Tuesday, December 22, 2009

How to Hire a Home Health Aide & Keep Future Medicaid Eligibility

Spotlight on Elder Law: How to Hire a Home Health Aide and Keep Future Medicaid Eligibility

As long term care needs increase, hiring home health aides often becomes necessary. Paying an aide, however, if not done correctly, can cause Medicaid ineligibility years later, after funds run out.

Qualifying for Medicaid requires spending down assets below $2000. Transferring assets may cause Medicaid ineligibility if you do not receive something of equal value back. Medicaid calls this a "penalty". However, and this is key, you must prove to Medicaid that assets transferred are not subject to a penalty. If you pay the aide cash (or check) but don't keep proper records Medicaid will assess a penalty. The aide may be reluctant to give you anything in writing, either because of immigration or income tax issues.

The penalty is calculated by dividing the transferred amount by the average cost of nursing home care. When one applies for Medicaid there is now a 5 year lookback period, meaning Medicaid will look back 5 years from the date of the application to find transfers. They will add together all the transfers made during that time. The penalty will begin when all other assets have been spent down and the individual enters a nursing home and applies for Medicaid.

Let's say Jane hires a home health aide at $700 per week cash, or $3000 per month. She keeps the aide 3 years until her funds run out and now needs round the clock care. A nursing home becomes the only option. She applies for Medicaid but is told, "Sorry, you're not eligible for 16.2 months. You'll have to private pay until then." Of course, Jane has no more money. She'll have to come up with the funds some other way, perhaps from family members. But at $8500 per month or more that may not be possible.

How did Jane get into this mess? Because Medicaid treated her payments to the aide ($108,000) as transfers subject to a penalty. How can you avoid Jane's problem? By keeping records to prove the payments were not gifts, which probably means paying withholding taxes and workers compensation insurance. Another, perhaps better, solution is to hire a home health agency that will supply the aide. Your contract with the agency will satisfy Medicaid that no gift is involved.
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Spotlight on Elder Law is distributed for informational purposes only and does not constitute legal advice. For more information or to receive future mailings contact Yale S. Hauptman at Hauptman & Hauptman, P.C.

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