Effective April 1, 2021, Medicaid’s Penalty Divisor Increased

Increase in Medicaid’s penalty divisor announced.

Last month, the New Jersey Division of Medical Assistance and Health Services (DMAHS), the State Medicaid agency, announced an increase in the state penalty divisor. Effective April 1, 2021, the penalty divisor has increased from $357.67 to $361.20 per day, amounting to $10,986.50 per month and $131,838 per year. For all cases received on or after April 1, 2021, the new daily penalty divisor of $361.20 will be used in the calculation.

What is the Medicaid “penalty divisor?”

When a resident of New Jersey applies for Medicaid benefits, the State Medicaid agency “looks back” to determine whether the applicant (or the applicant’s spouse) transferred assets for less than fair market value (in other words, made a gift) at any time within the five (5) year period prior to the date of the Medicaid application. This is often referred to as Medicaid’s “5-year look-back period.”

If the Medicaid applicant (or his/her spouse) makes a gift within the 5-year look-back period, a penalty is imposed. The penalty resulting from a gift made within the look-back period is the period of time during which the applicant is ineligible for Medicaid benefits.

How is the penalty divisor used by Medicaid?

New Jersey’s state Medicaid agency calculates the period of ineligibility for Medicaid benefits resulting from a gift by calculating the number of months of care in a nursing home that the gifted assets could have paid for had the applicant retained the assets rather than gifting them. To determine the length of the penalty period, the agency divides the value of the gift by the average monthly cost of nursing home care in New Jersey, referred to as the “penalty divisor.” The penalty period begins on the first day of the month in which the applicant filed for Medicaid.

Getting competent legal advice from an experienced elder law attorney about the impact of gifting assets before applying for Medicaid benefits could reduce or eliminate the resulting penalty period.

The notice from DMAHS, called a Medicaid Communication, announcing the increased penalty divisor, is attached here  – [gview file=”https://vanarellilaw.com/wp-content/uploads/2021/05/Medicaid-Communication-21-04_Increase-in-the-Penalty-Divisor.pdf”]

For additional information concerning Medicaid applications and appeals, visit:

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