Programs that Compensate Family Members to Care for Loved Ones with Alzheimer’s or Dementia

Introduction

Providing care for someone with dementia or Alzheimer’s disease can be difficult, and this task often falls to an unpaid and untrained family member. They might be able to provide the necessary care at first, but as the disease progresses the dementia patient’s care needs will increase, which will require more time and energy from the caregiver. They might need to cut back on their work hours or quit their job altogether to provide the care their loved one requires. Families in this predicament can find support in multiple avenues, from Medicaid to tax deductions.

How Medicaid Compensates Family Members to Provide Care

Medicaid is a public health insurance program for Americans with limited finances. To qualify, applicants have to meet certain eligibility requirements, which are discussed below. In addition to medical coverage, Medicaid also covers non-medical, long-term care services and supports for seniors, including those with Alzheimer’s disease and other dementias. It will cover these services in a variety of settings, such as nursing homes, the beneficiary’s home and, in most states, assisted living residences.

One way Medicaid covers in-home care is by paying family members to provide some of the long-term care, which many of them were already providing. These payments are primarily made by using Consumer Directed Care, but they can also be made via Structured Family Care. And Medicaid compensates family member caregivers in an alternative way using the Child Caregiver Exemption.

Consumer Directed Care

Consumer Directed Care gives Medicaid beneficiaries some decision-making power when it comes to their coverage. Depending on the state and their Medicaid care plan, this can include the ability to hire, and pay, caregivers of their choice, who can be family members such as adult children or grandchildren. In 33 states, these Medicaid-paid family caregivers can be the beneficiary’s spouse.

The type of care Consumer Directed Care options will typically pay family members to provide is personal assistance with the necessary chores of life. These are broken down into the Activities of Daily Living (mobility, bathing, dressing, eating, toileting) and the Instrumental Activities of Daily Living (shopping, cooking, cleaning, medication management, etc.). Most states will require family caregivers to pass a background check, and some states will require caregivers to undergo training or certification. Medicaid will pay family caregivers about 75% of the average pay for a professional caregiver in their area, although this can vary dramatically depending on the state.

Choosing a caregiver is not the only way Consumer Directed Care can be used to pay family members to provide care. Some Medicaid beneficiaries receive a monthly budget via Consumer Directed Care they can spend on healthcare expenses of their choice. These expenses could include paying a family member caregiver.

If the Medicaid beneficiary is not capable of making their own choices, which is a common symptom for dementia patients, there can be a substitute decision maker who can enact the Consumer Directed Care option on the beneficiary’s behalf. This proxy can not be the same person who is the paid caregiver, and in most cases the proxy will need a Power of Attorney that grants them decision making power in this area.

There are two Medicaid programs that offer Consumer Directed Care options: Home and Community Based Services (HCBS) Waivers and Aged, Blind and Disabled (ABD) Medicaid.

Home and Community Based Services (HCBS) Waivers
Most Consumer Directed Care options are available through HCBS Waivers. The exact names and benefits of these Medicaid programs change depending on the state, but in general they cover medical and long-term care for beneficiaries who need a Nursing Facility Level of Care but instead of living in a nursing home they reside in their own home, the home of a loved one, or, in some states, other settings in the community such as assisted living residences, adult foster homes and memory care facilities for people with Alzheimer’s disease and other dementias.

So, an HCBS Waiver with a Consumer Directed Care option could pay the beneficiary’s family member to provide personal care in the beneficiary’s home or the family member’s home. Or, in certain circumstances, the family member could be paid to provide care in the assisted living or memory care residence where their loved one resides.

Please Note: HCBS Waivers will not pay for room and board in any of these settings, with only a few rare exceptions.

There are two financial requirements for HCBS Waivers – an asset limit and income limit. In most states in 2026, the individual asset limit for HCBS Waivers is $2,000. That means applicants must have $2,000 or less in countable assets, but some assets are exempt (not countable), including a primary vehicle, personal items, clothes, household furniture and appliances and, in many cases, a primary home. The individual income limit for HCBS Waivers in most states in 2026 is $2,982/month. Almost all income is counted, including Social Security benefits, pension payments, alimony, rental income, stock dividends, salary, wages, etc.

It’s important to remember that these limits can change depending on the applicant’s state and marital status. People who don’t currently meet their limits can eventually qualify by using Medicaid Planning strategies. These tend to be complicated, so consulting with a professional is recommended before attempting them on your own.

