The New Jersey Medicaid Penalty Divisor increased from $357.67 to $361.20. Why is this important to families who are applying for Medicaid now or who may apply in the next five years?

First, we must answer the question: What is the Medicaid Penalty Divisor?  As many of you know, when one applies for Medicaid the County Board of Social Services reviews five years of financial, banking, and real estate transactions to determine whether the applicant is truly impoverished. The County caseworker combines all withdrawals, transfers, checks, and outright gifts and considers the purpose of such transfers to be made to impoverish the applicant and thus qualify her for Medicaid earlier than otherwise.  Then, the caseworker divides that number by the Medicaid Penalty Divisor to determine how long Medicaid will refuse to pay for the applicant’s care once she is otherwise eligible.

For example: Molly has no money left and applies for Medicaid to pay for her long-term care expenses in a skilled nursing facility. The County determines that over the prior five years Molly transferred $150,000 to qualify for Medicaid earlier.  Importantly, Molly did not intend to qualify for Medicaid earlier, but she cannot explain these transfers, or they were made for other reasons (such as helping an adult child or paying a caregiver without adequate documentation).

The County uses the following equation to determine how many days Molly must private pay before Medicaid pays for her care:  $150,000/$361.20 = 415 days.  Importantly, the 415-day penalty begins to run at the worst possible time – when Molly needs nursing home level care, and she is impoverished. 

What is Molly to do?  She has few choices: 

  • Move in with a family member or friend who will care for her for 415 days
  • Have someone else pay for her care
  • Or endure a discharge from the nursing home for non-payment

The increased Medicaid Penalty Divisor is GOOD NEWS because it softens the blow – but only slightly.

The average daily cost of nursing home care in New Jersey is closer to $400/day.  At NJELC, we have spent over a decade helping our clients and their families navigate the pitfalls of aging and long-term care.  We understand the importance of planning.  We educate our clients on strategies to allow them to use the Medicaid Penalty Divisor in their favor or trigger the penalty in a lower cost environment and enable them to pay for their long-term care needs without the indignity and inflexibility of impoverishment. 

If you or a loved one have an imminent need for long-term care or wish to plan for the possibility of long-term care in the future, please reach out so that you and your family can be properly educated and age on your own terms. 

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