The longer we live, the greater the likelihood that we will require care at some point in time. Many families go to great effort to keep their senior loved ones at home, even if that means bringing care into the home. Unfortunately, care is expensive. Paying for an aide through a home health care agency can cost $25 per hour. Thus, many families opt to hire persons “under the table” (i.e., not through an agency and, often, paid in cash) to help care for their loved ones. Hiring a caregiver “under the table” may be a less expensive alternative to hiring a caregiver through an agency, but it could prove problematic if the person needing care requires Medicaid assistance in the future.
Medicaid is a means-based government benefit that helps qualifying persons pay for their long-term care costs. However, Medicaid has strict rules about how a person can spend his or her assets prior to qualifying for benefits. What may seem like an innocuous, or even reasonable, expense at the time could result in a period of Medicaid ineligibility for your loved one in the future if you aren’t careful.
According to New Jersey’s Medicaid regulations, if a person transfers or disposes of resources for less than fair market value within sixty months of an application for Medicaid benefits (unless a certain exception can be satisfied), the Medicaid applicant will be penalized for having made such transfer. The penalty is a period of ineligibility that is calculated based on the total value of assets transferred.
In D.Z. v. Ocean County Board of Social Services, the New Jersey Appellate Division considered whether payments to private health aides should be considered penalizing transfers for Medicaid eligibility purposes. Unfortunately for D.Z., the Medicaid applicant in that case, the informal nature of the relationship between D.Z. and her aides led the Board of Social Services—and, ultimately, the Appellate Division—to determine that payments to her health aides were uncompensated transfers and, therefore, that a penalty period should be assessed. D.Z. did not enter into a service contract with her aides to memorialize the aides’ compensation rates or the services they were to provide. Additionally, there was no proof offered that the payments were to licensed caregivers whose skills warranted the rate of compensation being paid. In fact, there was no basis for the compensation paid and no evidence presented that the compensation was not greater than the prevailing rates for similar care or services in the community. In addition, the manner in which D.Z. paid her aides was imprecise and unclear, often making checks out to “Cash” for inconsistent amounts and paying certain aides multiple times in a day. A bad fact pattern, to be sure.
Still, there was no evidence that D.Z. and her family were making payments to the caregivers in an effort to qualify her for Medicaid benefits or for any purpose other than to provide her with care. Nonetheless, the family’s lack of understanding of Medicaid’s myriad of rules and regulations proved financially detrimental for D.Z. The payments to D.Z.’s caregivers were deemed uncompensated transfers and resulted in a period of ineligibility being assessed against D.Z. Thus, her Medicaid eligibility was delayed. This harsh result should serve as a warning. If you or your family have hired or are planning to hire caregivers, the parties should enter into a written service contract, which states the hourly rate to be paid and the services to be performed. In addition, a log of the services performed should be maintained. Proof should also be obtained regarding the skill and relevant experience of the caregiver in order to demonstrate that the caregiver warrants the rate being paid.
If you are considering hiring a private health care aide for yourself or a loved one, it is imperative that you first speak to an elder law attorney to structure the arrangement in a legal manner so that payments to the caregivers are not later questioned by Medicaid. If you are considering this for yourself or a family member, or are already engaged in such a relationship, please call our office at (856) 489-8388 to schedule an appointment with one of our attorneys.