Assets must be spent down to necessary limits before New Jersey Medicaid eligibility is achieved. That means that assets have to be spent for product or service of equal value. New Jersey will not take the applicant’s word for it. They require 5 years of financial records as part of the application process. That is 5 years of statements for every account that existed for the 5 years directly preceding the date of the Medicaid application, whether that account still exists or whether it existed at any time during that 5 year time frame. This is what is known as the “Medicaid look back”.
The Medicaid penalty is the amount of time the applicant is not eligible for Medicaid because he/she transferred assets for less than fair value. These transfers can be gifts. However, they are much more than that. Any transfer of assets that the applicant cannot explain with supporting documentation will be counted as a transfer subject to a penalty.
So to be clear, the lookback and the penalty are not the same thing