What You Need to Know About Pay Rates, Legal Requirements, and Government Programs

This article by attorney Nicole Wipp explains how much family members can get paid for caregiving, the legal requirements for payment, and how programs like Medicaid and VA benefits work so that families understand the risks and plan appropriately. It is for educational purposes only and does not constitute legal advice. Medicaid programs and VA eligibility requirements are complex and fact-specific. Family members are strongly encouraged to seek legal guidance before paying a family caregiver, especially if they anticipate a need for Medicaid or Veterans benefits eligibility. Call us today at (248)278-1511

When a loved one needs long-term care—whether at home or in a facility—many families step in to help. It’s common for family caregivers to wonder: Can I be paid for this? Family members can sometimes get paid for caregiving, with pay rates typically ranging from $12 to $25 per hour, depending on the state and program. The short answer is yes—but only under certain legal structures, with detailed paperwork, and with careful attention to public benefits like Medicaid and Veterans Benefits. In addition, some states offer paid family leave or family leave programs, which may provide payment or assistance to family caregivers. These programs vary by state, so it is important to check local regulations and employer policies.

Paying family caregivers sounds simple in theory. In practice, it’s legally complex—and the consequences of getting it wrong can be serious. All 50 states and the District of Columbia offer some type of Medicaid-funded consumer-directed personal care assistance program.

Families seeking information about state-specific caregiving programs and support can also contact their local area agencies, such as the Area Agency on Aging, which provides resources, counseling, and guidance for caregivers.

How Much Do Family Caregivers Get Paid?

The amount family caregivers are paid varies widely by state, the specific Medicaid or VA program, and the complexity of the care provided. The amount paid to a family member varies based on state regulations, the program involved, and the care needs, and monthly payments are common in some programs to help cover ongoing caregiving costs. In 2026, family caregivers in the United States typically earn between $12 and $25 per hour, depending on the program through which they are paid and the complexity of the care. Hourly pay rates for caregivers often mirror those of home health aides in the area, and each Medicaid self-direction program may set its own rates.

For example, Michigan’s MDHHS Home Help program pays $17.13/hour (base $13.73 + $3.40 pass-through) to individual family members who act as caregivers as of Jan 2026. States determine caregiver pay rates primarily through Medicaid waivers and specific Paid Family Leave (PFL) laws. New York’s CDPAP might pay $15–$21 per hour, while Texas’s STAR+PLUS might pay $10–$14 per hour. The pay rates for family caregivers are usually based on the going rates for home care aides in their state, ranging from around $13–$18 per hour or more. Higher costs of living, such as in California, can lead to higher caregiver wages, with the IHSS program projected to reach a minimum of $20/hour in 2026. The compensation amount for family caregivers varies depending on the program or person paying them, the state where they live, and other factors, and can differ significantly.

Caregivers with formal certifications or specialized training may qualify for higher pay tiers than those without such qualifications. In some states, passthrough rules—such as Indiana’s requirement that 80% of Medicaid funds go directly to caregiver wages—help increase take-home pay for family caregivers.

Starting in July 2026, transparency requirements will require states to publish their hourly Medicaid payment rates for caregiving services, making it easier for families to compare compensation options.

Why Families Choose to Pay a Relative

Family caregivers often provide an enormous amount of hands-on care—helping with bathing, meals, medications, mobility, and even medical tasks. Paying a family member can:

• Recognize the caregiver’s time and effort

• Help a caregiver remain financially stable

• Allow the care recipient to stay at home longer

But legal frameworks matter. Courts and government agencies don’t automatically accept informal or verbal payment arrangements.

Legal Risks of Informal Arrangements

Family members often rely on verbal agreements or cash payments when they act as a paid caregiver, assuming good intentions are enough. Legally, they are not.

