Home care agency or paid family caregiver: the two options
Agency home care means a licensed home care agency employs the aide. The agency recruits, screens, trains, schedules and supervises. You tell it what your relative needs, and it decides who comes.
A paid family caregiver is a relative or friend your loved one chooses, paid through a self-directed Medicaid option — consumer-directed care. New York calls it CDPAP, California calls it IHSS, Wisconsin has IRIS. The person receiving care is the employer; a payroll agency handles pay.
There's also a middle route: some agencies hire family members as aides and assign them to their own relative. And some states use daily stipends for live-in family, such as Structured Family Caregiving.
Agency care vs. family caregiver at a glance
| Home care agency | Paid family caregiver | |
|---|---|---|
| Who chooses the caregiver | The agency | Your relative |
| Who trains them | The agency | Usually a short orientation, if any |
| Who handles payroll and taxes | The agency | A fiscal intermediary or payroll agency |
| Same caregiver every day? | Not guaranteed | Yes, as long as they stay |
| Backup when sick | Agency sends a substitute | Family arranges it |
| Scheduling flexibility | Agency's shifts and minimums | Set by your relative within approved hours |
| Cost to the family | None under Medicaid | None under Medicaid |
Cost: what each costs the family and the program
Under Medicaid, neither route costs the family anything for covered hours. The program pays the agency, or it pays the caregiver through a payroll agency.
The difference is where the money goes. An agency receives a rate from Medicaid and pays the aide out of it, keeping part to cover recruiting, supervision, insurance and overhead. In self-directed programs, more of the rate typically goes to the caregiver as wages, with a smaller share to the payroll agency. That's one reason states offer self-direction at all.
For what a family caregiver earns, see family caregiver pay rates by state. New York's CDPAP pays $18.65–$20.65 an hour, California's IHSS $16.90–$22, and Pennsylvania reports about $13–$19.
Control: who decides who comes and when
With an agency, your relative describes their needs and the agency staffs the case. You can ask for a different aide, but the agency decides. Shifts often have minimum lengths and fixed start times.
With self-direction, your relative — or a representative they name — is the employer. They choose the caregiver, set the schedule within the approved hours, and decide how tasks get done. For someone who values privacy, speaks a language few aides share, or has strong preferences about personal care, that control can matter more than anything else.
Control also means responsibility: someone has to approve timesheets, keep track of hours and deal with problems. Most programs let a family member act as the representative if your relative can't.
Continuity: the same face every day
Agencies work hard to keep the same aide on a case, but staff turn over, and schedules shift. For a parent with dementia, a new face can mean a hard day.
A paid family caregiver already knows your relative's routines, medications, moods and history. The relationship doesn't reset. That continuity is the biggest reason families choose it — and why many programs were designed to allow it. If you're caring for aging parents, it's often the deciding factor.
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Reliability and backup coverage
Here agencies have a real advantage. If an aide is sick, the agency is responsible for sending someone else. You don't have to make calls at 6 a.m.
With a paid family caregiver, the family owns backup. Good ways to cover it:
- Enroll a second caregiver. Many programs let more than one person be paid within the approved hours — a sibling, a cousin or a neighbor.
- Use an agency for gaps. Some families self-direct most hours and keep an agency on call.
- Plan for respite. Look into respite care and family caregiver support programs before you need them.
If no one else in the family can step in, an agency — or a mix — is the safer choice.
Training and skills
Agency aides complete the training their state requires, and many agencies add their own. Aides are supervised, and a nurse may oversee the care plan. See what a home health aide does.
Self-directed programs usually don't require formal certification — the idea is that your relative trains the caregiver in how they want things done. Some programs require a short orientation, CPR or a background check. If your relative's care involves skilled tasks, ask the program which ones a family caregiver may perform.
When care is medical — wound care, injections, therapy after a hospital stay — that's home health, not home care, and it usually comes from a licensed agency regardless.
Taxes and paperwork
An agency aide is the agency's employee. The agency handles payroll, tax withholding, workers' compensation and W-2s.
