The New Jersey Department of Human Services, Division of Medical Assistance and Health Services issued Medicaid Communication No. 26-05 on June 11, 2026. The communication announces annual adjustments to the Community Spouse Maintenance Allowance (CSRA), shelter threshold, and related figures under N.J.A.C. 10:71-5.7, effective July 1, 2026. These figures govern how much of an institutionalized spouse's income may be set aside to support the spouse remaining in the community.
Key updated figures effective July 1, 2026:
Community spouse base maintenance allowance: Increased from $2,643.75 to $2,705.00 per month.
Excess shelter cost threshold: Increased from $793.13 to $811.50 per month. Shelter costs above this amount are added to the base allowance.
Standard utility allowance: Remains $878.00 per month (effective October 1, 2025), applicable where the community spouse directly pays utility charges.
Community spouse resource allowance: Unchanged. The greater of $32,532 or one-half of the couple's countable resources, not to exceed $162,660.
Home equity maximum: Unchanged at $1,130,000.
The Community Spouse Maintenance Allowance is calculated by starting with the $2,705.00 base, adding any shelter costs exceeding $811.50 (including the $878.00 utility allowance if directly paid), and then subtracting the community spouse's own gross income. The result is the amount that may be deducted from the institutionalized spouse's income before applying it to the cost of care.
The full communication, including a fact sheet with computation examples, is available here.
The New Jersey Appellate Division decision, A.D. v. Essex County Department of Family Services, A-2316-23 (decided May 5, 2025), illustrates how a Medicaid application for long-term care can unravel not because the applicant was ineligible, but because of confusion over income rules and missing paperwork. The case involved a resident of an assisted living facility in West Orange whose application was denied twice by the agency and twice appealed — with the Administrative Law Judge ruling in the applicant's favor both times — before DMAHS rejected those decisions and the Appellate Division affirmed the denial. The court's reasoning touches on several issues that arise regularly in NJ Medicaid applications for long-term care: what counts as income, when a Qualified Income Trust is required, and what happens when you cannot produce exactly the documentation the agency demands.
The Income Limit and the QIT Requirement
To qualify for Managed Long Term Services and Supports (MLTSS), the NJ Medicaid program that covers long-term care benefits an applicant must meet both a resource limit and an income limit. The resource limit is $2,000 in countable assets. The income limit is a gross monthly income cap, which currently stands at $2,982 per month (for year 2026). If your income exceeds that cap, Medicaid will not approve your application unless you establish and fund a Qualified Income Trust, also called a Miller Trust or QIT.
A QIT is a legal arrangement in which the applicant's total source of income above the cap is deposited into a dedicated trust account each month before being used to pay for care. The trust does not eliminate the excess income — it channels it in a way the Medicaid rules permit. If the income is over the cap and no QIT exists, the application will be denied. For more on how this works, see my post on Qualified Income Trusts in New Jersey.
In A.D., the agency determined the applicant's income exceeded the limit and required a QIT. The applicant's representative pushed back, arguing that the VA Aid and Attendance benefit included in the applicant's income is not countable for Medicaid purposes and therefore no QIT was needed. The court rejected this argument — not on the merits of whether Aid and Attendance is countable income, but because the applicant never provided the documentation the agency needed to make that determination in the first place.
The VA Award Letter Problem
This is where the case turns practical. VA pension awards can include several distinct components: a base improved pension, an Aid and Attendance supplement, a Housebound allowance, a surviving spouse award, and others. For Medicaid purposes, different components are treated differently — some are countable income, some are not. The agency cannot make that determination from a letter that shows only a total monthly benefit amount.
New Jersey has addressed this directly in Medicaid Communications 12-09 and 15-08. Under those directives, an applicant receiving VA benefits must provide either a letter that specifically identifies the dollar amount allocated to Aid and Attendance, or documentation showing that the VA has determined the applicant's unreimbursed medical expenses reduce their countable income to zero. A letter showing only a lump-sum benefit amount is not sufficient.
