The number of people who, in a relatively short period of time, will require daily long-term care is increasing by the day, and while some have purchased long-term care insurance, the reality is that many more have not, and will instead have to rely on other means of paying for care, including their own personal assets and Medicare, and potentially Medicaid.
For those who have no choice but to turn to Medicaid benefits, oftentimes family members attempt to intervene and provide care themselves instead, which in turn can put a strain on their own personal finances. Fortunately, under certain circumstances, family caregivers may actually be eligible for some level of reimbursement from Medicaid for the time they spend caring for family members!
In this guest post, Rafael Bernard of In Good Company details the rules and planning issues when trying to qualify for “Cash and Counseling,” a Medicaid program that provides for a monthly budget for people on Medicaid whereby they can reimburse family caregivers for providing Activities of Daily Living (ADL) assistance services (albeit with rules that vary state by state).
The essence of the Cash and Counseling program is for an individual who already otherwise qualified for Medicaid to obtain a “waiver” that will allow them to use their Medicaid reimbursement payments to compensate a family member or friends for care. Unfortunately, securing the proper waivers is no easy feat, and even then, some states limit the total number of waiver enrollments, which could mean that the Medicaid recipient gets put on a waiting list. In addition, many states will not permit spouses to be reimbursed for ADL services, only other members (leading to the rise of a phenomenon known as “Medicaid divorce”). Additionally, to qualify, family members themselves first need to get training and then be approved by the state as a Personal Care Attendant (PCA).
To help protect themselves from Medicaid later re-labeling Cash and Counseling payments as inappropriate gifts, it’s advisable for the Medicaid recipient and family caregiver to meet with an Elder Law attorney to draw up a formal caregiver contract, and to meet with a financial management service company (FMC) to help with calculating payroll taxes and with tracking hours worked to respect the formalities of the program.
Ultimately, family members who decide to become caregivers will still face challenges of their own, especially since the Cash and Counseling reimbursements to family PCAs are not intended to be a “good” wage, but simply to help partially ameliorate (and buffer the financial opportunity cost of) what is otherwise an even more damaging family cost of taking time off to provide care during one’s peak earnings years. Nonetheless, with Medicaid recipients who receive in-home care from family members reporting a higher quality of life versus a nursing home, and many family members feeling an obligation to help provide care where at all feasible, the Cash and Counseling program may make it at least a little more economically feasible for family members to help their loved ones receive the care they wish to give themselves.
(Michael’s Note: Rafael Bernard, MSFP, CFP®, is a financial planner at In Good Company, a MassMutual collaborative learning lab that provides accessible financial education, located in Brookline, Massachusetts. He is an alumnus of Bentley University’s financial planning program, and a member of the Massachusetts chapter of the FPA. You can contact him at firstname.lastname@example.org.)
Every day thousands of baby boomers are approaching an age or condition where they will begin requiring daily long-term care. While some had the foresight, guidance, and wealth to purchase a form of long-term care insurance, the vast majority will have to rely on the relatively limited long-term care benefits of Medicare, and otherwise may spend down their personal assets to the point that they are at the mercy of Medicaid as their health declines.
In most cases, those who rely on Medicaid end up going to a nursing home that accepts Medicaid patients, but many families attempt to intervene and provide care in the home as family caregivers. In some cases, severe health conditions simply do not make family caregiving feasible, but often, the limitation is simply that the family itself cannot make its own financial ends meet by taking time off from work to care for elderly family members. Which is why it’s crucial to know that family caregivers may actually be eligible for reimbursement by Medicaid for the hours they put into caring for their relatives on Medicaid.
Medicaid’s Cash And Counseling Program To Pay Family Caregivers
The laws regarding reimbursement compensation to family caregivers under Medicaid state programs, widely known as “Cash and Counseling,” are not well known to most and vary by state. Cash and Counseling is a “self-directed” program (also known as “consumer-directed” or “participant-directed”) for people on Medicaid. A senior accepted into this program will be given a monthly budget for purchasing Activities Of Daily Living (ADL) assistance, and with the appropriate waiver, the cash from this budget may be used to hire a family member as a Personal Care Attendant (PCA) caregiver for helping with those ADLs.
