“Informal” Arrangements for Home Care? What’s the Downside? Here’s One…

When it becomes impossible for a loved one to stay at home without help, one decision that families made need to face is whether to use an agency, or hire one or more individuals outright. Agencies are usually more expensive (at least on paper). But direct hires of home aides can raise other questions, including how to handle state and federal income taxes and documentation, insurance, transportation (read: more insurance questions), coverage for holidays, sick leave, overtime, and more.  You start off thinking this is short term help; the reality is it can last much longer….

But there is still one more question that may not be on the family’s radar screen, until it is too late.

If the informal home care arrangements eventually don’t suffice, perhaps because of increasing frailty and care needs, what happens when the individual’s money is gone and there is a need for Medicaid-paid care?  

As explained in a recent Michigan Court of Appeals case, “informal” arrangements for home care may trigger ineligibility for Medicaid-paid care based on state rules or policies implementing federal law.

In Jensen v. Department of Human Services, decided by the Michigan Court of Appeals on February 19, 2015, the court was asked to review an administrative decision denying Medicaid on the grounds that “contracts/agreements shall be considered a transfer for less than fair market value” unless services are performed “after a written legal contract/agreement has been executed between the client and provider,” and the services are “recommended in writing and signed by the client’s physician as necessary to prevent transfer of the client to a residential care or nursing facility.”  The department treated the “informal” (read — oral) agreement as insufficient to satisfy the standards set forth in “BEM 45 – the applicable policy upon which [the Department of Human Services] relied.” 

The Court pointed to federal law providing that a state plan must permit home or community based care, provided it is “pursuant to a written plan of care.” See 42 USC 1396n(d)(1).  Michigan’s “policy” interpretation is a bit more specific, right?

In the case,  a concerned grandson arranged for a home health aide for his elderly grandmother, with the arrangement lasting approximately 10 months, at a cost of $19,000, and paid for out of the grandmother’s savings.  No one asserted this sum was unreasonable. But there was no written contract. No one contended the help was unnecessary. Indeed, medical records for his grandmother documented that she was doing “better” with the help of the home health aide.  But there was no “written recommendation” for such care. 

It seems pretty clear from the evidence that the grandson was mostly trying to do the right thing, but he seemed to be doing so without awareness of several laws.  In response to the eventual application for Medicaid, the agency imposed a penalty period; the grandmother died in the interim. 

Ultimately, the court rejected the family’s argument that denying Medicaid in these circumstances elevated form over substance.  The court affirmed denial of Medicaid, based on the department’s enforcement of the stricter state policy, even though it was clear the court did not like the outcome. In a footnote, the court explained: “[It] does not appear from the factual record that [grandson] Jensen overpaid for [home health aide] Alexander’s services, or hired Alexander unnecessarily. If we were not bound by the plain language of [state policy] BEM 405, and were we permitted de novo review of the lower tribunal’s factual considerations, we would reach quite a different result.”

Who tells families about these Medicaid state policies “in advance?”  Elder law specialists can, but only if families consult them — in time.  Even the February 2015 decision in Jensen v. Department of Human Services doesn’t really help on the notice front — it is “unpublished.”