Clear the way for Medicaid
Making payments to a family caregiver without a personal-care contract in place may delay a parent's eligibility for long-term care coverage under Medicaid.
The money a parent pays to a family caregiver, absent an agreement in writing, will be deemed a gift by Medicaid, causing a period of delay where the parent will not qualify for the Medicaid benefit, Krooks says.
At the time of a parent's Medicaid application, Medicaid will total all the payments made to a family caregiver in the past 60 months and divide that total by the average monthly cost of a semiprivate room at a nursing home in the state.
The quotient is the penalty period, which equals the number of months Medicaid will not pay for nursing home care.
Let's say the average cost of a nursing home is $5,000 per month, and a parent pays a family caregiver $30,000 over the course of three years and then applies for Medicaid.
Without a caregiver contract in place, Medicaid could deem those payments as gifts, delaying the parent's Medicaid eligibility by a penalty period of six months. That number of months is determined by dividing $30,000 by $5,000.