How can Aid and Attendance Pension Pay Home Care Companies?

Payments to a licensed home care provider are medical expenses for purposes of entitlement to Pension with Aid and Attendance. This deduction allows a claimant to generate Pension income where there otherwise might not be an income.

For this in-home health care to be deductible medical services the attendant must be a licensed health care provider. Health care in the home might include such services as skilled nursing care, physical therapy, taking of vital signs, providing injections, changing IVs, inserting catheters, treating pressure wounds or changing dressings. This licensed health care provider may also provide custodial care such as assistance with ADLs or supervision because of dementia or other mental limitations.

All reasonable fees paid to the provider for personal care of the disabled person and maintenance of the disabled person's immediate environment may be allowed. This includes such services as cooking for the disabled person, housecleaning for the disabled person, and other IADLs. It is not necessary to distinguish between medical and non-medical services. However, services that are beyond the scope of personal care of the disabled person and maintenance of the disabled person's immediate environment, may not be allowed.

Home health agencies that are Medicare or Medicaid certified can offer health care services which are termed by these agencies "skilled care" and these agencies may also offer custodial care by home health aides who may or may not be licensed. Home health aides or nursing assistants working for home health agencies are supervised by licensed home health agency care providers and as such their services are considered deductible as well.

Likewise, non-medical home care companies that do not provide skilled care can offer paid custodial care services which is also deductible. In most states, these providers must be licensed and as such they would be considered health care providers and their services would be deductible. In those states where licensing is not required, VA will still allow for services paid to these providers to to be deductible. This is likely because VA considers them to be health care providers as they are offering professional custodial services.

Examples of custodial care include assisting a person with ADLs and may include assisting a person with IADLs ALONE when the person has a serious mental, developmental, or cognitive disorder. This special provision allowing for IADLs is a new and more liberal rule then was previously in place before October 18, 2018.

Using the Pension Benefit to Remain in the Home

About 70% of all people in this country, who are receiving long term care services – such as assistance with ADLs or IADLs or skilled care – are in their homes. Care is typically provided by family members, but there is a growing trend for private companies to provide this care as well. This is because family members are often employed full-time or live long distances away and cannot provide assistance. The vast majority of those people receiving homecare wish to stay in their homes and not have to move to a care facility.

The Pension benefit is particularly useful to pay private companies or family members to provide home care. But it is not always a suitable solution where household incomes are larger than $2,500 a month or the Pension benefit does not cover the full cost of care. It also works best for married couples where the claimant is the veteran because this provides the most amount of money. We will discuss below how the Pension benefit fits to allow Pension claimants to remain in their homes.

Using a Private Home Care Services Company for In-Home Care

There are two types of home care companies – home health agencies and non-medical home care or personal home care companies. Home health agencies are licensed by the state and typically certified by Medicare and Medicaid to provide services under these government programs. The person receiving care at home typically does not have to pay out-of-pocket for home health agency services. It is typically covered by Medicare or Medicaid. However, these services are limited to providing rehabilitation from an injury or disease or rehabilitation from a hospital stay or nursing rehabilitation home stay. They offer both skilled care and home health aides to help with ADLs and IADLs.

For individuals who have chronic conditions and require long-term custodial care, home health agencies are not the solution. In addition, government programs will only pay for this care for a limited period of time based on how well the care recipient is recovering.

Home health agencies also may provide hospice services which are paid for by Medicare. This is skilled care and custodial care for individuals who are considered terminally ill. Hospice care is usually provided in a home setting.

Non-medical or personal care home companies typically are not paid by government programs with the exception that Medicaid will sometimes provide home care services by contracting with these companies. The services of non-medical home care companies are predominantly paid out-of-pocket by the care recipient. The Pension benefit fits in with non-medical home care companies and not with home health agencies, unless home health agencies also provide non-medical home care services as a side business.

A non-medical home care company is not allowed to provide skilled care and can only provide custodial care. These companies may or may not be licensed by their state health department. Only about two thirds of the states require licensing for these companies. They typically charge by the hour with rates ranging from $15 an hour up to $40 an hour. The more hours that the care recipient utilizes per month, typically the lower the hourly rate. The services of these companies fit in with the Pension benefit. Let's look at 3 examples to see how it works.

In the first example we have a couple where the veteran is the claimant. The combined gross household income is $4,000 a month. For purposes of this example let's suppose that the Pension benefit for this couple with the aid and attendance allowance is $2,266 a month and the 5% deductible is $75 a month. From previous sections, we know that this couple needs to pay at least $4,075 a month to generate the full Pension benefit of $2,266 a month. This creates a dilemma. If this couple relies on their entire income to pay for maintenance costs such as food, lodging, utilities, loans and other costs, they are going to experience a deficit of $1,734 a month – the difference between their monthly home care costs of $4,000 a month and the reimbursement of $2,266 a month from VA to cover those costs.

This arrangement only works if they absolutely need the home care in the first place and have no choice but to pay for it out-of-pocket. They either have to live on less money or they have to have savings to help subsidize their maintenance costs. They may also consider taking out a reverse mortgage to generate some cash to cover the home care costs especially if they were going to pay for those costs anyway were the VA benefit not to exist. If they would have been stuck with the costs without the VA benefit, the benefit actually is a blessing because it produces an extra $2,266 a month that is tax-free.

The second example is a single veteran who makes $2,000 a month. For purposes of this example, let's assume that the Pension benefit with the aid and attendance allowance for a single veteran is $1,911 a month. This example works because the veteran can pay out a little over $2,000 a month for home care services and receive back from VA $1,911 a month as reimbursement for that. Hopefully the $2,000 a month for services provides for enough care to allow the veteran to remain in his home.

The third example is a single surviving spouse who makes $1,600 a month. For purposes of this example, let's assume that the Pension benefit with the aid and attendance allowance for the surviving spouse is $1,228 a month. She would have to pay out a little over $1,600 a month for home care services and would receive back from VA a reimbursement of $1,228 a month. She comes up short about $400 a month to pay her bills. Single surviving spouses, using the Pension benefit to pay for private home care services from a company that provides this care does not work very well. First of all, she may not receive enough Pension money to provide for the actual care that she needs on a monthly basis and second, the Pension benefit may be inadequate for her to survive at home without having some extra savings or contributions from her children to stay in the home.


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