Medicaid is the only government benefit that helps qualifying persons pay for their long-term care costs. Specifically, in New Jersey, Medicaid will cover care costs in an at-home setting, assisted living facility, and skilled nursing facility.
An applicant must meet certain financial and clinical requirements to qualify for Medicaid. To be deemed eligible, the applicant must submit his or her Medicaid application to the Board of Social Services in the county wherein he or she resides and is receiving care. In conjunction with the application, the applicant must disclose 5 years of financial records preceding the submission of the application. Medicaid will then review such financial records and if, during its review, Medicaid determines that the applicant (or his/her spouse, if any) has gifted or transferred assets during the preceding 5 years to another person or entity, that was not for the benefit of the applicant (or his/her spouse), even if the applicant is otherwise eligible in all other respects, Medicaid will impose a penalty.
The penalty is a period of time that Medicaid will not pay for the applicant’s care costs. The penalty period is calculated on the total amount of the gifts during the 5-year period, which is then divided by a penalty divisor, set by the State. This calculation results in the number of days that Medicaid will not cover the applicant’s care costs. As of April 1, 2022, the penalty divisor was increased from $361.20 to $374.39. This amount represents the average daily rate in a semi-private room in a skilled nursing facility in New Jersey.
For example, if Medicaid determines the applicant gifted $100,000 to his or her child, then the penalty period would be calculated as follows: 100,000/361.20 = 267.10. Accordingly, Medicaid will not begin to pay for the applicant’s care costs for approximately 267 days. Therefore, the applicant (or, more often, the applicant’s family) will be responsible for privately paying for his or her care costs during the penalty period.
However, given that the Medicaid penalty divisor has increased, and tends to increase annually, the penalty period ends up being shorter than it would have been under previous penalty divisors. In this situation, the penalty period is approximately 10 days less than it would have been with the prior penalty divisor. Unfortunately, a penalty period of any length, as a result of gifting, can certainly be a hardship for the applicant and his or her family who often do not have the resources to continue to privately pay for the applicant’s care. Of course, with the appropriate planning and foresight, there are Medicaid planning strategies available to protect your loved one’s assets and potentially avoid the imposition of a Medicaid penalty.
If you or a loved one are faced with decisions regarding long-term care, please contact us or give us a call to discuss how to navigate your way through the planning process. We can help you protect assets and properly qualify for Medicaid.
