NJ Increases Medicaid Penalty Divisor Rate


While the increase of the Medicaid penalty divisor rate is a good thing, the divisor rate is supposed to mimic what a family privately pays for a semi-private room in New Jersey. Now, things might be different in other places, but our clients would find a nursing home with a monthly rate equal to the new Medicaid divisor to be a good deal.  Thank you to Of Counsel, Stacey C. Maiden, Esq. for talking about what is the Medicaid Divisor in New Jersey and how it effects the calculation of a penalty period if any transfers have been made within 5 years of a Medicaid application.


On May 29, 2012, a Medicaid Communication was released announcing an increase in the penalty divisor to $7,757. The divisor was previously $7,282.

What is the Divisor and What Does an Increase Mean? When an application is made for Medicaid, there is a question on the form that asks if any transfers have been made within the previous 60 months. This is often referred to as the “5 Year Look-Back Period.”

For Medicaid purposes, if the Medicaid applicant (or the applicant’s spouse) transfers an asset without receiving adequate compensation in return, a penalty may be imposed. The penalty is a period of time where the applicant will be ineligible for Medicaid benefits.

Medicaid calculates the period of ineligibility as the number of months of skilled nursing care that the value of the transferred assets would have purchased at a rate (the divisor) set by Medicaid. For example, if the amount transferred was $77,570, the penalty period would be equal to $77,570 divided by $7,757, or 10 months of ineligibility for Medicaid benefits for nursing home care.

An increase in the divisor will reduce a penalty period, though the rate of $7,757 is still far less than the actual average nursing home rate in New Jersey. Because of the disparity, you may end up spending more privately paying a nursing home through the penalty period than gained in the transfer. Getting sound and competent advice about the impact of transferring assets before making any transfers could avoid this unintended consequence.

The announcement was made on May 29, 2012, but the effective date of the increased divisor is November 1, 2011.


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