Programs that Pay Children to Care for their Aging Parents

 

Introduction

Many people wonder if they can be compensated for the countless hours they spend caregiving for their aging parents. This is especially true with those family members who are caring for a loved one with Alzheimer’s or other form of dementia. The short answer to this question is yes, it is possible. Unfortunately, the short answer is insufficient, as the subject is complex. Many variables impact whether or not your loved one is eligible, and what many people fail to ask, is if they, themselves as caregivers, are eligible.

The article that follows comprehensively explores the many different options and programs that can be used to pay family members as caregivers. However, this in-depth exploration makes for heavy reading and many of the programs won’t be relevant to the reader based on varying eligibility criteria, such as veteran’s status, income, or state of residence. An alternative approach is to use our Paid Caregiver Program Locator. This interactive tool asks a series of question and provides the reader with a list of programs that are relevant to their family’s situation.

 

Medicaid Options

Of all the programs that pay family members as caregivers, Medicaid is the most common source of payment. Medicaid has eligibility requirements that apply to the program participant and it has rules that dictate who is allowed to provide them with care. While Medicaid is historically thought of as paying for nursing home care, modern Medicaid programs offer assistance options outside of nursing homes, in the beneficiary’s home or primary place of residence. We have identified four Medicaid programs that allow family members to be paid as caregivers. The bad news is that not all four are available in every state, but the good news is at least one of the four is available in every state.

 

HCBS Waivers and 1915 Waivers

The first and most common Medicaid option is Medicaid Waivers. These are often called HCBS Waivers, short for Home and Community Based Services, or 1915 Waivers or occasionally 1115 Waivers. Waivers allow states to pay for care and support services for individuals residing outside of nursing homes. Commonly, they pay for personal care (assistance with activities of daily living, such as eating, dressing, and mobility) and chore services provided for elderly or disabled persons who live in their homes or live in the homes of family members.

Most states Medicaid Waivers have an option called “Consumer Direction”. Consumer direction allows the beneficiary (the ”consumer”) to direct or choose from whom they receive care services. They can choose to receive care from a family member, such as their adult children. The adult child will be compensated by Medicaid for providing care for their elderly parent. In most cases, the adult child / caregiver is paid the Medicaid approved hourly rate for home care, which is specific to their state. In very approximate terms, caregivers can expect to be paid between $8 - $16 per hour.

It is important to note that the phrase “consumer direction” is not used in all states. However, the concept of consumer direction is available in all states. A variety of other terms or phrases are employed to describe this same concept. Depending on one’s state, alternative language may include Participant Directed Services, Self-Directed Care, Cash and Counseling, Choice Programs, and Self-Administered Services.

Waivers are offered as an alternative to nursing home care. Waiver names, eligibility requirements, and benefits are different in each state. While nursing home Medicaid is an entitlement, Waivers are not entitlements. They are enrollment capped, meaning there is a select number of people who can be enrolled in the program, and waiting lists are fairly common. A complete list of Waivers that allow family members to be paid as caregivers is available here.

 

Medicaid Personal Care Services


State Medicaid programs often cover personal care under their regular Medicaid program, sometimes referred to as their “Medicaid State Plan”. Unlike Waivers, regular Medicaid is an entitlement program; if you are eligible then you can receive benefits. Waiting lists do not exist.

Similar to how Waivers offer consumer direction of services, State Plan Personal Care often allows the beneficiary to choose their care provider. Family members, including the adult children can be chosen to provide care for their mothers and fathers. Again, like Waivers, the adult children caregivers are paid the Medicaid approved hourly rate for their efforts. During the initial enrollment process, the elderly individual is assessed, and it is determined how many hours per week they require care services. A list of state Medicaid programs that offer the choice of provider in their personal care benefit is available here. Readers should be aware of the various names these programs use, which include Personal Assistance Services or PAS, Personal Attendants. Sometimes, states don’t make a point to distinguish this option as a separate program, they just call it the personal care benefit under their regular Medicaid program.