A paid family caregiver is also paid through payroll, not in cash. In self-directed programs a fiscal intermediary withholds taxes and issues a W-2 — in New York that's PPL, the single statewide intermediary for CDPAP; in Texas every Consumer Directed Services employer uses a financial management services agency.
One tax point families often miss: if the caregiver lives with the person they care for, IRS Notice 2014-7 can make qualifying Medicaid waiver payments excludable from income as difficulty-of-care payments. Ask a tax preparer.
Who can be the paid family caregiver
Adult children, grandchildren, siblings, other relatives and friends can be paid in nearly every state. Spouses and parents of minor children are where rules differ. Spouses can be paid in 16 states, in 20 more under some programs, and not in 15. Check yours below.
If a spouse can't be paid in your state, an agency route or another relative may still work. See paid parent caregivers for children's programs.
When a home care agency is the better fit
- No family member is available, nearby or willing to take on the role.
- The family caregiver's own health or job can't absorb the hours.
- Your relative needs several caregivers across the day and night — see 24-hour home care.
- Care is complex and you want professional supervision.
- Family relationships are strained, and keeping care separate helps.
If this is you, read how to choose a home care agency and our guide to looking up an agency by name.
When a paid family caregiver is the better fit
- Someone in the family already provides much of the care for free.
- Your relative wants to choose who helps with bathing and dressing.
- Language, culture or dementia make a steady, familiar caregiver important.
- Agencies in your area can't staff the case, or staff it unreliably.
- The caregiver lives with your relative, which may also unlock stipend programs like live-in care and tax benefits.
If that sounds like your family, how to become a paid caregiver for a family member walks through the steps.
Using both: family care with agency backup
You don't have to pick one forever. Common combinations:
- A daughter is paid for weekday hours; an agency covers weekends.
- Two siblings split the self-directed hours; an agency is on call for emergencies.
- Family provides personal care; a Medicare-certified home health agency handles skilled nursing after a hospital stay.
Whether a mix is allowed depends on your state and your relative's plan. Ask the care manager at the assessment. Medicaid home care explains how hours are approved.
How it works in a few states
| State | Family route | Agency route |
|---|---|---|
| New York | CDPAP, payroll through PPL | LHCSAs through Medicaid plans |
| California | IHSS, paid through the state payroll system | Private or plan-based agencies |
| Pennsylvania | Services My Way / participant direction, payroll through Tempus | Agencies under Community HealthChoices |
| Texas | Consumer Directed Services with an FMSA | Agency option under STAR+PLUS |
| Georgia | Structured Family Caregiving stipend through a provider agency | Agency personal support |
Every state is on our states page. Not sure which route your relative qualifies for? Check eligibility in two minutes.
Where to go next
Frequently asked questions
Is it cheaper to use a paid family caregiver than an agency?
For the family, both are usually free under Medicaid. For the program, self-direction generally sends more of the rate to the caregiver because there is less agency overhead.
What happens if the family caregiver gets sick?
The family arranges backup. Many programs let you enroll a second caregiver, and some families keep an agency available for gaps.
Does a family caregiver need to be certified?
Usually not in self-directed programs, beyond a background check and sometimes a short orientation. Agency routes may require home care aide training.
Who pays the family caregiver's taxes?
A payroll agency or fiscal intermediary withholds taxes and issues a W-2. If the caregiver lives with the care recipient, some payments may be excludable from income under IRS Notice 2014-7.
Can a spouse be the paid caregiver?
In 16 states yes, in 20 more under some programs, and not in 15. New York and Pennsylvania do not allow it.
Can we use both an agency and a family caregiver?
Often yes, as long as the combined hours stay within what your relative is approved for. Ask the care manager or plan.
Can an agency hire me to care for my own parent?
Some agencies do, especially in states like Pennsylvania, New Jersey, Maryland and Missouri. You become the agency's employee and are assigned to your relative.
Sources: CareScout 2025 Cost of Care Survey · Medicaid.gov: self-directed services · IRS: certain Medicaid waiver payments may be excludable from income · IRS Publication 926: Household Employer's Tax Guide · PPL: New York CDPAP FAQ. Program rules and rates change — always confirm with the program. Reviewed September 30, 2026.