Paying a caregiver under the table (unreported employment often paid in cash) may cause an applicant to be ineligible for Medicaid, although this is not always the case.
The reason that it may result in Medicaid denial, at least for a specific period of time, is that Medicaid has a look-back period. This is a period of time in which Medicaid reviews all past asset transfers immediately preceding one’s Medicaid application date. (This period of time is 60-months in all states with the exception of California, which is 30-months). If it is found that an applicant has given assets away or sold them under fair market value during this timeframe, he / she will be penalized with a period of Medicaid ineligibility. This is because Medicaid is trying to prevent applicants from giving away their assets in order to meet the asset limit. Unfortunately, when paying a caregiver under the table, it may look like the applicant has been gifting money. Gifting money during the look-back period will result in a period of ineligibility.
That said, if a Medicaid applicant has been paying a caregiver under the table, he / she must prove that the payments were indeed for caregiving services. Often, the payments are for the same amount each month to a non-relative, which is rather easy to resolve. While a formal written caregiver agreement would be ideal, a signed timesheet would likely suffice as “proof” that the payments were made to a caregiver. However, if the caregiver is an adult child of the Medicaid applicant, it is much more difficult to prove that the payments were made for providing care. In this case, a signed caregiver agreement is extremely important to prevent Medicaid from considering payments to the adult child as “gifts”.
As a side note, a caregiver agreement must list the services in which the caregiver will provide, as well as the payment amount. Please note that is crucial that the caregiver’s pay be reasonable, or put another way, in line with the average pay of caregivers in the area.