NJ Medicaid Changes Penalty Divisor, Friedman Law

New Jersey Medicaid recently changed the way it calculates penalties for gifts.

New Jersey residents can qualify for New Jersey Medicaid, a government program that can pay for long term care in a nursing home, assisted living facility, or with home health aides. However, when you apply for long term care Medicaid, the Medicaid agency reviews your finances for the past five years, and looks to see if you’ve made any gifts.

If you have made gifts, Medicaid imposes a penalty based on the value of the gift. The penalty is a length of time (the penalty period) during which Medicaid will not pay for your long term care. During that time, you have to pay for your own care. However, the penalty period doesn’t start running until you’re eligible for Medicaid – until your resources are spent down below $2,000 and you’ve met Medicaid’s other requirements. In other words, during the penalty period people typically will have no money to pay for their long term care. So it’s a problem.

Medicaid calculates the penalty period based on a formula. Under the old penalty divisor formula from recent years, applicants lost roughly one month of Medicaid for every $13,000 in gifts. So if an applicant made a gift of approximately $100,000, the applicant would get a penalty period of roughly eight months.

Medicaid recently changed that formula, to the detriment of applicants who’ve made gifts. Under the new penalty divisor formula, applicants lose one month of Medicaid for roughly every $10,000 in gifts. So that same $100,000 gift would now result in a penalty period closer to ten months.

Some elder law attorneys are making efforts to get this change reversed, but it’s not clear whether those efforts will yield results.

All the same, if you need Medicaid to pay for long term care, or you have questions about gifts and Medicaid, FriedmanLaw is available to help. Call or email us today.