Without proper documentation:

• Medicaid may impose penalty periods

• Eligibility may be delayed or denied

• Families may be forced into extended (and very expensive!) private pay

• Disputes between family members become difficult to resolve

From a legal standpoint, informal caregiving arrangements are one of the most common—and costly—Medicaid planning mistakes. Many family members do not realize the damage until Medicaid or Veterans benefits eligibility is denied.

Government Programs Pay Family Members: But Family Caregivers Have To Be Very Careful To Meet Eligibility Requirements

Medicaid and VA Improved Pension (Aid & Attendance) are means-tested benefits. Eligibility requirements depend on strict income and asset limits for the care recipient. To become a paid caregiver, the care recipient must be eligible for Medicaid, and Medicaid recipients may be able to hire family members through specific programs. Because of this, the government closely examines whether payments to others were legitimate expenses or uncompensated transfers (gifts), particularly when government programs pay family members.

Even when care is real and necessary, the government does not assume payments are valid compensation. The burden is on the applicant to prove that money was exchanged for services provided to family members at fair market value. Many states offer consumer-directed or self-directed care options under their Medicaid programs, allowing participants to hire family members to provide personal care services and manage their own care. Many states call this a consumer-directed personal assistance program. Structured family caregiving is a Medicaid-funded benefit that provides financial support for unpaid primary caregivers who assist Medicaid beneficiaries with daily living activities. Medicaid waivers, such as home and community-based waivers, allow for flexible care arrangements, including hiring informal caregivers. Personal care and personal care services are often included in these programs. Many states allow participants to hire friends and relatives to provide needed assistance through Medicaid-funded consumer-directed personal care assistance programs.

That proof comes from a Medicaid-compliant care contract.^[1].

The Care Contract: A Necessity For A Paid Family Caregiver

Elements of a Care Contract

A care contract is not optional when family members become paid caregivers. Without one, Medicaid will almost always treat payments as gifts.

To be considered a valid exchange of value, a care contract must:

• Be in writing and signed before care begins

• Describe services in specific detail (not vague help)

• State exact hours and frequency of care

• Pay fair market value comparable to local home-care agencies

• Provide for regular payroll-style payments (weekly or biweekly)

• Prohibit retroactive or lump-sum payments

• Include clear start and termination provisions

Payments made without these elements—especially payments for past care to family members—are commonly disallowed during Medicaid review.^[2] An elder law attorney can help ensure the contract meets Medicaid’s exchange-of-value requirements before payments begin. Call us today (248)278-1511.

Important Consumer Notice About VA Benefits Advice

Families should be aware that legal advice regarding VA benefits may only be provided by:

• A VA-accredited attorney, or

• A VA-accredited claims agent or representative

Federal law strictly limits who may advise, prepare, or charge for assistance with VA benefit applications. Advice from unaccredited individuals—even if well-intentioned—can result in incorrect filings, benefit denials, or missed opportunities.

Nicole Wipp Is A Veterans Administration Accredited Attorney

Nicole Wipp, attorney and owner of our firm, is a VA-accredited attorney and is experienced in securing both Medicaid and VA benefits for clients. This dual experience is particularly important for family members who need coordinated planning—ensuring that caregiver payments, care contracts, and financial strategies comply with both Medicaid and VA requirements, now and in the future.

Financial Assistance For Family Caregivers in Michigan Using HCBS, A State Medicaid Program

What Are HCBS Waivers and Consumer-Directed Programs?

Home & Community-Based Services (HCBS) Waivers are a state Medicaid program that allows payment for care provided in the home or community, rather than in nursing facilities. Michigan participates in federal Home & Community-Based Services (HCBS) Waiver programs, including the MI Choice Waiver. These state Medicaid programs allow Medicaid to pay for certain services so individuals can remain at home or in the community, including in assisted living facilities, rather than entering a nursing facility. Through consumer direction, Medicaid recipients can hire informal caregivers, including family members, to provide care and manage their own services.

Even under HCBS waivers, payments outside the authorized plan or without proper documentation may still be treated as gifts.^[3] Many states allow participants to hire friends and relatives to provide needed assistance through Medicaid-funded consumer-directed personal care assistance programs. Care coordination with legal counsel can help prevent unintended violations.

