Z.P. was a resident of Aristacare at Cedar Oaks in South Plainfield, New Jersey. Z.P. filed for Medicaid benefits and was found to be medically and financially eligible as of December 1, 2016. However, Z.P. made transfers for less than fair market value within five years of the application date for Medicaid. As a result, the Medicaid agency imposed a 374-day transfer penalty period.

After the penalty period was imposed, the Medicaid agency found that Z.P.’s income exceeded Medicaid’s income limits for seven months, during the months of November 2016, February 2017, April 2017, June 2017, September 2017, November 2017, and February 2018. By Notice dated July 31, 2017, Z.P. was advised by Medicaid that he would not be eligible for Medicaid during the seven separate one-month periods identified above which occurred during the previously established 374-days transfer penalty, and that the transfer penalty would not run during those months of financial ineligibility. Z.P. appealed, seeking a Fair Hearing.

The issue on appeal was whether the Medicaid agency properly tolled petitioner’s transfer penalty for the seven months when petitioner’s income exceeded the Medicaid income limits. Z.P. filed a motion for summary judgment.

The Medicaid agency argued that the transfer penalty should be tolled for those seven months in which Z.P.’s monthly income exceeded the monthly allowable income limits. Z.P. argued that the Deficit Reduction Act of 2005, 42 U.S.C. § 1396p(c)(1)(A) (“DRA”) prohibited the tolling of the transfer penalty “for any reason.” In that regard, the DRA states:

The penalty period will continue to run for the number of months determined . . . . [and] Once the penalty period is imposed, it will not be tolled (i.e., will not be interrupted or temporarily suspended), but will continue to run even if the individual subsequently stops receiving institutional level care.

The state Medicaid agency provided no statutory support, nor any New Jersey Medicaid communications, which specifically permitted the tolling of transfer penalties in New Jersey.

After oral argument, the administrative law judge reversed the decision of the local Medicaid agency tolling Z.P.’s transfer penalty during the seven months of Z.P.’s financial ineligibility due to excess income.

The decision by the administrative law judge was then reviewed by the Director of the state Medicaid office. The Director affirmed the decision, ruling as follows:

The Centers for Medicare and Medicaid Services (CMS), which is tasked with the federal administration of the Medicaid program, has stated that “[o]nce the penalty period is imposed, it will not be tolled (i.e., interrupted or temporarily suspended), it will continue to run even if the individual subsequently stops receiving institutional level of care. For these reasons, the 374 day penalty period began to run on December 1, 2016, the day petitioner met income, resource and clinical eligibility, and would run continuously through December 11, 2017 without sporadic tolling during that period.

The matter was returned to the local Medicaid agency for a determination of eligibility.

The ALJ’s Initial Agency Decision is annexed here – Z.P. v. Middlesex Bd of Soc Svs (Initial Agency Decision)

The Final Agency Decision by the State Director of Medicaid is annexed here – Z.P. v MCBSS (Final Agency Decision)

For additional information concerning Medicaid applications and appeals, visit:

NJ Medicaid Applications