Quick Summary

Here’s a summary of a recent Michigan Court of Appeals case, Estate of Charla Brown v Department of Health and Human Services (Michigan Court of Appeals, 2026).

The court looked at whether Medicaid can automatically treat payments to family caregivers as a penalty just because there wasn’t a proper written care agreement in place.

The answer: No.

Medicaid cannot use a strict rule that says “no written contract = penalty” without looking at the real reason the payments were made.

Why This Matters

This case hits right at the heart of real-life family caregiving and a Medicaid rule that penalized payments made to caregivers.

Here’s what happened in plain terms:

A woman needed significant care at home after serious health issues. Her husband, daughter, and a family friend stepped in and provided daily help—bathing, feeding, mobility, medications, and more.

They were paid for that care.

Later, when she applied for Medicaid, the state said:

“These payments count as a penalty because there wasn’t a proper written and notarized care agreement in place ahead of time.”

That created a period where Medicaid would not pay for her care.

The problem?

Michigan’s internal Medicaid rule basically said:

  • If you don’t follow very specific contract rules
  • Then the payments are automatically treated as improper transfers

The Court of Appeals said that approach goes too far.

Why?

Because federal Medicaid law requires something more fair:

  • The state must allow families to show the real reason for the payments
  • If the payments were made for legitimate care—not to qualify for Medicaid—then they should not automatically be penalized
  • A rule that blocks that explanation is not allowed

In other words, Medicaid cannot create a “you automatically lose” rule just because paperwork wasn’t perfect.

That’s a big deal. The court pushed back on a Medicaid rule that penalized families for paying caregivers simply because the paperwork wasn’t signed and notarized ahead of time.

But here’s the important nuance:

The court did not say the family automatically wins.

Instead, the case was sent back to be reviewed the right way—looking at:

  • Whether the payments were reasonable
  • Whether they were truly for care
  • And whether they were made for reasons other than qualifying for Medicaid

So the outcome still matters. But now the process must be fair.

Simple Lesson

Good intentions are not enough—clear planning makes everything easier.

Action Step

If a family member is helping with care at home, don’t wait.

Make sure:

  • There is a clear care plan
  • Compensation is reasonable
  • And the arrangement is properly set up from the start

Even though this case gives families more protection, the safest path is still to plan ahead and avoid the issue altogether.

If this topic raises questions for you or your family, feel free to call (517) 548-7400 or contact us online: https://www.michiganestateplans.com/contact-us