Medicaid provides coverage for an individual’s long-term care costs, including institutional care in a facility. In order to qualify for Medicaid, an individual must be poor. Medicaid has stringent rules relating to financial eligibility, including the five year look-back rule. Any assets that are gifted within five years of a Medicaid application will result in the denial of Medicaid for a period of time known as the “penalty period”.
The duration of the penalty period is based upon the value of the gifts provided during the five year look-back period. According to applicable federal law, the penalty period is based upon the average monthly cost of nursing facility services in the State. Our New Jersey Medicaid regulations also refer to the average cost of nursing home services in the State of New Jersey.
Prior to April 1, 2024, the State of New Jersey calculated the duration of the penalty period by taking the total value of the gift and dividing it by the average daily cost of nursing home care of $384.57. The dollar amount of $384.57 is referred to as the penalty period divisor.
The New Jersey Division of Medical Assistance and Health Services (DMAHS) has changed the penalty period divisor as of April 1, 2024. The DMAHS issued a special directive to the New Jersey Medicaid agencies concerning the penalty period divisor. This directive is known as Medicaid Communication No. 24-03. According to Medicaid Communication No. 24-03, the penalty period divisor increased from $384.57 to $440.10.
The effect of the change in the law is a reduction in the duration of the penalty period. Prior to the change in the law, a penalty period on the transfer of $100,000 would have resulted in a penalty period of 260 days. Under the current law, the penalty period on the transfer of $100,000 is 227 days.
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