A Guide to Navigating Medicaid Penalties in New Jersey: What You Need to Know

What is a Medicaid Penalty?

A penalty period is defined as a period of time that a person will be ineligible for Medicaid benefits that results from violating Medicaid’s Look-Back Rule. 

What is the Look-Back Period?

The Look-Back Period is 60 months or 5 years where all financial transactions are subject to review during a Medicaid application. The Look-Back Period begins the date of one’s Medicaid application. For instance, if someone files their application on January 1. 2024, their Look-Back Period extends to December 31, 2018. 

The penalty period is calculated by taking the value of the transferred assets and dividing that number by the average cost of care per day, which New Jersey has estimated to be $384.57 (as of April 1, 2020).  For example, a person who gifted $50,000 to his or her children during the last five years would receive a penalty period of approximately 140 days (50,000/384.57=130.01).  The penalty period begins on the date you apply and are otherwise eligible for Medicaid benefits both financially and medically. During that time, full Medicaid benefits will not be provided.  Some people may qualify for ancillary services during the penalty period, but the large out of pocket costs, such as room and board at a facility, will not be covered.

Examples of types of transfers of assets that will trigger penalties are transferring personal property, monetary gifts, or giving a car away to a family member or selling it for less than market value. Unless the applicant can prove that these transfers were made for a purpose other than to qualify for Medicaid, these transfers will always result in a penalty period.

Remember that everything an applicant does financially preceding the Medicaid application is heavily scrutinized. Please document everything and keep accurate records to ensure penalties will not be applied to your application!

If you or someone you know needs to talk to a professional, please give us a call for a COMPLIMENTARY consultation at 973-577-9317 or contactus@njelc.com.