In the United States, anyone can qualify to provide non-medical home care for aid and attendance pension. Non medical home care services can be provided by non-licensed in-home attendants such as family members, friends, or non-licensed individuals hired to offer custodial care.
According to VA Pensions, all reasonable fees paid to the providers for personal care of the disabled person and maintenance of the disabled person’s immediate environment may be allowed. This includes services like cooking for the disabled person, housecleaning, and other IADLs. However, services that are beyond the scope of personal care and maintenance of the disabled person’s immediate environment may not be allowed.
In most states, to qualify to provide non-medical home care for aid and attendance pension, providers are expected to be licensed and also must be considered healthcare providers. In those states where licensing is not required, VA will still allow for services paid to these providers to be deductible because VA sees them to be healthcare providers as they are providing professional custodial services.
Note that the pension benefit is useful to pay private companies or family members to provide home care. But it is not always an ideal option where household incomes are bigger than $2,500 a month or the pension benefit does not cover the full cost of care.
It only works if they genuinely need the home care in the first instance and have no option but to pay for it out-of-pocket. They either have to live on less money or they need to have savings to help subsidize their maintenance costs.
According to reports, it also works best for married couples where the claimant is the veteran because this offers the most amount of money. Non-medical or personal care home companies are not paid through government programs, except Medicaid that sometimes, in some situations, provide home care services by contracting with these companies.
Aside from that, services of non-medical home care companies are primarily paid out-of-pocket by the care recipient. In the United States, only about 60% of the states mandate licensing for these companies or service providers. They more or less charge by the hour with rates ranging from $15 an hour up to $40 an hour.
Note that the more hours that the care recipient utilizes per month, the lower the hourly rate. Payments are also expected to be commensurate with the number of hours that the provider offers to the disabled person. It simply entails that payments must be based on hourly rates and not on arbitrary payment schedules.
Documentation Needed to Qualify for Aid and Attendance Pension
If, for instance, a veteran claimant gets an aid and attendance rating by VA, and the veteran pays an in-home attendant to administer medication and provide for his or her basic life needs such as bathing, dressing, cooking and cleaning the house, the amount incurred for all of these services is a deductible medical expense.
Note that the provider does not have to be a licensed healthcare provider, but once the fees are an allowable expense, receipts or certain documentation of this expense are required. This may be able to include any of the following;
- A receipt or paid invoice
- Statement on the provider’s letterhead
- Computer summary
- An Internal Revenue Service (IRS) Form W-2
- Ledger, or
- Bank statement.
The evidence submitted are also expected to include all of the following;
- Amount paid
- Date payment was made
- Purpose of the payment (the nature of the product or service provided)
- Name of the person to or for whom the product or service was provided, and
- Identification of the provider to whom payment was made.
In the United States, no type of verification of non-medical home care provider annual fees paid is required. The claimant is only expected to present documentation of expenses when the non-medical home care provider fees are first claimed, or when the person or agency offering the service changes. Nonetheless, maintaining records of payments for care is very necessary in case of an audit.
Common Issues with Non-Medical Home Care Arrangement
Have it in mind there can be certain issues with non-medical care arrangements. VA steadily audits a small percentage of Pension claims, especially if there is any sign of incompetency. Note that this entails that VA has determined that the beneficiary cannot handle their own finances. The audit will need extra documentation to verify the exact costs and services provided.
In terms of an audit, in order to safeguard the individuals providing care, claimants are expected to have a detailed care contract. Furthermore, members of the family or other informal caregivers being paid for care fall under the IRS domestic employee rules –also referred to as “nanny tax.” Have it in mind that their taxes need to be withheld and paid and a W-2 needs to be issued.
Although this can be very stressful and daunting, it comes with certain advantages as it will also establish a paper trail to confirm that money is exchanging hands on a month-to-month basis and legitimate services are being provided. Lack of a formal paper trail simply buttresses incompetency, but by setting up a formal arrangement with the taxes being accounted for, it shows that the money was paid every month.
Pension with aid and attendance is one of only a few government programs that pay family caregivers to offer care services for their loved ones to help them remain in their homes. Note that a formal arrangement also ensures the continuity of month-to-month payments that also ensures that the deduction for medical care can be claimed steadily.
Although this can vary from state to state, but if the contract also meets Medicaid rules, especially in states that allow personal care contracts in anticipation of Medicaid, it can serve as an extra advantage to setting up these personal care arrangements.
Notably, if the arrangement set up for receiving the Pension benefit does not reach the contract requirements under the Medicaid rules in a state and an application for Medicaid is done at some future date, note that Medicaid may stipulate the money paid to the children as a transfer for less than value.
According to experts, this will establish a penalty for Medicaid because Medicaid will note that the parents transferred the money to the children in a conscious attempt to do away with their assets to qualify for Medicaid. In addition, this transfer for less than value problem would also present itself if excess income were being held over to future months or care services were paid out of assets.
Have it in mind that funds received and spent in the same month are not an asset for Medicaid purposes and the transfer for less than value rule may not even hold water. In a situation where the money is being held over to the next month or services are being paid from assets, it is imperative to have a well detailed contract if there is an eventual application for Medicaid.
Meanwhile, if VA assigns a fiduciary for the benefit award – which is in most situations the case – the fiduciary service representative will ask the caregiver to put up accounts according to the way Fiduciary Services requires it. The requirements from Fiduciary Services may also create a problem under Medicaid.
In terms of a non-medical home care provider being a contractor and getting a 1099 as opposed to being a domestic employee and requiring a W-2, caregivers are regarded as domestic employees. Howbeit, if the caregiver is indeed in the personal-care business and has other clients that they provide in-home care services, then he or she can get a 1099 for contract services. But, if the caregiver only has the parent or relative as a client, he or she is more or less a domestic employee under IRS rules.