In A.D., the applicant provided a VA award letter that showed a surviving spouse benefit with Aid and Attendance listed, but did not break out what portion of the total was attributable to each category. The agency sent a sample letter showing the format it needed and asked for a compliant document. The applicant's representative responded that the VA does not provide a separate breakdown — and directed the agency back to the letter already on file. The agency denied the application. The court agreed: without the itemized breakdown, the application was incomplete, and the denial was not arbitrary or unreasonable.
The Resource Limit and the Timing Problem
The applicant also sought Medicaid eligibility retroactive to November 1, 2022, arguing that her bank balance on that date was below the $2,000 resource limit because a check written to the nursing facility had cleared and reduced the balance to $335.80. The agency looked at the bank statement for the following month, which showed a balance of $2,696.71. The applicant argued a second check, written in early November, had also cleared by month's end and would have brought the balance below $2,000. The bank statement did not confirm that the check cleared when claimed, and the court found no basis to disturb the agency's finding that the resource limit was not met.
The clinical eligibility piece followed the same pattern. The applicant argued that a Pre-Admission Screening request made in December 2021 should establish her clinical eligibility date, but the regulation is explicit: clinical eligibility begins on the date the screening is completed, not the date it is requested. The record showed the screening was not requested until December 29, 2022 and completed January 9, 2023. The court found no evidence to support an earlier request date.
What This Means If You Are Applying
The A.D. case is a reminder that a Medicaid application for long-term care is a documentation-intensive process with little margin for error. Several things are worth taking from it.
First, if you or a family member receives a VA pension of any kind, obtain the most detailed award letter the VA will provide before filing a Medicaid application. If the letter does not itemize the dollar amount for each benefit category — Aid and Attendance, surviving spouse benefit, Housebound allowance, and any others — request an updated letter from the VA or contact a veterans service organization for help. The agency handling the Medicaid application needs that breakdown. A general award letter will not be enough.
Second, if your gross monthly income exceeds the Medicaid income cap, a QIT must be established and funded before the application is filed. It cannot be set up after a denial and applied retroactively. The income cap and the QIT requirement are not technicalities — they are threshold eligibility conditions.
Third, if you receive a request for information from the County Social Service Agency, respond fully and on time. The agency must give you an opportunity to provide missing documents, but if you cannot supply what is requested ask for more time or provide documentary proof establishing your good faith effort to respond. For more on how to challenge a denial you believe was issued in error, see my post on contesting an arbitrary Medicaid denial in New Jersey.
Finally, be precise about timing. Resource eligibility is determined month by month based on countable assets at the beginning of each month. Pending checks, deposits, and transfers need to be documented with bank statements that actually show what cleared and when. And remember that both financial eligibility and clinical eligibility must be satisfied at the same time — meeting one without the other is not enough.
Medicaid planning for long-term care is not something to approach without preparation. The rules governing income, resources, and documentation are detailed, and mistakes are difficult to correct after the fact. If you are in the five-year lookback period and considering a Medicaid application, see my overview of the five-year lookback rule in New Jersey for background on how prior transfers can affect eligibility.
Applying for Medicaid to cover nursing home care requires disclosing financial information not just for the applicant, but for the applicant’s spouse as well. That requirement makes sense when both spouses are willing to participate. It becomes a serious problem when the spouse living at home — known in Medicaid terms as the “community spouse” — refuses to provide that information, or simply cannot.
A New Jersey appellate decision illustrates exactly how this problem plays out, and what an applicant can do about it.
The Two Spouses in a Medicaid Application
When one spouse needs nursing home care and applies for Medicaid, that spouse is the “institutionalized spouse.” The spouse remaining at home is the “community spouse.” Federal and New Jersey Medicaid rules require the agency to assess both spouses’ combined resources, even though only one spouse is applying for benefits. This is meant to prevent asset-shifting between spouses, but it also means the community spouse’s bank records, income, and other financial information become part of the application.
Most of the time, both spouses cooperate and the process moves forward. But what happens when the community spouse won’t provide that information — whether out of refusal, illness, age, or simply being overwhelmed?
