Can family caregivers get paid to care for a parent?

FAQs in this article ... How much do family caregivers spend in out-of-pocket costs related to that care? How do Medicaid-funded programs that compensate family caregivers work? What other public assistance programs exist to help caregivers alleviate financial strain?

Caring for an aging parent is the ultimate act of love, one rooted in gratitude for the sacrifices they once made and a desire to help them maintain dignity as they grow old. But it can also be a financial burden.

Out-of-pocket costs related to caregiving often include groceries, medications, and home modifications. Many adult children also experience a loss of income as they leave the workforce or reduce their hours to be more present for their loved one, which may affect their own retirement readiness.

Depending on where they live and whether they qualify, however, family caregivers can potentially get paid for the essential support they provide.

Indeed, Medicaid, the joint federal-state health care program for low-income Americans and certain individuals with a disability, offers pathways for Medicaid recipients to potentially hire a family member or friend to provide in-home care services. In some states, that can include the spouse.

“Many caregivers don’t realize that Medicaid programs may allow family members to be legally compensated for the care they provide,” said Bryan Bibbo, a financial professional and partner with JL Smith Group in Avon, Ohio. “These programs vary by state and do come with eligibility requirements, but they are often underutilized simply due to lack of awareness and can be well worth pursuing.”

In many cases, the ability to collect caregiver pay involves navigating complex eligibility requirements, payment structures, and application processes. And the compensation that family caregivers can potentially receive may not replace a full-time income.

But it can help reduce financial strain so that adult children can continue to support their loved one without putting their own financial future at risk.

Here’s a closer look at:

• The cost of caregiving.
• How Medicaid programs for family caregivers work.
• How much family caregivers can potentially earn from Medicaid payments.

The cost of caregiving

Some 53 million Americans, often adult children, provide unpaid care for an adult age 50 or older, a number that has swelled from 43.5 in 2015, according to SeniorLiving.org.¹

The support they provide centers on activities of daily living, including bathing, dressing, meal preparation, transportation, household chores, and financial and medical care coordination.

Family caregivers save the U.S. economy up to $870 billion per year by preventing or delaying the need for expensive nursing home care, which significantly reduces Medicaid and Medicare costs.²

According to a recent AARP study:³

• Family caregivers spend an average of $7,242 per year, or 26 percent of their income, in out-of-pocket expenses related to that care.
• About half of caregivers said they have experienced financial setbacks, which may include having to curtail their spending, dip into personal savings, or cut back on retirement contributions.
• Roughly one-third of respondents reported two or more work-related strains, such as having to change their schedule or take leave, which leads to an average annual outlay of $10,525.

The Family Caregiver Alliance further notes that the loss of income and career advancement opportunities adds up over time, especially for female caregivers who are more likely to assume the role of caregiver. For women caregivers, it estimates the total lifetime cost of caregiving is from $295,000 to $324,044. 

“From a financial planning perspective, caregivers need to think beyond today’s cash flow,” said Bibbo. “Reducing work hours or leaving the workforce impacts not only current income, but also future Social Security benefits, employer retirement contributions, health insurance, and long-term earning potential. Using personal savings early can create compounding financial strain later in life.” (Related: 4 financial realities when an elderly parent moves in)

Medicaid reimbursement programs for family caregivers

All 50 states and the District of Columbia offer some form of Medicaid-funded program that can be used to compensate family caregivers. The availability and structure of those programs, however, vary widely from state to state.

Most states provide compensation through consumer-directed or self-directed care options under their Medicaid programs, which allow care recipients to choose their own caregivers, including family members.

To be eligible for Medicaid, your loved one must typically:

• Be considered low-income based on the guidelines of the state where they reside.
• Be a resident of the state in which they receive Medicaid.

Some states, not all, also offer a “medically needy” program for residents with significant health needs whose income is too high to qualify for Medicaid. Under these programs, individuals can potentially spend down the amount of their income (on medical expenses) that is above the state’s income threshold so that they would be eligible for Medicaid.⁴ 

 

How much do family caregivers get paid?

Family caregivers and personal care providers who qualify for Medicaid compensation may receive about $18 per hour, or roughly $2,880 per month, according to health policy researcher KFF. But it notes that “considerable variations” exist depending on the state.⁵

The Medicaid programs in California and New York, for example, pay informal caregivers up to $20 per hour, while states like Mississippi and Alabama pay from $11 and $13 per hour.⁶

Total compensation is typically determined by the required level of care, local cost of living, and specific state waivers.

Roughly a dozen states also offer a specialized benefit called Structured Family Caregiving (SFC), which provides potentially tax-free, daily stipends for live-in caregivers who provide 24-hour supervision and care.

The caregiver receiving the stipend can be a spouse in several states, including:⁷

• Indiana
• Louisiana
• Missouri
• Nevada
• North Carolina
• North Dakota
• Ohio
• South Dakota

Recipients of SFC stipends can receive from $1,750 to more than $3,000 per month, depending on the state and level of care provided. They may also receive training and respite services. But they may be required to pass a background check.

