Contracts for Personal Care Services and Medicaid

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One of the fastest growing industries in the United States overall, as well as our region is the provision of personal care in the home. The primary problem with this industry is that it has a very low cost of entry, which results in providers and caregivers covering a broad range of quality. One way to combat disappointment with these types of situations is by treating the engagement of these professionals in a businesslike manner. Most often this is accomplished via the use of a contract.

Oftentimes, conflicts arise in conjunction with the provision of care by a relative of the individual being cared for in the arrangement. In these cases, the Courts have been exceedingly strict about—. As such, it is always wise to use a formalized contract when using a relative for personal care.

However, it is just as important that a contract process be undertaken when using external care providers that are unrelated to the person receiving the care. In certain instances, especially those involving payments under Medicaid, a contract can be the key to a successful outcome in any variety of cases. A recent Appellate Court decision in the state of Michigan sheds some light on the significance of formalizing a contract for such services.

Reversing a lower court, a Michigan appeals court ruled that under state regulations, a Medicaid applicant’s payments to a non-relative caregiver subjected the applicant to a penalty period because the caregiver did not have a written contract and a doctor had not recommended that the service rendered by the caregiver be provided. Jensen v. Department of Human Services (Mich. Ct. App., No. 319098, Feb. 19, 2015).

The facts of this case are common. Jason Jensen hired a non-relative caregiver for his grandmother, Betty Jensen, who suffered from dementia. Mr. Jensen and the caregiver had an informal agreement and no contract was signed, but Mr. Jensen paid the caregiver a total of $19,000 from Ms. Jensen’s assets over the course of the months she worked for Ms. Jensen. When Ms. Jensen’s condition worsened, she entered a nursing home and applied for Medicaid. The state established a penalty period, holding that the payments to the caregiver were an unlawful transfer. Ms. Jensen died before the penalty period ended.

Mr. Jensen appealed, but the state upheld the decision. Under state regulations, payments to caregivers are considered “divestments” (an important characterization). The payments are also considered transfers for less than fair market value unless there is a signed contract and a doctor has recommended in writing that the services be provided, among other requirements. Mr. Jensen appealed to court, and the trial court reversed, holding that the regulation requiring that a contract be in writing applied only to relative caregivers. The state then appealed.

The Michigan Court of Appeals reversed the decision of the trial court, holding that the trial court improperly interpreted the regulations and that the penalty period was appropriate. According to the court, because there was no written contract and no written doctor’s recommendation for the services, the payments to the caregiver were a divestment. The court notes that “it does not appear from the factual record that [Mr.] Jensen overpaid for [the caregiver’s] services, or hired [the caregiver] unnecessarily. If we were not bound by the plain language of [the regulations], and were we permitted de novo review of the lower tribunals’ factual considerations, we would reach quite a different result.”

The takeaway from this Appellate Court decision should be to respect the formality of the relationship through the use of a contract. If you plan to hire a caregiver for you or another, even on a limited basis such as two days a week, it is important to draw up such a formal agreement, especially if you think you may eventually apply for, or use, Medicaid long-term care benefits.

The drafting of the document is not a major undertaking but does require an attorney with eldercare experience.

Should you wish to discuss any element of this case further, or how such a contract might be beneficial for you, please contact Bob Grossman.