 

Medicaid Caregiver Exemption

The Caregiver Exemption is also referred to as the Child Caregiver Exception. This option does not directly pay the adult child for their caregiving efforts on an hourly basis, but instead compensates them indirectly. To better understand this option, some background information on Medicaid eligibility is required. Eligibility for elderly persons is based largely on their income and their assets. One’s home, provided it is lived in by the Medicaid participant, is considered an exempt asset. However, if one moves from their home (into a nursing home, for example), then their home is no longer considered an exempt asset (unless their spouse lives there). When the elderly person passes away, their state may try to take the home or some of the home’s value to pay for the elderly person’s care. This is known as Medicaid Estate Recovery.

The Caregiver Exemption allows the adult child who provides care for their elderly parent in their parent’s home to inherit the home, instead of the state taking the home under Estate Recovery rules. There are additional requirements. The adult child must live in the home with their parent and provide care for at least two years. The level of care they provide must prevent their parent from being placed in a nursing home and they must have the medical documentation to validate this fact.

How much the adult child receives in compensation depends on several factors, including the value of the home, their parent’s equity in the home, and how much nursing home care would have otherwise cost the state were the adult child / caregiver not there to provide care.

The Caregiver Exemption is complicated. Therefore, it is strongly advised that families plan in advance for this option to avoid both Medicaid and family conflicts. One can read more about the Caregiver Exemption here or connect with a Medicaid planning expert to discuss if, and how this option, would work for your family.

 

Adult Foster Care 

In a limited number of states, Medicaid allows the adult children to become adult foster care providers for their aging parent(s). In this situation, the aging parent moves into their adult child’s home. The caregiver / child is responsible for providing personal care, assistance with the activities of daily living, meals, transportation to medical appointments, and other supports. Medicaid will continue to fund the elderly parent's medical care, prescriptions, etc. In return, the adult children are compensated by Medicaid for their care services, but not for room and board. Medicaid, by law, cannot pay for room and board. However, many states offer supplemental financial assistance from state funds to Medicaid beneficiaries who live in an adult foster home situation. This additional financial assistance is intended for room and board expenses. To summarize, the adult children caregivers will be compensated from two sources, Medicaid and the state’s supplemental program. It is estimated that the caregiving child will be compensated between $1,500 - $2,500 per month, dependent on the level of care required by their aging parent and, of course, their state of residence. State Medicaid programs offering adult foster care.

 

Programs for Veterans 

Veterans Directed Home and Community Based Services 

This program is often abbreviated as VD-HCBS or referred to informally as Veterans Directed Care. The program is open to any veteran who is currently enrolled in the VA health care system whose care requirements are such that “nursing home level care” is required. Under Veterans Directed Care, veterans are able to select from whom they receive care services. Veterans with a certain level of care needs, require personal care or personal care attendants. This program gives veterans the option to hire whoever they choose, including family members, such as their adult children to provide them with personal care services.

Adult children caregivers are paid an hourly rate. This rate is determined annually by Veterans Health Administration and modified for regional differences in home care costs. It is difficult to accurately project what caregivers will receive, as each veteran is assessed for a different amount of home care assistance. That said, caregivers might expect to be compensated between $10 - $20 per hour for their efforts.

The program is run at the local level through participating VA Medical Centers. See a list of participating VAMCs here.

 

Veteran’s Aid & Attendance Pension 

The veterans’ pension, which is called the Aid & Attendance benefit, is a program specifically designed for wartime veterans and their spouses. How it can be used to pay individuals to provide care for their aging parents is a little complicated. It is important to understand that the dollar amount of pension that a veteran or their spouse receives depends on their current, non-pension related income. The second important factor is when calculating income, the Department of Veterans Affairs allows the beneficiary to deduct all care related expenses from their income. This can include the cost of personal care assistance provided by an individual or home care agency. Therefore, an aging parent can hire their adult child as a private caregiver. The adult child invoices their parent for their caregiving services, the parent deducts those invoices from their income, and the VA increases their pension check by the amount of the invoices. While confusing and seemingly roundabout, this approach is well documented, legal, and encouraged by many VA benefits experts. Learn more about Aid & Attendance or connect with a VA Pension planning expert to determine if your family is eligible and to discuss if this approach can work for you.

