Many clients come to us after placing a spouse or parent in a nursing home.  They are appalled by the poor quality care $8,000 a month buys.  Often  a child asks “What if we took Dad out of the nursing home and to my house where I will care for him?  Can I be paid thousands of dollars a month for providing better care?”  Sometimes a return to home is not possible, but given the low quality care a child may ask  “Can I now be paid for helping Dad for years taking care of his every need?” Let’s put that question into a hypothetical, but common, fact pattern.

Dad is in a nursing home after hip surgery and his Alzheimer’s is so much worse now that he cannot return to his daughter’s home where he lived for the past three years. She did everything for him. He moved in because he could no longer live safely at home. Even then his Alzheimer’s was at the point where he could not take care of himself. The children looked at assisted living facilities and were shocked at the monthly rent – over $5,000 per month. The kids decided it would be best if he would live with his oldest daughter.

Now Dad is spending his money down for Medicaid. Can Dad now pay daughter $5,000 for every month he lived with daughter as part of his Medicaid spend down? Let’s look at how the law and Medicaid policy look at the question.

General Michigan Law of Personal Service Contracts.

First point: services between parent and child are presumed to be performed for free. It does not matter how valuable the service is. In legal terminology the presumption can be rebutted by proof of contractual agreement. This might be a written agreement. It might be oral.

The facts of this case raise the question of whether Dad was competent to contract. After all he had Alzheimer’s and it got to the point that he could not safely live at home. Could he legally agree to pay his daughter fair market value for “assisted living”? The answer is “Yes, if he understood in a reasonable way.”

But what would he have to understand? Michigan law requires him to understand “in a reasonable way” the agreement that he is making. Would it be enough if he knew he was living with his daughter? No, that does not mean he would pay. So, would it be enough if he knew he was going to pay rent? The answer is “it depends.”

Could Dad understand the concept of rent? We might think that anybody could understand that – but we could be wrong in this case. Let’s go further. Did Dad understand the concept of “assisted living”? Did he understand what his daughter was going to do for him and that he would pay “fair market value” for those services? Once again Michigan law only requires him to understand in a reasonable way. So, could he agree to pay his daughter more than $5,000 per month, say $10,000 per month? Not likely since that would not be considered reasonable.

It is easy to see why an agreement in this case would best be written.

What does Michigan Medicaid require of Personal Service Contracts?

Michigan Medicaid imposes requirements substantially in excess of what general Michigan law requires.  I have questioned whether these additional requirements are “legal.”

Written Notarized Contract: Michigan Medicaid policy requires a written legal contract, signed, dated and notarized. The contract must spell out the show the type, frequency and duration of such services being provided to the client and the amount being paid to the provider.

The policy requires the contract/agreement to be signed by the client or legally authorized representative, such as an agent under a power of attorney, guardian, or conservator. If the agreement is signed by a representative, that representative cannot be the provider. This latter proposition conflicts with general law. If the provider were a court appointed guardian or conservator who signed and performed under court approval, then the policy would conflict with a court order.

May not be in an assisted living facility: The Michigan Medicaid policy puts further limits on payment for services provided. It stipulates that at the time of the receipt of the services, the client may not be residing in a nursing facility, adult foster care home, or medical institution. And at that time the client may not be “eligible for home and community based waiver, home health or home help.” This requirement is ambiguous since the person need only be “eligible” for those programs and not actually participating in them.

Doctor Certification that necessary to keep out of nursing home: The policy also requires that at the time services are received, the services must have been recommended in writing and signed by the client’s physician as necessary to prevent the transfer of the client to a residential care or nursing facility.  One could interpret that to mean that a child could not be paid for care until the parent could no longer live in their home.

These requirements clearly exceed what the general Michigan law require for a valid contract and are not required by federal Medicaid law. The question  arises these additional requirements are legal. Nonetheless, unless somebody wants to challenge the state Medicaid department in court, it is easier to “do it their way.”

Court Case upheld Department’s Requirements: A Michigan Court of Appeals case interpreted the Michigan programs requirements and its conclusion was as bad as one would imagine.  In JENSEN v. DHS,  the applicant’s grandson hired a non-relative health aide by an informal contract to help Mrs.Jensen stay in her own home. Over the course of a year he paid $19,000.  That ended when her condition became so bad she had to enter a nursing home and apply for Medicaid. The Department denied the application because of the payments were not made under a contract that conformed the the Department’s strict rules.  The payments were deemed divestment” of assets. The court upheld the Department’s denial.  “The applicant must prove that he or she did not fritter away his or her money for unnecessary services simply in order to become eligible for Medicaid.”  In other words the paying a non-relative to help grandmother stay in her home was just such frittering.

Moral: Unless payment for all in-home services in the five years before applying for Medicaid are made under a Medicaid contract, an application will be denied.  See an elder law attorney to help you draft such a contract.  Otherwise you will find the money spent avoiding nursing home placement should have been used to make the nursing home placement sooner and used to pay the nursing home.

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