Unfortunately, each state has its own name for this program with its own regulations, making planning difficult for financial advisors who have clients and/or client’s relatives residing in many different states. But there are several sites online that track such information for each state, where you can enter the senior’s information to discover which state programs he or she is eligible for. (It also may be helpful to direct them, or any senior client for that matter, to Benefits Checkup to see what other programs they may possibly take advantage of.)
Notwithstanding particular variances from one state to the next, to qualify for paid family caregiver benefits under Medicaid in general, the senior will first have to apply for Medicaid in the appropriate state at their local Medicaid office. After that, the senior must apply to participate in the “Cash & Counseling” program (or whatever consumer-, participant-, or self-directed program name is used in that state, and assuming the senior is not already in a nursing home, where the family caregiver benefit is unavailable). Then finally, once approved for Cash & Counseling, he or she will be able to apply for a specific waiver to use those Cash & Counseling dollars to reimburse a family caregiver by establishing a formal contract where the family member provides caregiver services and is paid accordingly (including the senior paying payroll taxes on behalf of the family member as a household employee).
Unfortunately, though, as if it isn’t intensive enough to have to care for an elder family member, helping him or her with acquiring a waiver which allows one to be reimbursed for caregiving is not so simple, and can be time-consuming as well. Processing the application for the waiver (for the family member to actually get paid as a caregiver) can take 2-4 months for a current Medicaid patient, and could take several more months for a senior who is just now first applying for Medicaid. In fact, once the waiver application is processed, many states still limit the total enrollment for the waiver (i.e., only a limited number of seniors can be claiming family caregiver payments under the state’s Medicaid program at any one time), which in turn can result in the senior and family being placed on a waiting list for an extended period of time, potentially further disrupting the timing for the family’s plan to have a family member serve as a paid caregiver. In addition, as noted earlier, not all states even offer a reimbursement plan (which is determined not by where the family caregiver lives, but where the senior themselves has applied for and been approved for Medicaid), as not all states have chosen to opt into the program. Though based on the numbers showing the insufficient projected increase in personal care attendants (PCA), the remaining states may not have much of a choice but to offer comprehensive Care and Counseling at some point. So even if you don’t have clients with relatives in states with comprehensive and flexible family caregiver reimbursement programs, you likely will eventually. In fact, since the turn of the century, Congress has introduced dozens of bills that would in some way enhance the situations of family caregivers, the most recent bill being the RAISE Family Caregivers Act.
Even as paid family caregiving through Medicaid expands, though, it’s important to note that some states restrict which family members may be compensated through this program. In fact, as of today, only 13 states allow for a spouse to be reimbursed as a family caregiver, contributing to a trend known as “Medicaid divorce” where a couple gets divorced specifically to circumvent this family caregiver reimbursement Medicaid restriction. Otherwise, the family caregiver must be some other non-spouse family member (and some have further restrictions on which family members may be compensated for care); of course, any family member may firstly be paid directly from family assets in order to spend down to qualify for Medicaid, as it’s only the payments then continuing as a paid family caregiver under Medicaid’s Cash & Counseling program that must qualify under the family member limitations.
There are also some states where your client may be reimbursed as a family caregiver if he or she serves as an adult foster care provider. In this situation, the senior moves into the family member’s house, and the family member may then be eligible for PCA wage reimbursement, as well as a stipend from a non-Medicaid program to cover room and board for the senior.
It’s also important to recognize that not only are there regulations to apply for Cash & Counseling and qualify for a waiver to compensate a family member, but there are also regulations for having a family member becoming approved as a PCA to be compensated in the first place. While the rules again do vary by the state, they generally involve needing to register with the state as a licensed care provider, pass a background check, and enroll in some caregiver training. States also have their own educational attainment level requirements for prospective PCAs, though a high school diploma is usually sufficient, and for those who want to go deeper, relevant classes are often offered at local community colleges.
