Medicaid Caregiver Contract for Transportation: How to Protect Payments During the Look-Back Period

Why Transportation Payments Need a Written Contract

When a family member drives an aging parent to appointments, many families simply reimburse the driver from the parent's savings — gas money, a flat fee per trip, or a monthly stipend. If the parent later applies for Medicaid to cover nursing home or long-term care costs, those payments create a serious problem.

Medicaid's five-year look-back rule examines every financial transaction made during the 60 months before the application date. Payments to family members that were not made in exchange for documented services at fair market value may be treated as uncompensated transfers — essentially gifts. Medicaid calculates a penalty period based on the total value of those transfers, during which the applicant may be ineligible for benefits. The penalty divisor and calculation are state-specific, so even moderate payments can produce months of ineligibility.

A Personal Care Agreement (PCA) — sometimes called a Caregiver Contract or Family Care Agreement — can help document those payments as compensation for services rendered. A properly drafted and executed PCA supports a fair-market-value record, but it does not guarantee how a state Medicaid office will classify the payments.

What a Medicaid-Compliant Transportation PCA Must Include

The contract should be signed before the services begin. A retroactive PCA — drafted after the fact to justify payments already made — may be rejected during the look-back review.

Required elements for a transportation-focused PCA:

Parties and effective date. Full legal names of the care recipient (your parent) and the caregiver (the family member providing transportation). The agreement must be dated and signed before the first compensated trip.

Scope of services. Specify exactly what the caregiver will do: drive the parent to and from medical appointments, pharmacy, grocery, social activities, and religious services; provide door-through-door assistance including help entering and exiting the vehicle, navigating stairs, and carrying packages; coordinate scheduling with other transport providers.

Compensation rate. The rate must reflect fair market value for the services in the parent's geographic area. Research what home care agencies or non-medical transport services charge per hour or per trip in your parent's county. The current IRS mileage rate may be a reference for the driving component, but it does not establish Medicaid fair-market value; document separate local rates for physical assistance and wait time.

Payment schedule and documentation. Set a payment schedule that matches the services actually rendered. Use a traceable payment method where possible, with a memo line referencing the PCA. Maintain a log of every trip: date, pickup and drop-off locations, mileage, departure and return times, and services provided. This log supports the payments during a Medicaid audit.

Term and termination. The agreement should specify a term (one year, renewable) and conditions under which either party can terminate — death, incapacity, relocation, or mutual agreement.

Prohibition on inheritance offset. Some attorneys include a clause stating that the caregiver's compensation is not an advance on inheritance. Ask counsel whether that clause is appropriate under the parent's state law and estate plan.

Common Mistakes That Invalidate the Contract

Paying above fair market value. If home care agencies in the area charge $22 per hour and the PCA pays the family caregiver $45 per hour, Medicaid may treat the excess as a gift.

No contemporaneous records. A PCA without trip logs is a piece of paper. Medicaid caseworkers may request documentation of actual services rendered — dates, times, destinations, mileage. If you cannot produce it, the payments may be reclassified as uncompensated transfers.

Lump-sum prepayments. Some families pay the caregiver a large upfront sum for "future transportation services." Prepayments for unperformed services can create transfer concerns, so obtain state-specific advice before using them.

Using the wrong signer. If the parent lacks cognitive capacity to understand and sign a contract, whether an agent can execute a PCA depends on the Durable Power of Attorney and state law. If no usable authority exists and the parent lacks capacity, an elder law attorney can explain whether guardianship or another court process is required before a PCA can be created.

State-Specific Variations

Most states apply a federal five-year look-back period, but implementation details and penalty calculations vary. Some states, including California, have different or changing Medicaid transfer rules, so confirm the current rule for the parent's program. New York and states with filial-responsibility laws may add further state-specific issues; an elder law attorney can explain how those rules affect a PCA.

Consult a Medicaid planning attorney in the parent's state before finalising the PCA. The attorney can verify the applicable look-back period, confirm the fair market rate standard used by the local Medicaid office, and ensure the contract language meets that state's specific requirements.

The Transportation Solutions for Non-Driving Parents toolkit includes a Caregiver Transport Contract template designed for Medicaid compliance, along with a trip logging system that captures the documentation Medicaid auditors request.