The Spousal Waiver and Spousal Refusal
Federal Medicaid law, 42 U.S.C. § 1396r-5, addresses this exact scenario in two related ways. The first is spousal refusal. Under the statute, if a community spouse refuses to make their income or resources available to the institutionalized spouse, the institutionalized spouse can still be found eligible, provided the institutionalized spouse assigns to the state any right of support from the community spouse. In other words, the applicant transfers to the state whatever legal right they would otherwise have to seek support from their spouse, and the state can then pursue the community spouse directly for reimbursement of the cost of care. The eligibility determination itself proceeds without counting the community spouse’s resources.
Second, and separately, the statute allows the state to waive its resource assessment when denying eligibility would otherwise impose an “undue hardship” on the institutionalized spouse. This is the provision New Jersey’s Division of Medical Assistance and Health Services (DMAHS) has applied in practice when a community spouse is uncooperative, but DMAHS has historically construed this waiver narrowly — generally limiting it to cases involving a documented break in the marriage, an unverifiable death or divorce, or a community spouse whose whereabouts are unknown.
That narrow approach was tested directly in N.S. v. Division of Medical Assistance and Health Services, an unpublished Appellate Division decision from 2019.
What Happened in N.S.
N.S. was an 87-year-old man admitted to a nursing facility. Before his admission, he had lived with his wife, who was 86. His daughter, acting as his authorized representative, applied for Medicaid on his behalf and began the lengthy process of gathering financial documentation — a process that dragged on for months as the county welfare agency made repeated, sometimes inconsistent, requests for records.
The daughter ran into a wall when it came to her stepmother’s financial information. The wife was elderly, in poor health, and became distressed every time she was asked for documents. She told her stepdaughter to stop asking. The nursing facility sent her three separate letters requesting the information; she did not respond to any of them. The county agency sent three more letters directly. Still no response.
The nursing facility’s attorney requested a spousal waiver, arguing that denying benefits because of the wife’s refusal to cooperate would work an undue hardship on N.S. The county agency disagreed, reasoning that because the couple had been living together and there was no evidence of a broken marriage, the waiver did not apply. N.S.’s application was denied. Both spouses died within months of each other — the wife in October 2016, N.S. in November 2016 — before the matter was resolved.
An administrative law judge upheld the denial, and DMAHS adopted that decision. The case went to the Appellate Division.
The Appellate Division’s Ruling
The court reversed. It found that DMAHS had applied an overly narrow standard by treating “estrangement” as essentially the only basis for a hardship waiver, without pointing to any regulation or formal guidance requiring that result. The court noted that DMAHS had never adopted regulations specifically interpreting the undue hardship provision — it was relying on an unwritten internal practice.
More importantly, the court held that an undue hardship determination has to be a fact-sensitive inquiry that considers the totality of the circumstances. In this case, the unrebutted facts were that the wife was elderly, in poor health, had asked her stepdaughter to stop asking for information because it was making her sick, and had not responded to six separate written requests from two different sources. There was no evidence that anyone was gaming the system to shield the wife’s assets. The agency, the court found, ignored all of this and focused exclusively on the fact that the couple had been living together before N.S. entered the nursing home — a single fact that does not, by itself, rule out hardship.
The court also found that the agency’s separate basis for denial — that N.S. himself had failed to provide his own financial records — was not supported by the record. The daughter had, in fact, provided the requested information; the agency’s own correspondence simply failed to track what had already been submitted.
The court reversed the denial and directed the agency to process the application without regard to the wife’s resources.
What This Means If You’re Applying
If you are applying for Medicaid on behalf of a spouse and the community spouse won’t or can’t provide financial information, do not assume the application is doomed. Document everything. Keep copies of every letter and email sent to the community spouse requesting information, and keep records of any response — or lack of one. If the community spouse’s refusal stems from health issues, cognitive decline, or sheer distress, get that documented too, ideally through a treating physician or a written account from someone who witnessed it.
Request a spousal waiver in writing and be explicit about the basis: cite the hardship that denial would create for the institutionalized spouse, not just the community spouse’s general unwillingness. And if the county agency denies the request based solely on the fact that the couple wasn’t estranged, know that DMAHS’s position on this issue has been challenged and rejected by an appellate court.
