal care services refers to monitoring health care, securing hospitalization, medical treatment, visitation, transportation, financial management, shopping, etc. Home maintenance services refers to providing repair and maintenance services, or agreeing to pay the future cost of repairs, property maintenance, property taxes, homeowner’s insurance, heat and utilities for real property.
Under the new rules, a relative who provides such services are presumed to do so for love and affection, and compensation for such services shall be considered a “gift,” which will disqualify a person from becoming Medicaid eligible unless stringent guidelines are followed. A relative is anyone related to the client by blood, marriage or adoption. See “The New Medicaid Gift Rules” article for a discussion on calculating a gift penalty.
The rules differentiate between contracts which are “prospective” and “pay-as-provided” type contracts.
In the past, a person could enter into prepaid, lump-sum service agreement with a relative for an amount equal to the total cost of such services based upon the person’s life expectancy without creating a divestment penalty. Under the new rules, these “prospective-type” agreements are considered a divestment.
Agreement which compensate a relative for services provided in a “pay-as-provided” manner, versus a “prospective-type” contract, will also create a divestment unless the compensation is in accordance with all of the following:
1. The services must be performed after a written legal contract/agreement has been executed between the client and provider, and the contract/agreement must be dated and the signatures must be notarized; and
2. The services are not paid for until the services have been provided; and
3. At the time of the receipt of the services, the client is not residing in a nursing facility, adult foster care home, institution for mental diseases, inpatient hospital, intermediate care facility for mentally retarded or eligible for home and community based waiver, home health or home help; and
4. At the time services are received, the services must have been recommended in writing and signed by the client’s physician as necessary to prevent the transfer of the client to a residential care or nursing facility; and
5. Such services cannot include the provision of companionship; and
6. The Department of Human Services (”DHS”) will verify the contract/agreement by reviewing the written instrument between the client and the provider. If the amount paid for services is above fair market value a divestment penalty will result. If in question, fair market value of the services may be determined by consultation with an area business which provides such services; and
7. The contract/agreement must be signed by the client or legally authorized representative, such as an agent under a power of attorney, conservator, etc. If the agreement is signed by a representative, that representative cannot be the provider or beneficiary of the contract/agreement.
Given the serious consequences, any person who may need to apply for Medicaid benefits should avoid paying a relative for personal care or home maintenance services without a carefully drafted formal agreement and without first complying with the above guidelines.