The national average wage for unskilled aids is about $11.00 an hour. Caregivers can expect to be paid $9 to $15 dollars an hour, depending on the state-permitted Medicaid reimbursement rates for PCAs, though in general, most states under Cash & Counseling will require family caregivers to receive a slightly-lower-than-market-rate hourly wage (which was implemented to reduce the risk that the program is abused). On the other hand, some states have a PCA network represented by a union that assists with establishing (more competitive) PCA wages.
It’s difficult to predict exactly how many hours a prospective family caregiver will be able to bill for and be reimbursed for per month since rules (again) vary greatly by state, though it’s is helpful to know how a budget will be determined. First, Medicaid will conduct an investigation of the senior’s health records and current ADL needs. Then the patient, who must have a qualified chronic condition or need help with several ADLs, will need a doctor’s approval for the program. A budget will then be constructed based on the hourly needs and economic factors within the geographic region. Some programs have a strict monthly budget, while others just focus on determining total hours needed as well as an appropriate hourly wage. Most states also have a cap built into the program based on what the cost would otherwise be for Medicaid to provide care directly for the senior. After the (initial) budget is established, it may at any time be increased or decreased as the senior’s needs change.
It is highly advisable that the senior and family caregiver meet with an Elder Law attorney with expertise in Medicaid to help draw up a formal PCA caregiver contract (necessary to avoid having Medicaid deem the payments to the PCA as an inappropriate gift). The state program will provide a list of financial management service companies (FMC) available for senior to help calculate payroll tax, track hours billed, etc., and some states make the use of an FMC compulsory for the senior. Whenever an FMC is used, they will be compensated by taking a percentage of wages that otherwise would have been paid to the family PCA. Neither the financial management company nor the Medicaid program can provide legal advice for the senior or PCA, so it is advisable if you are a financial planner who does not have sufficient competent Elder Law attorneys in your referral network to find one in each state that you have clients.
Planning Strategies For Paid Family Caregivers
Unfortunately, $11.00 an hour is not even a livable wage in many parts of the country, but the reality is that the funds are not intended to provide for a full-time living, and rather are just intended to at least partially compensate for the opportunity cost. Because unfortunately, one of the greatest costs, not just to our caregiver clients but to the entire economy, is in the opportunity lost by not being able to otherwise work while taking care of elder family members. This represents time they could have used to pursue more education, start a business, or simply work more hours in another (higher-paying) job. Estimates are that 22–26 billion hours of informal care time were provided in 1997. Recent estimates (National Alliance for Caregiving and AARP 2009) indicate that nearly one in five adults in the United States provides care to an elderly relative or friend older than 50. Which is even more challenging economically given that the majority of family caregivers are part of the same demographic that create the bulk of productivity in the economy to begin with. They are middle-aged, hardworking people, sandwiched between caring for their elderly parents and taking care of their children as well.
Since we know that the same people who are heavily relied upon in the economy are the ones taking care of elder family members, the potential opportunity costs when considering family caregiving manifests itself in some obvious ways: more days off from work (resulting in lost wages), as well as lack of productivity at work due to exhaustion (which can impact getting raises and promotions). Also, there is a ripple effect, in the sense that employers and coworkers may feel detrimental effects due to not being able to rely as much on an employee who needs flexibility in order to take care of an elder (further adversely impacting career progression over time), and at worst, higher absenteeism could make them a target in a future round of layoffs. Thus, we must counsel our caregiver clients on this potential risk to their employment, recognizing that “just” getting paid for their time alone as a family caregiver may not fully make up for these secondary impacts.