Spousal refusal and the hardship waiver are both narrow tools, and DMAHS does not apply them generously. An elder law attorney can help determine which approach fits your situation and how to build the record needed to support it.
Federal law is changing who qualifies for NJ FamilyCare. Beginning October 1, 2026, many lawfully present immigrants may lose their coverage. Congress passed the One Big Beautiful Bill Act, which President Trump signed into law in 2025. Among its many provisions is a significant restriction on Medicaid eligibility for non-citizen immigrants. Starting October 1, 2026, certain lawfully present immigrants who are currently enrolled in NJ FamilyCare — New Jersey's name for its Medicaid program — may no longer qualify.
This is not a future concern. NJ has already begun mailing letters to potentially affected members to gather information and assess eligibility before the October 1 deadline. If you or someone you know receives one of these letters, the worst thing to do is ignore it.
Who Is Affected
The changes target a specific set of immigration categories. The following groups of lawfully present non-citizens may lose NJ FamilyCare coverage on October 1, 2026:
Refugees;
Asylees;
Certified victims of trafficking and their spouse, child, sibling, or parents;
Veterans or active-duty military and spouses or unmarried dependents who also have qualified non-citizen status;
Iraqi and Afghani parolees;
Individuals who were paroled into the U.S. between February 24, 2022 and September 30, 2024 under the Ukrainian Humanitarian Parole (UHP) program; and
People whose deportation is being withheld.
What these categories share is that they represent people who entered the United States through humanitarian or protection-based pathways — people who, in many cases, fled violence or persecution. Under existing rules, federal law treated many of them as eligible for Medicaid. The new law removes that eligibility for those who have not taken a specific additional step: transitioning to Lawful Permanent Resident (LPR) status.
The Green Card Exception
Adjusting to LPR status — becoming a permanent resident with a green card — does not automatically solve the problem. The law imposes a five-year waiting period. If you transitioned to LPR status less than five years ago, you may still be ineligible. The five-year clock runs from the date the immigrant obtains qualified alien status.
There are, however, carve-outs to the five-year rule. If you originally arrived in one of the affected categories and you have since transitioned to LPR status, you may still qualify even if it has been less than five years. These categories include:
Refugees;
Asylees;
Certified victims of trafficking and their spouse, child, sibling, or parents;
Veterans or active-duty military and spouses or unmarried dependents who also have qualified non-citizen status;
Amerasian immigrants;
Iraqi and Afghani special immigrants and parolees;
Individuals who were paroled into the U.S. between February 24, 2022 and September 30, 2024 under the Ukrainian Humanitarian Parole (UHP) program; and
People whose deportation is being withheld.
The state has been directed to treat those individuals more favorably than others in the LPR-under-five-years category.
If that sounds complicated, it is. The intersection of immigration status and Medicaid eligibility has never been simple, and the new law adds another layer of complexity. If you are uncertain whether these changes apply to you, do not try to figure it out alone.
Who Is Not Affected
Not every non-citizen is at risk. In addition to the categories noted above, several groups will continue to qualify under the new rules including:
Lawful Permanent Residents of at least 5 years (calculated from date on green card);
Lawfully present non-citizens who are pregnant, or under the age of 21;
Cuban/Haitian Entrants;
Compact of Free Association (COFA) migrants, including individuals from Micronesia, Marshall Islands, and Palau; and
Children under 19, regardless of their immigration status.
These populations are protected by separate statutory provisions and should not see a change in their eligibility on October 1.
What New Jersey Is Already Doing
NJ FamilyCare is not waiting until October. The state has begun sending outreach letters to members whose immigration status may bring them within the affected categories. These letters are not yet termination notices — they are requests for information to help the state determine who remains eligible and who does not.
If NJ FamilyCare already has what it needs to confirm your continued eligibility, you will receive a letter telling you your coverage has been renewed. If it needs more, you will receive a request for documentation or a renewal packet. The critical thing is to respond promptly. Failing to respond can result in a gap or termination of coverage, even if you are actually still eligible.
Members should also make sure their contact information is current. If your address or phone number has changed, call NJ FamilyCare Customer Service at 1-800-701-0710 (TTY: 711) now, before any letter goes undelivered.
