2023 Medicaid Penalty Divisor

As I have written about frequently in this blog, many of the Medicaid and VA benefit numbers are updated annually.  Most are adjusted in lock step with Social Security’s cost of living adjustment (COLA).  With inflation being as high as it has been in many years, the COLA for 2023 was also higher than it has been since 1981.

One Medicaid number that doesn’t adjust with Social Security is the Medicaid penalty divisor.  That is the number by which any transfers for less than fair value are divided to calculate the penalty – or waiting period – for Medicaid benefits.  This time period begins when a Medicaid application is filed and the applicant has proven that he/she has met all the other Medicaid requirements.  In other words, Medicaid would be approved but for the transfer of assets.  The more money transferred, the longer the penalty.

The divisor is supposed to represent the average cost of nursing home level care in the state.  With inflation running at 8.7%, one would think that the cost of long term care certainly has increased along with other goods and services, if not at 8.7% then somewhere close to it.

New Jersey announced that, effective April 1, 2023 its Medicaid divisor has increased from $374.39 to $384.57.  The $10.18 increase amounts to only a 2.7% bump.  The State doesn’t share its methodology so we don’t know what data it considered.  On a monthly basis that would mean an average cost of $11,697 for care.

In any event, the slightly higher divisor does mean a slightly smaller penalty this year than last for the same transfer.  Keep in mind that this new number only applies to applications seeking benefits after April 1, 2023.  The old divisor will still be used for benefits sought before that date.