If a person provides gifts within five years of a Medicaid application then he or she will be denied Medicaid assistance for a period of time known as the penalty period. The penalty period is calculated by taking the value of the gift and dividing it by the average daily cost of skilled nursing care in the State of New Jersey. This is known as the penalty period divisor.
Until recently, the Division of Medical Assistance and Health Services (DMAHS) has indicated that the penalty period divisor is $357.67. The DMAHS has issued a new directive to the County Medicaid agencies concerning a revision to the penalty period divisor. The DMAHS’s new directive sets forth that effective April 1, 2021, the penalty period divisor increased from $357.67 to $361.20.
By way of illustration, if a person transfers $20,000 within the last five years then the penalty period will be 55 days. This was calculated as follows: $20,000 ÷ $361.20 = 55.37 days. According to the directive issued by the DMAHS, the penalty period is then “rounded down”. Therefore, the penalty period on the transfer of assets worth $20,000 is 55 days. That individual will not be eligible for Medicaid assistance for a period of 55 days due to the transfer of gifts worth $20,000.