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McHugh & Macri
Certified Elder Law Attorneys Serving New Jersey Residents since 1978.
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The Impact of an Incorrect Divisor

NAELA National Academy of Elder Law Attorneys, Inc. MEMBER

1) In November 2012, CMS settled a lawsuit brought by the Medicare Advocacy Center to rectify a longstanding error whereby rehab and therapy facilities discontinued Medicare coverage if the patient had "plateaued" by achieving the maximum rehab potential. The correct standard has always been and this settlement reinforced that if elimination of rehab and therapy would cause the patient to "regress" from the level attained then Medicaid rehab and therapy would continue. A copy of a New York Times article which discusses this ruling is attached.

2) In October 2012, CMS granted a Comprehensive Demonstration Waiver to the State of New Jersey to promote aging in place, rather than forced entry into a nursing home, to achieve Medicaid eligibility. One significant aspect of the waiver was to eliminate the current $2,130/month Medicaid income cap on the waiver programs of Global Options, which includes at-home Medicaid and assisted living facilities. Until now, a Global Option Medicaid applicant who exceeded the income cap was ineligible for Global Option Medicaid and forced to a nursing home, which has no income cap. The effective date for this change is unclear.

3) Divisor Lawsuit. The Federal law provides that transfers of assets within the five years prior to seeking Medicaid are subject to a penalty which is determined by dividing the amount transferred by the Aaverage cost of a semi-private room in a nursing home in the State of New Jersey. This definition of divisor in Federal law is mirrored in State Medicaid regulations. The New Jersey Division of Medical Assistance and Health Services (DMAHS) in 2001 established a divisor amount at $5,525 and a method to update that divisor. Fast forward to 2011 when the current Medicaid divisor established by DMAHS as of 11/08 of $7,282. A survey by NJ NAELA of 370 nursing homes confirmed an Aaverage cost of $8,909 per month, a 24% delta. John Callinan and I filed a Federal lawsuit to seek an accurate divisor and after filing, the State thereafter raised the divisor to $7,757 per month.

To illustrate the impact of an incorrect divisor, consider a client who transfers about $52,000 to his/her four children in compliance with Federal gift tax law. That $52,000 gift renders the donor ineligible for Medicaid for 7 months. Since the divisor is less than the Areal number, the cost of those 7 months is $63,000 on average (actually 70-75K in North Jersey, a 20-40% difference). This pending lawsuit will probably be the subject of discussion at next year's Elder Law College.

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