The medical, or functional, requirement for HCBS Waivers is requiring a Nursing Facility Level of Care (NFLOC), as mentioned above. This means the kind of 24/7 care and supervision associated with a nursing home. However, the exact definition of a NFLOC can change between states, which can have different methods of evaluating Medicaid applicants to determine if they do need a NFLOC.

Even if an HCBS Waiver applicant meets the financial and medical requirements, they are not guaranteed coverage by the HCBS Waiver. That’s because these programs have a limited number of enrollment spots. If these spots are full, additional applicants are placed on a waitlist.

Aged, Blind and Disabled (ABD) Medicaid
This is also known as state or regular Medicaid, but ABD Medicaid is designed for seniors and should not be confused with the regular Medicaid that is available to people of all ages. Some states offer Consumer Directed Care through ABD Medicaid. It may be offered through programs like the Community First Choice Option, the Self-Directed Personal Assistant Services Plan Option or the Home and Community Based State Plan Option, which shouldn’t be confused with the HCBS Waivers described above.

ABD Medicaid covers seniors who live in the community, like HCBS Waivers, but ABD Medicaid applicants are not required to need a Nursing Facility Level of Care (NFLOC), unlike HCBS Waivers. In fact, there is no medical requirement to receive basic healthcare coverage (primary care visits, prescription medications, short-term hospital stays, emergency room trips, etc.) via ABD Medicaid. But, and this is an important “but” for this discussion, in order to receive long-term care through ABD Medicaid, which includes the Consumer Directed Care options, applicants/beneficiaries must show a medical or functional need for those long-term care benefits.

So, an ABD Medicaid applicant or beneficiary who does not need personal care assistance will not be able to access a Consumer Directed Care option and pay a family member, but those that do show a need for that personal care assistance may be able to use Consumer Directed Care and pay a family member via ABD Medicaid, as long as their state allows it and it’s part of their Medicaid care plan.

In most states in 2026, the individual asset limit for ABD Medicaid is $2,000. The individual income limit for ABD Medicaid in 2026 ranges from $994/month to $1,845/month, depending on the state. Again, these limits can change depending on the applicant’s state of residence and marital status.

ABD Medicaid is an entitlement, which is different than HCBS Waivers and guarantees that all eligible applicants will receive coverage without wait.

Structured Family Caregiving

Structured Family Caregiving (SFC) will pay family members who live with the Medicaid beneficiary and provide constant supervision and personal care assistance. SFC is commonly called adult foster care and can be especially helpful for families with loved ones who have Alzheimer’s disease or other dementias.

SFC caregivers are often adult children who are already living with their parent. But SFC caregivers can also move in with the senior after they have been accepted by Medicaid, and in some states SFC caregivers can be spouses, or people who are not related to the beneficiary. All SFC Caregivers must be 18 or older, pass a background check and be committed and able to be the primary caregiver for the Medicaid beneficiary. Some states may also require they have certain training or certifications.

State Medicaid agencies will assign a care coordinator and nurse to oversee SFC caregivers, answer questions and provide support. States will also provide training based on the care needs of the Medicaid beneficiary, as well as fill-in respite caregivers.

SFC programs are typically available through Medicaid’s HCBS Waivers, which are described above. Currently, there are 12 states that offer SFC: Connecticut, Georgia, Indiana, Louisiana, Massachusetts, Missouri, Nevada, North Carolina, North Dakota, Ohio, Rhode Island and South Dakota. This webpage from the American Council on Aging has links to state-specific SFC programs.

Child Caregiver Exemption

Family member caregivers are not compensated with money via this exemption, but they are compensated in a different way – with a home. The Child Caregiver Exemption lets senior homeowners transfer their home to a qualified adult child without jeopardizing their Medicaid eligibility and coverage. The adult child is qualified if they have lived in the home for at least two years and during that time that have provided care that allowed their parent to remain living in the home instead of moving into a nursing home.

