2020 Medicaid Penalty Divisor
Many of my articles concern Medicaid and avoiding or trying to minimize a Medicaid penalty. That penalty, which is a waiting period for benefits is a result of a mathematical calculation. The amount of any transfers for less than fair value is divided by the Medicaid divisor to get the resulting penalty.
The divisor is what the State of New Jersey sets as the average cost of a semi private room in a nursing home. It is a state wide average and is supposed to be adjusted every year. The rate for 2020 was just announced last month and there is a slight increase from the 2019 rate. The rate per day is now $357.67 up from $351.84 last year. On a monthly basis the 2020 rate comes to $10,879 per month.
Let’s look at an example of how this would work. If I apply for Medicaid and during the course of the application process it is determined that I transferred $50,000 for which I did not receive equal fair market value back in product or service, the resulting penalty would be 140 days or about 4 and ½ months. During that period of time I would need to continue to pay for my care at whatever the private pay rate is. Medicaid will only begin to cover my care after the penalty period expires.
Depending on where geographically in the State of New Jersey I live and what type of care I receive (ie. in a nursing home, assisted living facility or at home), the actual cost of care during that 4.5 month period could be greater or less than $50,000. For example, care tends to be more expensive in Bergen County and less expensive the farther south in the state you travel. Remember the penalty is a statewide average. This leads to different strategies when we discover there are potential penalties. In some cases it is best to return money (if that is even possible) before filing the Medicaid application to wipe out any potential penalty. In other cases it is better to accept the penalty if the cost of care on a private pay basis is less than the penalty divisor. As elder law attorneys we pay close attention to the divisor as it impacts the recommended course of action in each individual case in our office because when it comes to Medicaid there is not a one size fits all strategy.