It is a great relief when you can find a person you trust to take care of your parents or loved one as they age. Caregivers can be a great help for those who may not be totally self-sufficient. But there may come a time when your parents’ needs exceed the scope of an in-home caregiver. At this point, you may look nursing home care for your loved ones, especially if medical professionals feel that that is necessary.
Once in a nursing home, most people will try to qualify for Medicaid, which is the only governmental program that will pay for long-term care for seniors. Medicare and Medicare’s supplemental insurance will not pay for long-term care despite the public’s misunderstanding of this. It is at this point of applying for Medicaid that many discover that any prior payments to caregivers may be treated as unallowable transfers resulting in a penalty period before your loved one is eligible for Medicaid.
This means that your otherwise eligible parent will not be able to receive payment for their care needs immediately, and will have to continue paying for the nursing home care out of pocket until the penalty period created by unallowable transfers to prior caregivers has run out. Ouch!
However, with proper documentation, you can avoid the penalty period and have a chance to help your parents qualify for Medicaid right away. Since Medicaid uses a five-year look-back period, as soon as you hire a caregiver, start keeping track of their work and how much you pay them. Have a written contract describing the caregivers’ responsibilities and compensation, which you can use as evidence of the legitimacy and fairness of the prior payments to protect your loved ones from a penalty period later on. You are well advised to seek the counsel of a qualified attorney in drawing up any such contract.
The contract should identify the caregiver, state how much money the caregiver was to be paid per hour (note: this must be a commercially fair and reasonable rate) and list how many hours per week the caregiver will work. If you did not make a contract with your caregiver, you may still be able to avoid the penalty period by showing appropriate documentation. Receipts, invoices, and cancelled checks can help to show that the payments to caregivers were allowable and prevent your parents from incurring a penalty period. But without enough documentation of where and to whom the transfers were made, your loved ones may be denied Medicaid. It is safer to have a written contract in place before services begin.
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