Applying for Medicaid in NJ? Is NJ Giving the Right Info Re: Transfer Penalties?

Category: Elder Law

Is New Jersey mis-stating the new Medicaid Law for new applicants? Rumors are that Medicaid applicants are being unfairly denied access to Medicaid by the local offices applying the new Medicaid transfer laws to transfers that took place BEFORE the new Medicaid law was passed.

The Deficit Reduction Act of 2005 was signed into law by President Bush on February 8, 2006. I have previously summarized and debated and debated the provisions of the DRA. One item that should NOT be at issue is the effective date of February 8, 2006. The law specifically says that its is effective for all transfers AFTER that date. However, it seems that the State of New Jersey seems to be ignoring that little fact.

The law governing transfers made BEFORE February 8, 2006 was that (1) any transfer created a penalty, (2) any transfer within 36 months from the date of the Medicaid application needed to be disclosed, and (3) the penalty was reduced by (approximately) $6050 for each month that passed from the month of transfer. Thus, a $20,000 gift made in January, 2006 should create a penalty period of 3 months, which would expire at the end of March, 2006, so that you would be eligible for Medicaid starting April, 2006 (assuming you otherwise qualified).

The law governing transfers made AFTER February 8, 2006 is that (1) any transfer created a penalty, (2) any transfer within 60 months from the date of the Medicaid application needed to be disclosed, and (3) the penalty is reduced by (approximately) $6525 for each month that passes starting from the date that (a) you are institutionalized, and (b) you have no other funds to pay. Thus, a $20,000 gift made in March, 2006 should create a penalty period of 3 months and 2 days. This penalty would start when (a) you are in a nursing home, and (b) your total countable assets are $2000 or less (how your care is paid for during the penalty period is a separate question).

It appears that some New Jersey counties are telling people making applications currently that there is a 60 month lookback. This 60 months transfer penalty should only apply to transfers made after 2.8.06.