The penalty period divisor is used when calculating penalty periods that a Medicaid Applicant may incur due to gifting or transferring of assets during the 5-year look back period for New Jersey’s Medicaid’s Managed Long Term Services and Supports (MLTSS) Program.

Upon submission of a Medicaid application, the applicable county’s Board of Social Services reviews the applicant’s financial records for the five years immediately preceding the application.  If the County determines that assets have been gifted or transferred to benefit someone other than the applicant or applicant’s spouse, a penalty will be assessed. 

The combined amount of the gift or transfer of assets during the five years is then divided by the penalty period divisor to determine the length of time that Medicaid will refuse to cover the individual once she is otherwise eligible for Medicaid.  During a penalty period, a person will not receive most services from Medicaid, including payment for room and board at a facility. 

For example, John gives his son $50,000 in 2020 and applies for Medicaid June of 2020.  The County calculates the penalty as follows:  50,000.00 / 374.39 = 134.5505 days.  If John is otherwise eligible for Medicaid, John will not receive full Medicaid benefits for 134 days from the date he is determined eligible by the County, and he will be responsible for private payment to the facility during the penalty period.

Since most nursing facilities in New Jersey cost more than $374.39 per day, the penalty often results in the family paying the facility more than the cost of the gift.  Importantly, the same penalty divisor is used for Medicaid applications in lower cost environments, such as assisted living and home.  This presents a viable strategy for Medicaid planning.

The annual increase for the penalty period divisor for NJ has been released.

On May 24, 2022, the NJ Department of Medical Assistance and Health Services (DMAHS) announced an increased penalty period divisor from $361.20 to $374.39 as of April 1, 2022.  This figure represents NJ’s “average daily cost” of a semi-private room in a nursing home.  

NJ Elder Law Center at Goldberg Law Group provides sound and creative Medicaid advice in a friendly yet professional manner.  We offer complimentary consultations.