When a person applies for Medicaid to pay for home care or nursing home care, a penalty will be imposed if assets were given away during the preceding five year “look-back” period. There are numerous regulations in federal and state law concerning “uncompensated transfers,” which are gifts. A “gift” is distinguished by law from a “payment for goods and services at fair market value.” In general, any transfer of money from a Medicaid applicant to their family members during the look-back period will be suspected to be a gift unless there is credible proof that it was payment for something. For example, the child may be employed by the parent, or the child may have sold something to the parent. The applicant must show that the payment was not a gift.
In situations where the elder is paying their family member on an ongoing basis to provide home care services, the proofs become very important, so as to prove that this is wages and not a “gift.” Greater scrutiny is given to those situations than to the situation where a non-family member is the paid Aide. Extensive evidence is needed to satisfy the agency that the work was actually done, that there was specified terms of employment, and that the wage was consistent with prevailing wages (i.e. not a wage of $70 an hour for work which is normally paid for at $15 an hour). A written contract isn’t explicitly required, but a recent case strongly suggests that it is needed.
Suppose, though, that the child is being paid now for caregiving services that were allegedly provided in the past? A payment made after the fact to a family member for alleged caregiving services is presumed to be a gift, if services were performed for free before the payment was made and there was no pre-existing written contract spelling it all out. For such situations, the burden of proof is on the applicant to produce “credible documentary evidence preexisting the delivery of the care or services indicating the type and terms of compensation,” as well as proof that the wage was at “prevailing rates for similar care or services in the community.” N.J.A.C. 10:71-4.10(b)6.ii.
The recent decision in E.B. vs. DMAHS illustrates the common problem all too well. The decision is not approved for publication, which means it is non-precedential and is limited to its facts and the parties in the case.
E.B. moved into her daughter’s home, and the daughter began providing some caregiving services when she was not at her job. After two years, the daughter quit her job and became the full-time aide. The absence of income began to create a hardship for her. She was the Agent under Power of Attorney for her mother. She did some research about prevailing wage for this kind of work, and then using her mother’s funds, she began to pay herself $10 per hour for 40 hours a week of home care companionship services plus $25 per week for the two-and-a-half hours she claimed she spent each week to shop for petitioner’s food, medication, and toiletries, “for a total of $425 per week from April 2011 to May 2013, when petitioner entered the nursing home. J.W. did not keep a ledger of the services she provided and the days and hours she performed them. J.W. claimed that, when lucid, her mother understood and agreed to J.W. paying herself from petitioner’s funds to compensate J.W. for her services.”
When E.B. applied for Medicaid to pay for her care, she was penalized for the $69,211.90 she had paid her daughter. (note that this amount divided by $425 is just over 36 months, so part of the payment must have reflected post-facto payment for work previously done). After a hearing with testimony and other evidence at the Office of Administrative Law, the penalty was upheld by the Division (DMAHS), and this appeal followed. The Appellate Court upheld the penalty.
The Administrative Law Judge found that (1) there was insufficient proof of the actual tasks performed, (2) there was insufficient proof that rate selected was prevailing wage, and (3) there was no pre-existing written contract. The Judge held it against her that she began receiving wages when it was “foreseeable that [petitioner’s] advanced age and deteriorating condition would require intensive care and the possibility of entering a nursing care facility.” This is a completely irrelevant consideration, as a person receiving care in the home would otherwise have to BE in the nursing home!! The Director of Medicaid affirmed those conclusions.
The primary problem for E.B. was that the Medicaid Agency was not satisfied with the proofs provided. The Appellate Court emphasized that there was no written agreement specifying terms of employment, and there were no records showing exactly what work was done, when and how. However, the Court was harsh, criticizing the daughter for choosing to be the caregiver rather than hiring somebody outside the family. I find this criticism deeply disturbing and unfair. National and state policy encourages people to take care of their family members, and in fact, the Medicaid home care program is only part time because it is presumed that there is someone available to fill in the gaps. Further, the Court did not distinguish between the payments for ongoing work and the payment for work previously done. The Court found that “Petitioner did not rebut this presumption. She did not provide the requisite “convincing evidence” the asset was transferred exclusively for some purpose other than to establish eligibility. First, J.W. did not show why she could not have paid a competent professional ten dollars per hour to take care of her mother, which would have freed her up to return to work. As a former claims adjuster, presumably J.W. was capable of earning more than ten dollars per hour and, thus, would have been in a better position to address her budget needs. Further, while a third party may not have been a relative, that does not mean a competent professional caretaker could not have been located to meet petitioner’s needs.amount of proof that this was payment of wages for work that was actually done.”
The lesson here is that it is still perfectly legal for children to be employed by their parents to provide senior care in the home. However, the demands of the Medicaid program for elaborate proofs to disprove the notion that a payment was a gift require the applicant to prepare a strong paper trail coupled with enough corroborating formal evidence to satisfy a state auditor. Informal verbal arrangements will not be sufficient. Assembling proof beyond a reasonable doubt is the safest approach to take.