- If you make a gift within 5 years of applying for Medicaid, you will be penalized. A penalty is a mathematical calculation. The amount of any gift(s)/transfers for less than fair value is divided by what’s called a penalty divisor.
- Being penalized means NJ will not pay for your care during a penalty period.
- This article discusses how a penalty is calculated.
I used a term called “penalty divisor”. A penalty divisor is what the State of New Jersey claims to be the average monthly cost of a semi-private room in a nursing home. It is a state wide average and is supposed to be adjusted every year. The rate for 2020-2021 is now $357.67, up from $351.84 in 2019. On a monthly basis, the rate is $10,879.
Here’s an example. If I apply for Medicaid and during the course of the prior 5 years, I transferred $50,000 for which I did not receive equal fair market value back in product or services, then I will be penalized just under 4½ months. During that period of time I need to continue to pay for my care from my own money. Medicaid will begin to cover care costs after the penalty period expires.
Depending on where you reside geographically in the State of New Jersey, the actual cost of care during that 4.5 +/- month penalty period can be greater or less than $50,000. In Bergen County, the costs are sky high. They are less expensive the farther south in the state you travel.
As an elder law attorney, I pay close attention to the divisor as it impacts many of our planning options to save clients money.
To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Applying for Medicaid Attorney