The Broader Picture
These changes do not exist in isolation. The same legislation that is cutting Medicaid eligibility for immigrants also introduces work and community engagement requirements for certain adult enrollees beginning January 1, 2027, and shortens the renewal period from annually to every six months for those in certain plans. The cumulative effect of these changes is a significant increase in administrative burden on the states and more paperwork for some of the most vulnerable Medicaid enrollees in the state.
New Jersey has historically taken steps to extend coverage to immigrant populations beyond what federal law requires but those programs cost money. Whether New Jersey will maintain state funded coverage options is an open question.
Many New Jersey Medicaid recipients who need help with daily activities — bathing, dressing, toileting, mobility — are entitled to Personal Care Assistant (PCA) services. These are in-home, hands-on services paid for by Medicaid and delivered through a managed care organization. They can make the difference between living independently at home and moving to a facility.
What most people don’t know is that PCA services are available under all New Jersey Medicaid plans — not just MLTSS. This post explains how PCA eligibility works, how hours are determined, and what New Jersey consumers should know before agreeing to switch their Medicaid plan.
What Are PCA Services?
Personal Care Assistant services are non-emergent, health-related services provided in the home of an eligible NJ FamilyCare (Medicaid) beneficiary. They are intended to help people with disabilities and chronic conditions maintain independence and remain in the community rather than moving to a nursing facility or assisted living.
PCA services cover hands-on assistance with Activities of Daily Living or ADLs. PCA services do not cover skilled nursing, medication administration, or medical procedures. They are personal care — the kind of hands-on daily assistance that allows someone to function safely at home when they can no longer do so independently.
Who Is Eligible?
📌 Key Point: PCA services are available to ALL New Jersey Medicaid beneficiaries who meet the functional criteria — not just those enrolled in MLTSS.
Eligibility for PCA services is governed by N.J.A.C. 10:60-3.1. A beneficiary qualifies if they require either a) moderate or greater hands-on assistance in at least one ADL, or b) minimal assistance or greater in at least three different ADLs, at least one of which must require hands-on assistance.
A diagnosis alone is not sufficient. The functional limitations must be documented through a face-to-face assessment using the State's standardized PCA Assessment Tool.
Activities of Daily Living (ADLs) are defined as:
Oral hygiene and care of teeth and mouth
Grooming — care of hair, shampooing, shaving, nail care where upper extremity function or cognitive impairment requires assistance
Bathing — in bed, tub, or shower
Toileting and use of bedpan
Changing bed linens with the beneficiary in bed
Ambulation indoors and outdoors
Transfers — moving from bed to chair or wheelchair, in and out of tub or shower
Assistance with eating, including placing food and liquids into the mouth and assisting with swallowing difficulties
Dressing
Accompanying the beneficiary to physician visits, clinics, or other trips for medical diagnosis, treatment, or therapeutic purposes
Instrumental Activities of Daily Living (IADLs) are defined as:
Sweeping, vacuuming, and dusting of the beneficiary's room and areas used by the beneficiary
Care of kitchen — maintaining cleanliness of refrigerator, stove, sink, and floor; dishwashing
Care of bathroom — maintaining cleanliness of toilet, tub, shower, sink, and floor
Care of the beneficiary's personal laundry and bed linen, including necessary ironing and mending
Bed-making and changing of bed linen
Rearranging furniture to enable the beneficiary to move about more easily
Listing, shopping for, and storing food and essential household supplies
Planning, preparing, and serving meals, including special therapeutic diets
Relearning household skills
One of the most misunderstood aspects of the PCA benefit is the fact that it is not available to every senior or person with a disability who may need some assistance at home. It is important to know that IADL assistance alone — no matter how significant — does not establish eligibility for PCA services. A beneficiary who needs help with meal preparation, housekeeping, laundry, and shopping but does not meet the ADL threshold above does not qualify for PCA. IADLs are authorized only in conjunction with ADL services, as a supplement to hands-on personal care.
IADLs for Shared Households
It is also crucial to understand that when a beneficiary lives with a legally responsible relative, that relative is expected to handle IADL tasks that benefit the household generally — cleaning shared spaces, shared laundry, shared meal preparation, and shopping for items used by all household members. PCA IADL coverage is limited to tasks that specifically serve the beneficiary's personal needs.
