Recently, I sued the state of New Jersey on behalf of several clients of mine in federal court over an issue involving the Medicaid program. This past week, my clients—and thousands of other residents of New Jersey who are applying for Medicaid or who will apply for Medicaid in the future—saw the benefit of this federal lawsuit that I filed.
Medicaid is a health insurance program for needy individuals. In order to qualify for Medicaid, an individual must have limited assets and must have income that is insufficient to pay for his care. Medicaid pays for long-term care costs. Long-term care can cost a lot of money, up to $12,000 a month.
Given the costs associated with long-term care, it is not surprising that a person who may have never thought—or wanted to—qualify for Medicaid seeks to qualify for Medicaid when he requires long-term care. It is these costs that drive a great number of people to my office. They come looking to qualify for Medicaid benefits and looking to preserve a portion of their estate for themselves and for their family.
When an individual applies for Medicaid benefits, the Medicaid office looks at his finances for the past 5 years. The Medicaid office requests 5 years worth of his financial records and scours those records to see if the applicant has given away any money in the past 5 years.
This five-year period of time that the Medicaid office is looking at to see if the Medicaid applicant made any gifts is called the “lookback period.” It is called the lookback period because the five-year period of time is, quite literally, the period of time that Medicaid is looking at to see if the applicant made any gifts.
If the applicant made gifts during the lookback period, then the Medicaid office will aggregate the value of those gifts and punish the applicant for having made the gifts by making the applicant ineligible for Medicaid benefits for a period of time.
For instance, assume that Mr. Smith applies for Medicaid in April 2014. The Medicaid office will request financial records for the period of time from May 2009 through April 2014, which is the five-year lookback for an application that was filed in April 2014. Let’s further assume that Mr. Smith made the following gifts during the lookback period: $10,000 in January 2010, $20,000 in December 2012, and $15,000 in March 2013. The total of these gifts during the lookback period is $45,000.
Based upon $45,000 worth of gifts occurring during the lookback period, the Medicaid office will assess a “penalty period” against Mr. Smith. A penalty period is a period of ineligibility for Medicaid benefits.
Prior to my federal court case, Medicaid would calculate the penalty period by taking the aggregate gifts ($45,000) and dividing it by a divisor number, which was supposed to represent the average cost of a nursing home room in New Jersey. Prior to my lawsuit, the State used a divisor figure of $7,787. Based upon that divisor figure, Mr. Smith would be ineligible for Medicaid for 5.7 months ($45,000/$7,787 = 5.7).
I can tell you for a fact that a nursing home room in New Jersey costs far more than $7,787 a month. In fact, as a result of my federal lawsuit, the State conducted a survey of every nursing home in New Jersey and found out that the average cost of a nursing home room in New Jersey is $9,405.
Beginning April 1st, the State will use the figure of $9,405 to calculate penalty periods, so for instance, Mr. Smith’s penalty period for a $45,000 gift will go from 5.7 months to 4.7 months ($45,000/$9,405 = 4.7). This is the first time in my career that I can say the penalty divisor number is accurate.
You’re welcome, Mr. Smith, and the thousands of other Medicaid applicants my suit helped. It was my pleasure.
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