Comparison Chart: Medicaid Rules by Care Setting (Michigan)

How Veterans Affairs Benefits Interact With Paid Family Caregiving

VA Caregiver Payment Documentation

For veterans and surviving spouses, Department of Veterans Affairs (VA) benefits can play an important role in paying for long-term care—but, like Medicaid, the VA is skeptical when you pay family. Programs such as VA Aid & Attendance and Housebound benefits are needs-based and subject to financial eligibility rules. Payments made to family members without proper documentation may be treated as unreimbursed expenses or impermissible transfers, potentially affecting benefit eligibility.

Three key programs for veteran's care include Veteran-Directed Home and Community-Based Services, Respite Care, and Aid and Attendance Benefits.

Family Caregivers and VA Rules

The VA does not prohibit paying family members for caregiving, but when you pay family, it must still be supported by a written agreement and consistent payment records. Informal arrangements, lump-sum payments, or retroactive compensation raise red flags and may be disallowed. As with Medicaid, verbal agreements are insufficient.

Qualified veterans may be eligible for a monthly VA pension, which can be supplemented by Aid and Attendance Benefits to help cover the costs of family caregiving.

Coordinating VA and Medicaid Benefits

Many families mistakenly assume that VA benefits and Medicaid operate under identical rules. In reality, they are separate programs with different financial standards and documentation requirements. However, one principle is consistent across both: caregiver payments must be supported by a properly drafted contract to be recognized as a legitimate expense. When VA benefits are used first and Medicaid may be needed later, improperly structured caregiver payments can create serious problems during Medicaid’s five-year look-back period.

The Veteran-Directed Home and Community-Based Services program offers a flexible budget for veteran's home care, allowing veterans to hire family members as caregivers.

When documenting payments, it is important to note that VA programs may provide monthly stipends for eligible caregivers, ranging from approximately $1,818 to $2,909, or $18 to $24 per hour.

The VA also offers a respite care program to provide temporary relief for family caregivers.

Planning Ahead Protects Everyone

Paying a family member can be appropriate and beneficial when structured correctly. The key is planning before a crisis occurs.

Best practices include:

• Drafting a Medicaid-compliant care contract early

• Coordinating caregiver pay with Michigan Medicaid progam rules

• Avoiding lump-sum or retroactive payments

• Consulting with an elder law attorney or Medicaid planning professional

There are several tax breaks and tax credits that family caregivers can take advantage of. Labor laws regarding minimum wage and overtime may also be applicable to family caregivers, and these laws differ by state.

Transition: Let’s wrap up with some final thoughts and how our office can help you navigate these complex rules.

Final Thoughts

Medicaid does not prohibit paying family members—but it demands precision, documentation, and compliance. In Michigan, there are several important options, but they do not eliminate the need for legally sound planning.

A properly drafted care contract can mean the difference between smooth Medicaid approval and months of costly delays.

For families navigating long-term care decisions, understanding these rules early can protect both assets and access to care. A brief legal consultation early in the process can prevent months of delay, thousands in unnecessary private-pay costs, and significant stress later.

Our Office Provides Comprehensive Assistance: Contact Us Today at (248)278-1511

Legal Notes & Sources

1. Social Security Act §1917(c); 42 U.S.C. §1396p(c) (Medicaid transfer-of-asset rules)

2. Michigan Medicaid Provider Manual, Eligibility Section (asset transfers and uncompensated transfers)

3. 42 C.F.R. §441.301; Michigan MDHHS HCBS Waiver Policy (payment restrictions and authorized services)

4. Michigan Medicaid Asset and Income Limits for Long-Term Care (MDHHS guidance)

This article is for educational purposes only and does not constitute legal advice. Medicaid rules are complex and fact-specific. Families should consult a qualified elder law attorney regarding their individual circumstances.