Without the Child Caregiver Exemption, transferring the home would violate Medicaid’s Look-Back Period, which means the senior homeowner would be facing a penalty period of ineligibility. The Look-Back Period is used by states to make sure applicants don’t just give away their assets in order to qualify for Medicaid. This includes things like paying for a grandchild’s education, or giving a home to an adult child caregiver who lives there, even if they might eventually inherit the home anyway. In most states, the Look-Back Period is 60 months (five years), which means the state will look back into the applicant’s financial history for the 60 months prior to their application date to make sure they have not given away any assets or sold them at less than fair market value.

State Funded, Non-Medicaid Programs

In addition to the Medicaid options listed above, there are also non-Medicaid state programs that pay relatives to provide care for a loved one with dementia. These programs, like many of the Medicaid programs, allow the individual who requires care to choose the caregiver that they see fit to provide the care. Unfortunately, not all states offer these types of programs, they can be difficult to find, and usually, there is limited enrollment creating waitlists.

Programs for Veterans to Care for their Loved Ones

1) Veteran Directed Care Program
For seniors with dementia who are veterans, there are veteran-specific programs that assist in paying for care. As part of the VA Medical Benefits package, Veteran Directed Care Program (formerly called Veteran-Directed Home and Community-Based Services) is available. Rather than requiring nursing home care, this allows seniors with dementia to receive care in their homes and community via funds from a flexible budget. Since the services are veteran-directed, they can choose their caregiver. This means a family member can be paid to provide the care that is needed for their loved one. More information is available here.

2) A&A Pension
Another option for veterans, and their spouses, who served during a period of war is the Aid & Attendance Pension. This pension is intended to assist with the cost of long-term care and is ideal for those who are suffering from dementia. As the disease progresses, your loved one will need to be reminded to perform daily activities, such as brushing one’s teeth or washing one’s hands. One may need assistance with eating, dressing, moving from one location to another, using the bathroom, and so forth. The Aid & Attendance Pension is intended for those who require assistance with the above daily living activities and is an extremely desirable option since veterans can choose their caregivers, including relatives. However, because the VA counts a spouse’s income when considering eligibility, Aid & Attendance cannot be used to pay a spouse as a caregiver but can be used to pay adult children and other family members. Read more.

Paid Family Leave Programs

A positive trend among states is the creation of Paid Family Leave programs. For years only 3 states offered Paid Family Leave that could be used to care for family members with dementia. As of 2025, the list has expanded to include:

• California
• Connecticut
• Delaware
• District of Columbia
• Hawaii
• Maine
• Maryland
• Massachusetts
• Minnesota
• New Jersey
• New York
• Oregon
• Rhode Island

Under Paid Family Leave, it is the relative’s employer (or their insurance) that provides pays a reduced rate while they take a leave from work to provide care for their loved ones. An individual can normally take up to 6 weeks of leave, but this is limited to 4 weeks in Rhode Island. While this isn’t a long-term solution to providing care for a loved one with Alzheimer’s, it does allow for a short-term solution. For instance, it might be ideal to take this leave when the individual with dementia is on the cusp of requiring nursing home care but is still able to live at home if a family member can provide care. Alternatively, instead of taking 6 consecutive weeks of leave, a caregiver may elect to take one day each week throughout most of the year to provide care.

Long-Term Care Insurance

Long-term Care Insurance is another possibility for family members to be paid for providing care for a loved one with dementia. Each policy is different, so verify to determine if their specific policy will indeed pay relatives for providing care. Some policies that do allow relatives to be paid caregivers require that the caregiver be certified to provide care. However, this is a rather simple process and one should not feel intimidated. Alternatively, if relatives are not permitted to be paid, one might consider forming a home care agency and hiring and paying the agency instead. In some states, this workaround approach may be adequate.

Tax Deductions and Credits

Applying tax deductions, while not technically a way to be paid for providing care, is a way to offset the cost of care. For example, say your mother who is suffering from Alzheimer’s lives in your home and you are fully supporting her. As a result, you can deduct certain medical expenses from your taxes, such as the cost of doctors’ visits, prescription drugs, and home modifications that are medically necessary, such as grab bars.

One may also apply a tax credit such as the child and dependent tax credit if they pay for a dependent person with dementia to be cared for while he or she is at work. Again, while it doesn’t directly pay the family member for providing care, it does decrease the amount of taxes one will owe, in turn, saving the individual money.

There are several ways to get paid to provide care for a loved one suffering from Alzheimer’s disease or another dementia. Since each situation is highly personal, all the circumstances should be carefully considered to find the best solution for you and your family.