The V.A. permits family caregivers to be paid, but watch out if applying for NJ Medicaid

The Veterans Administration provides a Pension and Aid and Attendance benefit for wartime veterans or their widows/widowers who have low assets and whose income is below the MAPR after deducting their uncompensated monthly health care expenses. Throughout the country, vast numbers of elders are being cared for by family members. Often those family members have given up their fulltime work — maybe even given up their part-time work- to provide this devoted care in the home.  And often the parent feels it is only right to pay their child something for this work.

According to the Family Caregiver Alliance, https://www.caregiver.org/selected-caregiver-statistics “43.5 million of adult family caregivers care for someone 50+ years of age and 14.9 million care for someone who has Alzheimer’s disease or other dementia.[Alzheimer’s Association, 2011 Alzheimer’s Disease Facts and Figures, Alzheimer’s and Dementia , Vol.7, Issue 2.] – Updated: November 2012″

When a low-asset individual is applying for VA  pension, the applicant needs to list all of their recurring health care expenses. If the gross monthly income left over after deducting these expenses is below a threshold called MAPR, the person is eligible for VA Special Pension. If the person is also dependent upon the caregiving services provided by another individual, they can qualify for additional Aid and Attendance. Payments or wages to an in-home caregiver are permissible as deductible medical expenses. A family member can be a qualified caregiver for these purposes, provided that the family member is not claimed as a Dependent on the Applicant’s income tax return. Also, a spouse is not a qualified caregiver for these purposes (i.e., cannot be paid).

There is a form to complete with the application which provides the details of the caregiving. Here’s the application. VBA-21-527EZ-ARE  The hours and wages should be specified. Other than that, a formal preexisting written employment contract is not required. Generally speaking, the payor would issue either a W-2 or a 1099 to the family care giver, but that is the subject for a different day. The applicant should confer with their tax advisor, as should the family member.

In  previous posts, I have highlighted some differences between the VA pension program and Medicaid. The issue of family caregivers is another one. When Medicaid applications are processed, and the agency performs its 5-year look-back, all checks that were paid to a family member are regarded as having been gifts in the absence of “convincing” evidence to the contrary. When it comes to family caregivers, there is a specific regulation – N.J.A.C. 10:71-4.10(b)6.ii. There has to be a pre-existing written contract. The contract has to specify the terms of employment — hours, duties and rates of pay. The rate of pay has to be reasonable or “fair market value.” The applicant should obtain some proof of the market rate for each of the service, in case the agency later disputes the reasonableness of the rate of pay. All of this means that the elder or disabled person needs to have a formal written arrangement with their family member before issuing that first “paycheck,” or they risk having the payments treated as uncompensated transfers — gifts — that result in a denial of Medicaid benefits when they need them later on.

As I’ve said before, the planning for Medicaid and the planning for Veterans Pension benefits are very different. What works for one program can cause big problems if you apply for the other program. Now the VA has proposed new regulations that would make many changes in  the pension program — and would make it similar to Medicaid in some respects. You may want to contact your congressional representatives to express your opinion about it.

I always emphasize the importance of keeping potential Medicaid eligibility in mind, because VA pension is a modest benefit –  a maximum of $1,072 a month for pension and $1,149 for Aid and Attendance in 2015. A person who is in need of  Aid and Attendance is already frail and in need of home health services. This means there is a high likelihood that they could need full-time care within 5 years, and for most retirees, the cost of that care will be well beyond what VA pension can pay for, even when their fixed income is added to it. This is particularly true if they need to move into a  nursing home. The Medicaid transfer penalties create wicked surprises for many applicants. Careful planning can prevent a crisis.

Call us for planning involving Medicaid eligibility and VA pension … 732-382-6070