When gifts are provided within the Medicaid five year look-back period, the County Board of Social Services will impose a period of ineligibility for assistance. This is known as the Medicaid penalty period. The duration of the penalty period is based upon the value of the gifts.
According to applicable federal law, the penalty period is based upon the cost of long-term care. Pursuant to New Jersey law, the penalty period is calculated by taking the value of the gifts and dividing it by the average cost of nursing home care per day. The average daily cost of long-term care is known as the penalty period divisor.
In New Jersey the penalty period divisor is revised on April 1st of each year. Usually the revision is not made until May and sometimes during the summer months of the year.
On May 24, 2022, the New Jersey Division of Medical Assistance and Health Services (DMAHS) changed the penalty period divisor. The penalty period divisor increased from $361.20 to $374.39. This change is effective as of April 1, 2022.
Prior to the change in the law, if an individual gifted $100,000 during the Medicaid five year look-back period, then they would have been denied Medicaid assistance for a period of 276 days, or approximately nine months. According to the current law, the penalty period on the transfer of $100,000 is less than nine months. The penalty period will be 267 days.