Am I ineligible for Medicaid? Recently, the New Jersey Medicaid program issued a letter increasing the uncompensated asset transfer penalty divisor. The penalty divisor figure is used to calculate the period of time an applicant for Medicaid benefits is ineligible for benefits when he makes an uncompensated asset transfer during the lookback period.
Medicaid is a federal and state health payment plan for needy individuals. If an individual qualifies for Medicaid, the program will pay for many of the costs associated with long-term care, such as care in a nursing home or assisted living residence.
For this reason, many people come to me seeking to qualify for Medicaid benefits when a family member resides in a nursing home. In a great many cases, I can save the family tens of thousands of dollars and qualify the family member for Medicaid benefits sooner than they would have qualified without Medicaid planning.
Long-term care facilities cost a lot of money. A nursing home in this area costs anywhere from $9,500 to $14,000 a month. An assisted living residence can cost anywhere from $5,000 to $10,000 a month.
In order to qualify for benefits, an individual must have a very limited amount of assets. Some people believe they can simply give their assets away and qualify for benefits.
In order to punish individuals who seek to impoverish themselves artificially and qualify for benefits, the Medicaid program punishes applicants who give their money away in order to qualify for benefits. The way Medicaid punishes an applicant who gives away assets is by making the applicant ineligible for benefits for a period of time. The more money the applicant gave away, the longer he will be ineligible for Medicaid benefits. Only transfers made within a certain time prior to applying for Medicaid benefits are punished.
The Medicaid program only punishes gifts that were made within five years of applying for benefits. This is called the lookback period. If the gift were made before the lookback period, then the gift cannot be punished. For instance, if Mr. Smith gave away $1,000,000 six years before he applied for Medicaid benefits, the gift of $1,000,000 cannot be punished.
Medicaid assesses a penalty period by taking the aggregate of all gifts made during the five-year lookback period and dividing that figure by a divisor figure, which is currently $12,000. In other words, if Mr. Smith gifted $144,000 in the past five years, Medicaid would take the $144,000 in gifts and divide that figure by $12,000. The result of this division is 12. Twelve is the number of months for which Mr. Smith would be ineligible for Medicaid benefits.
The $12,000 figure is based upon the statewide average cost of nursing home in the state of New Jersey. That is the figure the State must use to calculate the penalty period. For years, the State used an artificially low divisor figure, resulting in penalty periods that were inappropriately long.
Several years ago, I sued the state of New Jersey in federal court over the divisor figure. As a result of that federal law suit, I was able to have the State enter a consent agreement with my client whereby the State agreed to survey annually the cost of all nursing homes in New Jersey and recalculate the divisor figure after conducting that survey.
The new $12,000 figure is a direct result of that settlement agreement. The figure represents an accurate divisor figure, and a win for thousands of individuals across this state. A direct result of my efforts on behalf of my client continues to pay off today for thousands of people.