 

Other Options 

State Based, Non-Medicaid Programs 

The concept of Consumer Direction (discussed under Medicaid) is not limited to Medicaid programs. Most states offer what are loosely categorized as nursing home diversion programs. These are state funded programs that provide assistance to elderly individuals who live at home with the objective of preventing unnecessary placement of these persons in Medicaid-funded nursing homes. Some of these state programs allow for consumer direction of care services. Phrased another way, program participants are given the flexibility to choose their own caregivers. Participants can choose their adult children to provide them with care services and assistance, instead of working with a state-chosen caregiver or home care agency. Caregivers are paid a rate comparable with the average hourly rate for home care in their geographic area.

Unfortunately, these programs are not available in every state. Further limiting this option is the fact that some programs allow for consumer direction, but disallow family members. Finally, many of these programs are means-tested (this means eligibility is based on the financial resources of the participant). See a list of state programs that allow consumer direction here.

 

Life Insurance 

Persons with life insurance policies with a death benefit valued at over $50,000 can use those policies to pay family members to provide care. As with many of the programs described in this article, the process is complicated. The policyholder, while living, engages in what is called a life settlement. A life settlement is the sale of one’s life insurance policy to a 3rd party while the policyholder is alive. The buyer pays the policyholder a lump sum amount, they take over paying the monthly premiums, and when the policyholder passes, they collect the full amount of the death benefit. In taking this approach, the original policyholder receives a lump sum of cash from their policy while they are alive.

This money can be used directly to pay a family member, such as a son or daughter, to provide care. However, a better option exists called a Medicaid Life Settlement. This type of life settlement allows the policyholder to preserve the option to receive Medicaid in the future, should the proceeds from their life settlement run out. A more thorough investigation of this strategy and its pros & cons can be found here.

 

Long Term Care Insurance 

Some elderly individuals that have long-term care insurance may use the benefits from that insurance to pay their children to provide them with care. Each policy is different and some policies may expressly prohibit family members from being compensated. However, such rules are relatively rare. More common is the long-term care insurance policy that requires care providers to be licensed. Fortunately, this should not prevent the family members of the policyholder from being paid to provide care. It does, however, create a minor logistical obstacle in that the son or daughter will have to obtain a business license as a care provider and register with their local authorities. While this process may sound daunting, it is in fact a fairly simple and quick process. The adult children who are now paid caregivers must declare their payment as income and pay taxes as they would with any other income.

 

Paid Family Leave Laws 

Three states currently offer paid family leave laws; these are California, New Jersey, and Rhode Island. Under paid family leave, adult children are permitted to take time off of their work and care for their aging parent. While doing so, they continue to collect a large percentage of their original salary and continue to maintain the health insurance benefits from their employer. These laws will pay the adult children for periods of between 4 – 12 weeks, so this is not a permanent solution for most aging parents. However, the paid leave does not have to be taken in one extended period. Alternatively, the caregiving child could take one day off each week for many months. Additionally, multiple siblings can take paid family leave which when combined, can make a large impact in helping an elderly parent. Read more about paid family leave in CA, NJ, or RI.

 

Tax Deductions and Credits 

Tax deductions or tax credits do not pay the adult children directly as caregivers, however, they can considerably decrease the tax burden of those caring for their elderly parents. The net effect is the same, they have more money available to them as a result of their familial caregiving efforts. For persons whose parents are financially dependent on them, the medical and care expenses incurred by the aging parents can be deducted from their own income. Read about medical and care expense deductions here. Another option is the Dependent Care Credit. For persons who must pay for care for their elderly parent so that they are able to continue working, this credit is highly relevant. Expenses such as home care or adult day care, in most instances, are fully deductible under this credit. Read more.