Finally, it is important to know that PCA services do not include the following:
Supervision as a standalone service
Companionship
Services limited to non-hands-on personal care needs only
Services for conditions with no functional limitations (e.g., high cholesterol)
Services for acute short-term diagnoses expected to heal (e.g., a fracture)
How PCA Hours Are Determined
PCA hours are not self-reported or set by a doctor’s prescription. They are determined by a professional who conducts a clinical assessment in the applicant’s home using New Jersey’s standardized PCA Assessment Tool. The assessment evaluates the individual’s functional status across each ADL category and determines how many hours per week of PCA services are medically necessary.
Prior authorization from the MCO is required. The MCO reviews the nurse’s assessment and the plan of care before authorizing hours. Under New Jersey administrative code, PCA hours are authorized on a weekly basis. Unused hours cannot be banked or carried over to the following week — even if the beneficiary or aide was ill or hospitalized.
The current weekly cap on PCA services is 40 hours. If a beneficiary disagrees with the number of hours authorized, they have the right to appeal through their MCO and, if necessary, through a Fair Hearing before an Administrative Law Judge.
The Personal Preference Program: Self-Directing Your PCA Services
New Jersey offers an alternative to agency-provided PCA services through the Personal Preference Program (PPP). Under the PPP, eligible Medicaid beneficiaries receive a monthly budget based on their authorized PCA hours and can use that budget to hire their own caregiver directly, including a family member, friend, neighbor, or spouse.
Any Medicaid beneficiary who qualifies for PCA services and chooses to self-direct can participate. The authorized representative who manages the budget cannot be the same person who provides the care. A fiscal intermediary handles payroll, taxes, and withholding on behalf of the participant.
To switch from agency-provided PCA services to the PPP, contact your MCO and request enrollment. A reassessment of hours may or may not be required depending on the MCO.
The MLTSS Misconception — and Why It Matters
⚠️ Consumer Alert: PCA services are a benefit of all NJ Medicaid programs — not exclusively an MLTSS benefit. Consumers who are told they must switch to MLTSS to receive PCA services are being misinformed.
A widespread misconception among New Jersey Medicaid recipients — and sometimes among their families and care coordinators — is that PCA services are only available through MLTSS. This is incorrect. PCA services are a New Jersey State Plan benefit, meaning they are available to all NJ FamilyCare beneficiaries who meet the functional criteria, regardless of which Medicaid plan they are enrolled in.
MLTSS is a different and more comprehensive program designed for individuals who meet nursing facility level of care. MLTSS covers a broader array of services than standard Medicaid, including assisted living, case management, home modifications, and personal emergency response systems. For consumers who genuinely need that level of service coordination, MLTSS may be the right choice.
But not every Medicaid recipient who needs PCA services needs MLTSS. A person who needs 15 hours of weekly PCA assistance but is otherwise managing well at home may have their needs fully met by standard Medicaid with PCA services. Enrolling in MLTSS when it is not necessary adds administrative complexity, may change the consumer’s provider network, and is not required to access PCA benefits.
Why MCOs May Encourage MLTSS Enrollment
Understanding why MCOs sometimes steer consumers toward MLTSS requires a basic understanding of how managed care financing works. Medicaid pays MCOs a capitation rate — a fixed monthly payment per enrollee. The capitation rate for MLTSS enrollees is significantly higher than the rate for standard ABD Medicaid enrollees, reflecting the greater expected cost of serving a population with nursing facility-level needs.
This creates a financial incentive structure worth understanding. As long as an MCO’s actual cost of serving an MLTSS enrollee remains below the capitation rate, the MCO retains the difference. Enrolling a consumer in MLTSS who could be adequately served under standard ABD Medicaid generates a higher capitation payment for the MCO for what may be a comparable cost of services. This is not a hypothetical concern — federal Medicaid policy documents on New Jersey’s MLTSS program have explicitly acknowledged that MCOs have financial incentives to enroll additional participants in MLTSS as long as their costs remain below the capitation rate.
