State Penalizes Medicaid Applicants Who Have Paid for Home Health Services A court decision issued in February 2015 gives Medicaid applicants cause to fear that they will be denied long-term care Medicaid benefits if they paid for in-home care prior to applying for Medicaid.
Betty Jensen and her home health aid (Jensen v. DHS)
Betty Jensen, an elderly woman with dementia, needed some help in her home. Her son, acting as her power of attorney, paid a non-relative home health aid to provide care for Ms. Jensen. Ms. Jensen's doctor confirmed that she was doing better with the help of this home health aid, and all involved, including the Michigan Department of Human Services (DHS) agreed that Ms. Jensen paid a reasonable rate for the services provided by the home health aid. Ms. Jensen later needed nursing home care and applied for Medicaid assistance. The DHS imposed a divestment penalty for payments Ms. Jensen made to the home health aid because Ms. Jensen and the home health aid had not entered into a written, notarized, physician-certified care agreement in advance of the care and associated payments.
Ms. Jensen appealed this decision. An administrative law judge agreed with the DHS decision, but a circuit court judge later overruled the administrative law judge and agreed that Ms. Jensen should not be penalized. The Michigan Court of Appeals, however, reluctantly agreed with the DHS. The court's opinion suggests that the three-judge panel did not think the outcome makes much sense but that the court is limited to only deciding whether the DHS followed its own rules.
DHS Medicaid divestment rules
When applying for Medicaid to help with the cost of long-term care, a Medicaid applicant will be penalized for any divestment of assets that occurred in the previous five years. In its simplest form, divestment is a gift, bargain sale, or other transfer of assets for less than fair market value. For example, if a Medicaid applicant gave $500 to her child or sold a $4,000 vehicle to her son for $3,000, the DHS will impose a divestment penalty. To the extent that penalty applies, Medicaid will not help with the applicant’s long-term care expenses even though the person otherwise qualifies for assistance. Greater divested amounts result in longer penalties.
Until recently, the DHS has applied this rule only to Medicaid applicants who have paid a family member to provide care. Recently, however, the DHS began applying this rule to Medicaid applicants who have paid non-relative care providers. The DHS now treats payments made to all care providers as gifts, which will result in a divestment penalty for the Medicaid applicant.
A Medicaid trap
Most seniors who hire a home health aid or pay for help arranging transportation to a doctor's appointment do not consider the need for a signed, notarized agreement. Moreover, many seniors who purchase these services do so not to prevent admission to a nursing home but rather to reduce other burdens and maintain more comfortable and independent lives. Despite what the DHS argues, seniors who pay for these services are not giving gifts or otherwise trying to shield assets from Medicaid. They are simply paying for care they need due to their declining health, often in an effort to maintain their independence and forestall the need for institutional care.
The most shocking part of Ms. Jensen’s case for those of us in the senior care community is that the DHS penalized Ms. Jensen for paying a non-relative home health aid a reasonable rate to provide care that her doctor confirmed was worthwhile.
Following the Jensen case, any Medicaid applicant who has paid for home health care is at risk of penalty. Seniors who plan to pay for such care and monitoring and who believe that they may need long-term care Medicaid benefits at some point in the future should consult with an elder law attorney and implement a DHS-compliant caregiver agreement in advance of paying for services. If the senior has already paid for services without a DHS-compliant agreement, such an agreement should be implemented for future payments in order to minimize the potential penalty.
Click here to read the Court of Appeals decision in Jensen v. Department of Human Services
Gregory R. Kish, CELA
Certified as an Elder Law Attorney by the National Elder Law Foundation