Today, New Jersey Medicaid increased the penalty divisor for applicants who make gifts.  This is a very good thing for people who need Medicaid to pay for long term care.

If you apply for Medicaid to pay for long term care (in a nursing home, assisted living facility or with home health aides), you must submit five years of financial records and disclose any gifts made in the past five years.  If you or your spouse has made any gifts, then Medicaid imposes a gift penalty.

The penalty is a period of time (called a “penalty period”) for which you will not receive Medicaid, and will have to pay for your own long term care.  Let’s say you’ve made gifts and Medicaid assigns you a two-month penalty period.  If you meet Medicaid’s requirements on June 1, and Medicaid would have started paying for your nursing home care then, this means that instead Medicaid will start on August 1, and you’ll have to pay for an extra two months of nursing home care.

The length of the penalty period is based on the amount you have made in gifts, and is determined using the penalty divisor.  Effective April 1, 2017, New Jersey Medicaid increased the penalty divisor from $332.50 / day to $423.95 / day.  If you make $10,000 in gifts, you would incur a 24-day penalty.  If you make a $30,000 gift, you could incur a 70 day penalty, a little over two months.

The penalty divisor is based on a survey the state conduct of the average cost of nursing home care in New Jersey.  That the divisor is higher is a good thing for FriedmanLaw and its clients.  It means clients will be penalized less for gifts already made, and it potentially opens new planning opportunities that FriedmanLaw can use to help our clients preserve assets when they need long term care.

If you or a loved one may need long term care in the future, we encourage you to call or email FriedmanLaw for information about your options.