These challenges are further compounded by the fact that, again, the family caregiver reimbursement under Medicaid is not intended to represent a livable wage. Which is why family members are not necessarily expected to quit their job to provide full-time care for elder family members (recognizing that also helps to reduce the risk of abuse in the program as well). But to the extent that family circumstances do dictate a cut in hours (or in the extreme, quitting work to be a full-time family caregiver anyway), the reimbursement at least helps to mitigate the lost financial opportunity cost. But make sure your clients are aware of this before they think about cutting down on work (or stopping entirely) in order to become a family caregiver. Also, as previously discussed, family members intending to be paid caregivers under Medicaid will have to go through the effort with the senior of completing the strenuous application for a waiver in order to become reimbursed in the first place, possibly will be required to enroll in some training, and will need to meet any other minimum regulatory standards.
On the plus side, recognizing that being a PCA involves helping with an elder’s most personal aspects of life, it is no wonder that seniors prefer having family take care of them rather than strangers, and it’s a positive that the Cash & Counseling program can make this more feasible for at least some families. In fact, even for families where it is not “financially advisable” to become a caregiver, a desire for greater privacy alone by having a family caregiver (instead of an “outsider” PCA) may be compelling. And recognize that paid family caregiving does not have to be all-or-none, either; it is possible to work with a professional PCA for just some of their ADLs (e.g., less intimate tasks), and then have a family PCA perform the rest of the duties. For instance, a friend of mine who is a PCA for his father, recently revealed to me that he often uses a third-party PCA through MassHealth (Massachusetts Medicaid program) as well to help out as needed. It has allowed his mother to remain employed full-time, and for him to pursue employment and education opportunities as well. Because even with all the hours he puts in, along with the other approved family members to share the time burden, they still require the help of non-family PCAs in order to have a fair shot at pursuing opportunities.
On the other hand, it’s also important to recognize that there is a risk of a family member PCA controlling their elder in this age of elder financial abuse; to safeguard against this, it would be advisable to have health care proxies and powers of attorney established or updated as soon as possible, ideally including another friend or family member besides just the family PCA, to establish a basic system of checks-and-balances protection for the senior.
One notable challenge for some clients is that they may come from cultures where caring for an elder is considered obligatory. Accordingly, they may be hesitant about being reimbursed as a PCA because, if care is something we give from the heart, doesn’t the introduction of payment demean that dimension of the relationship? At a minimum, though, this is a good opportunity to review the client’s own financial plan with them, and at least be certain they understand the monetary impact on their plan if they decline to be reimbursed by Medicaid for caregiving (if they could have become eligible in the first place).
The bottom line, though, is simply to recognize that in today’s fast-paced Western lifestyle, where one may need much education in order to obtain lucrative employment, and where often both spouses work just to make ends meet, the traditional mode of caring for elders has been proven unsustainable, especially for a wide swath of low- and middle-income families. As for our lower-net-worth clients (where purchasing a form of long-term care insurance on behalf of a relative may not be affordable), it may be a virtuous thing to care for one’s ailing parent, but risks causing them to fall dangerously behind the intended trajectory of their own career path. But by taking advantage of programs like Cash & Counseling, those families can at least partially ameliorate some of the financial impacts of family caregiving (though sadly, even with non-family PCAs to help for some or much of the time, the financial and emotional toll is still great on the elder’s family). Nonetheless, it’s crucial for family members of the elder to not lose so much opportunity that the inability of their parents to pay for private care outside of Medicaid limits other family members from being able to build their own financial lives as well.
On the plus side, elders enrolled in Medicaid’s long-term care program report a higher quality of life when allowed to live at home instead of a nursing home, and an even higher quality of life when the in-home caregivers are family members. Which has made it all the more appealing for families who have at least some flexibility to be family caregivers. Yet by helping those family members to be aware of and navigate options like the Cash & Counseling program as well, it’s more feasible for them to stay on track for retirement while also empowering them to improve their loved one’s quality of life.
Disclaimer: The views and opinions expressed are those of the author and may not accurately reflect those of Massachusetts Mutual Life Insurance Company (MassMutual), or its affiliated companies.