Other states, including Massachusetts and Nevada, offer a similar personal care compensation program, which may not require family caregivers to provide live-in services.

Compensation through inheritance

It is important to note that caregivers who are not eligible for Medicaid caregiver reimbursement may still be able to be compensated — indirectly — for their service through an inheritance.

The Medicaid Caregiver Child Exemption, also called the Child Caretaker Exemption, may permit eligible seniors to transfer ownership of their primary home to a qualifying adult child who cares for them without violating Medicaid’s look-back period. Eligibility generally requires that the adult child lived in the home and provided care for at least two years that delayed the parent’s need for nursing home care, though interpretation of these rules may vary based on the state.

The look-back period is typically 60 months preceding an application for Medicaid, during which time any assets (including their home) transferred out of the applicant’s estate for less than fair market value may render them ineligible for public benefits. Under the Child Caregiver Exemption, however, Medicaid applicants can potentially transfer ownership of their home without jeopardizing their benefits.

Set boundaries

Because of the expense involved and potential impact to their financial stability, Bibbo suggests caregivers set boundaries that are both reasonable and healthy.

In many situations, he said, it is beneficial to formalize arrangements through caregiver agreements, care budgets, or documented compensation plans, especially when Medicaid or other public benefit programs are involved.

Transparency protects both the caregiver and the care recipient and helps preserve family relationships, particularly among siblings or future heirs. (Related: Making sure heirs don’t fight)

“Caregiving, often provided willingly, should not come at the expense of the caregiver’s own financial stability or long-term independence,” said Bibbo. “Clear boundaries help prevent burnout, resentment, and misunderstandings within families.”

The challenges of securing reimbursement

Despite the prevalence of caregiver compensation programs, securing reimbursement can be a challenge. The process can take more than a year to complete and require families to jump through bureaucratic hoops. And many state Medicaid programs specifically prohibit spouses from getting paid, although a few (as noted above) offer eligibility through waivers.

Caregivers may also be required to complete background checks, use electronic verification systems to clock in and out each day, meet certification requirements as a home health aide, and demonstrate that their parent or the individual receiving care needs a "nursing facility level of care."

The future of Medicaid caregiver reimbursement programs is also unclear, as proposed cuts to public health insurance programs may reduce ongoing support for family caregivers.

Other public assistance programs for aging seniors

Regardless of whether you are eligible for compensation as a family caregiver, financial professionals agree that adult children should research other public assistance programs that may help alleviate financial strain.

“Take stock of all the public assistance programs that exist before reaching into your own pocket, including those available through Medicaid and for veterans,” said John Pearson, a financial professional with Barnum Financial Group in Stamford, Connecticut.

“Individual states and counties might also have programs that provide assistance with keeping seniors in their homes or respite care for the caregiver, so contacting your state social services department is also a useful exercise.”

BenefitsCheckUp.org from the National Council on Aging offers a customized search tool that identifies programs and subsidies for which low-income seniors and people with disabilities may be eligible. Examples include:

• HUD public housing
• Housing Choice Voucher program (Section 8)
• USDA Housing Repair Program for health and safety upgrades.
• Utility bill assistance through local government or utility providers.
• Phone bill assistance
• Prescription drug discounts through participating pharmacies and Medicare Part D’s Extra Help program
• Tax Credit for the Elderly or Disabled Provides a federal income tax credit to seniors age 65 and older with limited income.
• Property tax assistance: Seniors may be eligible for an installment plan or exemptions that lower their property tax bills. Assistance varies by location.
• Food assistance : Your parents may be eligible for prefunded debit cards to purchase groceries (the modern equivalent of food stamps); free meals at local senior centers, schools, or churches; and home-delivered meals through programs such as Meals on Wheels if they are homebound.
• Supplemental Security Income Seniors 65 or older who have limited income and assets may qualify for this federal government benefit.

The U.S. Department of Veterans also offers:

• Aid & Attendance benefit: A tax-free monthly pension enhancement for veterans who qualify for a VA pension (and surviving spouses) who require help with daily living activities.
• Housebound allowance: A monthly benefit to help cover the costs of skilled home health care and adult day care for members who are permanently housebound, living in a nursing home due to the loss of mental or physical abilities, or have severely limited eyesight. 
• Geriatrics and Extended Care: Offering skilled home health care, adult day care, and benefits to cover homemakers and home health aides for those who qualify, as well as respite care for caregivers.

Take advantage of tax deductions

Caregivers who provide more than half of their parent’s total financial support for the year may also be able to claim their parent as a dependent on their tax return, said Pearson. Typically, caregivers can only deduct the amount of their total medical expenses (including their own and their parent’s) that exceed 7.5 percent of their adjusted gross income.

“If you are spending your own money to help support a parent, it’s possible that those out-of-pocket costs could qualify for a medical deduction,” said Pearson.

A financial professional can be instrumental in helping family caregivers develop a plan to help them meet their loved one’s needs while keeping their own financial future on course.

Discover more from MassMutual…

Are you liable for your parent’s nursing home bills?

How to help parents in retirement while preserving your own plan

Medicare pitfalls in retirement

________________________________________