Summary
Personal Care Agreements are written contracts that establish the working relationship between a care recipient and their caregiver. These agreements provide Medicaid Long Term Care beneficiaries with proof that their payments to caregivers (including caregivers who are family members) have not violated any of Medicaid’s financial rules and won’t prevent them from qualifying for Medicaid.
A Personal Care Agreement (PCA) is, essentially, a written contract between a caregiver and a care recipient that establishes what kind of care services will be provided and how much those services cost. These agreements are also known as Family Caregiver Contracts, Elder Care Contracts and Personal Services Contracts. As the other names suggest, these contracts are often made between family members, specifically adult children and their parents who are in need of long-term care. For some, it may seem natural to provide care to family members without any kind of written or formal arrangement, but Personal Care Agreements can help those family members when it comes to qualifying for Medicaid Long Term Care in the future. PCAs do this by providing proof that the beneficiary wasn’t simply giving away their assets to become Medicaid eligible.
To be eligible for Medicaid, seniors need to meet an asset limit, which is $2,000 in most states as of 2024. To prevent people from simply giving away their assets to get under this limit, Medicaid also has a “Look-Back Period.” In most states, the Look-Back Period is five years. This means that states will “look back” into a senior’s financial history for the five years before they applied for Medicaid Long Term Care to make sure they haven’t been giving away any assets or sold them at less than fair market value. Without a Personal Care Agreement, paying a family member for care could look like giving away assets to a state Medicaid official. But with a Personal Care Agreement, those care payments are an allowable way for a person to “spend down” their assets and become Medicaid eligible.
There is no standardized Personal Care Agreement form or template. There are, however, certain elements that every Personal Care Agreement should contain.
Services can include personal care assistance (help with movement, dressing, bathing, eating, toileting), grocery shopping, cooking, housekeeping, laundry, transportation, financial management, medication oversight and coordinating healthcare. When detailing how often these services will be provided in the Personal Care Agreement, it can be helpful to leave room for flexibility by using terms like “for a minimum of 20 hours and a maximum of 60 hours per week.”
A modification clause allows either party to make changes to the Personal Care Agreement in such a way that they won’t violate Medicaid rules. And the termination clause establishes guidelines for the contract to end without breaking any Medicaid rules.
Even through there is no universal Personal Care Agreement form, there are some generic templates you can use. This page has a free Personal Care Agreement form.
The caregiver can be any adult family member – child, grandchild, sibling, niece, nephew, etc. It can be a spouse, but this will not help the care recipient when it comes Medicaid’s financial eligibility. That’s because Medicaid considers all assets to be jointly owned when it comes to married couples.
While the caregiver can be related to the care recipient, it is not necessary. The caregiver can also be a friend or an unrelated and independent third party.
Once the Personal Caregiver Agreement is in place, the caregiver should keep a detailed, daily log of all the services they provided, hours they worked and payments they received from the care recipient. This document, along with the Personal Caregiver Agreement, can be used to prove the working relationship between the caregiver and the care recipient.
The caregiver must be paid a reasonable rate for the Personal Care Agreement to meet Medicaid standards. If the pay rate is too high, it will appear as though the care recipient is giving away assets. Instead, the caregiver should be paid around the average rate a private personal care provider in the same geographic area would receive.
It’s also important that the caregiver be paid only for future services. The caregiver cannot be paid retroactively for the Personal Care Agreement to work under Medicaid rules. This means payments must be made periodically (weekly or monthly, for example). Some states also allow a lump sum pre-payment for future care that can extend for the rest of the care recipient’s life. The amount of these pre-pay lump sums is calculated using an actuarial life table and the reasonable pay rate mentioned above.
The Personal Care Agreement should be created before any caregiver services are provided. This allows the payments to be made for future services only. If services are already being provided without a Personal Care Agreement, one should be drawn up as soon as possible. And the care recipient should understand that any payments made to the caregiver before the Personal Care Agreement was created could violate Medicaid’s Look-Back Period and lead to a period of ineligibility.
All three of these programs have asset limits, but the Look-Back Period only applies to applicants for Nursing Home Medicaid and HCBS Waivers, and not ABD Medicaid. So, a Personal Care Agreement could be especially important for Nursing Home Medicaid or HCBS Waiver applicants because it provides proof they were not breaking Look-Back Period rules by simply giving away their assets to get under the asset limit, but spending them on personal care, which is an allowable way for Medicaid beneficiaries to “spend down” their assets without violating the Look-Back Period. Even though the Look-Back Period doesn’t apply to ABD Medicaid, using Personal Care Agreements is recommended. They might eventually need Nursing Home Medicaid or an HCBS Waiver, and those programs could deny or penalize the applicant for not using a PCA.
Even after a care recipient is approved for Medicaid Long Term Care, they should maintain a Personal Care Agreement if they continue to pay for personal care on top of the care Medicaid provides. This way they will have documented proof they are not simply giving away their assets. This situation may be common for people who have HCBS Waivers or ABD Medicaid, since they usually still live at home and are more likely to need extra care. And even though Nursing Home Medicaid does provide fairly comprehensive coverage, it doesn’t cover everything, so a person who is in a nursing home and is paying for extra care should also still keep a Personal Care Agreement.
No, you do not need a lawyer to create a Personal Care Agreement. However, it is important to include all of the items mentioned above – services to be provided, frequency of services, location of services, caregiver pay rate, start date, end date, modification clause, termination clause and signatures – to make sure the document meets Medicaid standards.
There is also no need to have a Notary Public witness the Personal Care Agreement signing unless the Medicaid rules in your state require it.
Personal Care Agreements that include lump-sum payments can make the contract more complicated. If you’re not comfortable dealing with that calculation, or any other part of the agreement, it may be a good idea to consult a Certified Medicaid Planner or an elder lawyer.
A legal document that may be necessary when it comes to a Personal Care Agreement is a Power of Attorney. If the care recipient has given someone Power of Attorney and that person created the Personal Care Agreement with the caregiver, a copy of the Power of Attorney document should be kept with the Personal Care Agreement.
Every state has a Medicaid Estate Recovery Program (MERP) that is legally obligated to try and recoup the money the state spent on Medicaid Long Term Care for any individual through that individual’s estate.
Here’s how a Personal Care Agreement might impact MERP actions. Suppose a Personal Care Agreement declares a caregiver is to be given a lump-sum pre-pay to provide care for the rest of the care recipient’s life, which is expected to last 12 more years according to the actuarial table. But if the care recipient only lives three years, the caregiver did not technically earn that entire lump sum payment, and the money they did not earn would, in fact, revert to the estate of the care recipient. And that means that a MERP could go after that money as part of the state’s reimbursement for Medicaid.
However, legal arguments could be made against the idea that the money would revert back to the care recipient, and it seems unlikely that a MERP would, in fact, go after these kinds of funds. As long as the Personal Care Agreement meets Medicaid standards in the first place, and the caregiver upholds the agreement and keeps a daily log, Medicaid is unlikely to attempt reimbursement.
If you are concerned about losing your home or financial assets when applying for Medicaid long term care, consider working with a Medicaid Planning professional. These fee-based experts help families structure their finances to become eligible, while streamlining the application process and preserving assets for spouses and family members.
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