Payments To Caregivers Can Cause Medicaid Ineligibility

Medicaid Planning

A recent Michigan Court of Appeals opinion upheld a decision by the Department of Human Services (DHS)​ imposing Medicaid ineligibility for applicants who pay for personal care services to anyone, including payments to in-home care agencies. The results of this opinion were incorporated into changes made to Michigan’s Medicaid rules that went into effect on October 1, 2015.

The decision in Jensen v. DHS is a substantial departure from prior Medicaid rules. It affects anyone who is providing care services and any person who is receiving or who may need Medicaid benefits in the future. Anyone paying for such care services, in-home care agencies, as well as senior and assisted living facilities (in which such care services are offered to residents) should be familiar with the impact of the decision.


Medicaid Eligibility Rules

To understand the impact of the Jensen decision and recent Medicaid rule changes, you must understand some basic Medicaid eligibility rules. Medicaid will help pay for certain long-term care expenses, including nursing home level and pre-nursing home level care.

To be eligible for Medicaid, a person must meet three basic eligibility requirements which include:

  • Being medically needy (needing nursing home level care),
  • Having income below a certain level, and
  • Having “countable” assets below a certain level — countable assets include everything other than a person’s homestead, a motor vehicle and personal property.

Michigan’s Medicaid Five-Year “Gift” Look Back Rule

In order to prevent people from transferring all their assets away just before applying for Medicaid, the state of Michigan has a five-year “gift” look back rule. That is, the state looks to see if you gifted/transferred assets away within five years of applying for Medicaid. If you have, they imposed a “divestment” penalty period during which, even if you are otherwise eligible for Medicaid, the state will not pay your provider or the nursing home as they normally would.

For a number of years now, the state of Michigan has treated payments to relatives gifts unless certain conditions were met. If you wanted to pay up a relative for providing personal care services, the state required the following:

  • written, notarized contract be in place before the services were provided,
  • You had to pay the care provider fair market value (based on your geographic area) for the services,
  • You could not be residing in a nursing home, and
  • physician certified that the services being provided were such that it was preventing you from being in a nursing home.

However, this long-standing rule only applied to payments for care services to relatives, but not to non-relatives, such as professional in-home care agencies or private, non-relative caregivers.

Jensen v. DHS and the New Michigan Medicaid Rule

The Jensen Decision

The Jensen decision changed the long-standing rule by applying the relative caregiver penalty rule even to non-relative caregivers. The Court of Appeals determined (reluctantly) that the way the Medicaid rule was written, the requirements for relative caregivers applied also to non-relative caregivers. That is, unless you met the above-listed requirements, payments even to non-relative caregivers are going to be treated as a “gifts,” thus creating a Medicaid ineligibility. This is despite the fact the Michigan Medicaid caregiver rule had been in effect for numerous years and had not been interpreted as such by the state during those years.

The New October 1, 2015 Michigan Medicaid Rule​

The October 1, 2015, Medicaid rule change went even further than the Jensen decision did.

The Medicaid rule change indicates that payments for caregiving services will be considered gifts if they are made while the person resides in a nursing facility or adult foster care home — presumably including payments for caregiving services provided while a person is in an assisted living facility.

That rule change indicates that payments for caregiving services will be considered to be gifts if they are made while the person resides in a nursing facility or adult foster care home (licensed or unlicensed). This presumably would include payments for caregiving services provided while a person is in an assisted living facility. This will create a huge problem for professional care providers hired to supplement care in assisted living facilities.

Moreover, although the Medicaid rule change took place on October 1, 2015, the results of the Jensen decision apply to payments for caregiving services even before October 1, 2015, because the Medicaid rule interpreted by the Jensen decision had existed for many years prior.

The recent rule change also makes it clear that a presumptive gift is created not only for payment for personal care services, but also for home care services, such as repairs to a person’s home, property maintenance (i.e. lawn maintenance, snow removal, etc.).

The recent Medicaid rule change also clarifies the definition of a “relative” to mean anyone who is a relative by blood, marriage or adoption.


Payments to Any Type of Caregiver Can Create a Period of Medicaid Disqualification​

The practical effect of the Jensen decision (and recent Medicaid rule) means that payments to any type of caregiver are now considered gifts that will create a period of Medicaid disqualification, unless there is a written contract in place and other requirements (noted above) are met.

How to Pay for Caregiving Services and Still Qualify for Medicaid

Therefore, for families paying for caregiving services for a loved one, it is essential that there be a proper contract in place before payment is made for those services and that a physician’s statement that complies with the Jensen decision. Interestingly, the Medicaid rule change in October did not include the physician’s statement requirement that had previously existed and which was required by the Jensen decision. Nonetheless, we believe it’s wise to obtain such a physician statement regardless.

Through our Medicaid planning services, our firm is available to assist you with the preparation of a qualified caregiving agreement and supporting documentation.

If payments to caregivers have already taken place prior to a written contract being signed, you should consult with the our firm to understand the impact that such payments will have on the person’s Medicaid eligibility and develop a plan to help cover costs during the penalty period.

If you work for or represent an in-home care provider, a senior living community or an assisted living facility (that provides or has outside companies provide care services to its residents), you should have your agreements reviewed and have your residents meet with a qualified elder law attorney to ensure their compliance with these rules. Otherwise, in the future, your residents may be subject to a Medicaid penalty because of services provided by your company. In addition, such payments can affect their eligibility for Michigan’s MiChoice Waiver and Adult Home Help Services programs, which may be paying for part of the services provided by an agency/facility.

To learn more, you can read the Jensen decision or review a copy of the recent Michigan Medicaid rule changes.

For a more detailed explanation of the Jensen decision, we welcome you to watch the PowerPoint webinar presentation that our firm conducted in August. View the webinar by visiting the private Free Resources section of our website.

Related Articles