Each year, the New Jersey Division of Medical Assistance and Health Services (DMAHS) reviews and updates the Medicaid “penalty divisor.”
The penalty divisor is a key figure used to determine the penalty period for Medicaid Long-Term Services and Supports (“MLTSS”) applicants who have transferred assets for less than fair market value during the five-year lookback period. This divisor represents the average daily cost of nursing home care in New Jersey, and is central to calculating the length of any Medicaid ineligibility period resulting from such asset transfers.
Effective April 1, 2026, the State of New Jersey increased the daily penalty divisor from $402.74 to $420.69 per day, according to the attached Medicaid Communication No. 26-04 issued by DMAHS. This new figure reflects what the state determined as an increase in the average daily cost of nursing home services, based on an independent statewide survey of licensed facilities.
The penalty period is calculated by dividing the total amount of assets transferred for less than fair market value by the penalty divisor amount. With the new, higher divisor, applicants who have made uncompensated transfers will now face shorter ineligibility periods for Medicaid coverage. For example, a $100,000 transfer that created an 8.16-month penalty under the prior divisor now results in approximately 7.81 months of Medicaid ineligibility.
This change underscores the importance of careful Medicaid planning. Individuals and families considering asset transfers or seeking Medicaid eligibility should consult qualified counsel to understand the full impact of these updates on eligibility timing and long-term financial planning.