None of this means that every MCO recommendation to enroll in MLTSS is financially motivated or that MLTSS is the wrong choice for a given consumer. For many New Jersey residents with complex long-term care needs, MLTSS is the appropriate program. The point is that consumers should make this decision based on their own needs and circumstances — not based on a recommendation from an entity that has a financial stake in the outcome.
What Consumers Should Ask Before Switching
If you or a family member is currently enrolled in standard ABD Medicaid and is being encouraged to switch to MLTSS, ask these questions before agreeing:
Am I eligible for PCA services under my current ABD Medicaid plan?
What specific services does MLTSS provide that I cannot receive under my current plan?
What are the clinical eligibility requirements for MLTSS, and do I actually meet them?
What are the financial eligibility requirements for MLTSS, and how will this impact me going forward?
What impact will this have on my Estate since Medicaid is entitled to be paid back after I pass away?
Consumers have the right to remain in their current Medicaid plan. A recommendation to switch — however well-intentioned it may be presented — is not a requirement.
Final Thoughts
PCA services are one of the most valuable benefits available to New Jersey Medicaid recipients. They allow people with significant functional limitations to remain in their homes and communities rather than moving to institutional care. Knowing that this benefit is available under standard Medicaid plans — and understanding how hours are assessed and authorized — puts consumers in a much stronger position to advocate for themselves.
It is one of the most common questions elder law attorneys hear: “If my parent goes on Medicaid, does the state get the house when they die?” The short answer is: it depends — and the details matter enormously.
New Jersey, like every other state, operates a Medicaid Estate Recovery Program (MERP). Under federal law, states are required to seek reimbursement from the estates of Medicaid recipients for long-term care costs paid on their behalf. The home — often the only significant asset remaining at death — is frequently the target. But the rules governing when and how New Jersey can pursue recovery are specific, and with proper planning, recovery can often be minimized or avoided entirely.
This post explains how New Jersey’s Medicaid estate recovery program works, what protections exist, and what families can do to protect a home and other assets.
What Is the Medicaid Estate Recovery Program?
The Medicaid Estate Recovery Program is administered in New Jersey by the Division of Medical Assistance and Health Services (DMAHS). Under both federal law and New Jersey law, DMAHS is required to seek reimbursement from the estates of deceased Medicaid beneficiaries for all Medicaid payments made on their behalf for services received at age 55 or older.
This is a point that catches families off guard. Medicaid’s eligibility asset rules during the recipient’s lifetime exempt the home from the $2,000 asset limit, provided the recipient intends to return home or a spouse or dependent relative lives there. But that exemption during life does not protect the home from recovery after death. The state is effectively deferring its claim until the recipient passes.
Recovery is not limited to nursing home care. Under New Jersey’s rules, DMAHS recovers for all Medicaid payments made on behalf of a recipient age 55 or older, including:
Nursing facility care
Home and community-based services, including MLTSS
Capitation payments (the cost of the Medicaid plan) made to managed care organizations on the recipient’s behalf — even if no specific services were rendered
Hospital and prescription drug costs related to long-term care
This broad scope means that recipients of home-based care programs are equally subject to estate recovery as nursing home residents. Families who chose home-based care assuming it carried no recovery risk should be aware of this.
What Does New Jersey Count as Part of the Estate?
New Jersey’s definition of “estate” for recovery purposes is broad — and broader than the probate estate in important ways. Under NJ DMAHS rules, an estate includes any property that belonged to the deceased at the time of death or at the moment prior to death, including:
The decedent’s home or share of a home
Bank accounts — whether solely or jointly held
Trusts and annuities
Stocks and bonds
Any other real or personal property
Critically, New Jersey’s rule extends to jointly held property. Even though a jointly held bank account or home typically passes to the surviving joint owner outside of probate — by operation of law — New Jersey treats the deceased recipient’s share as part of the recoverable estate. This is an area where New Jersey’s rules are particularly aggressive compared to some other states, which limit recovery to the probate estate only.
Families who added an adult child to a parent’s bank account or deed as a matter of convenience should understand that this titling arrangement may not protect those assets from MERP. See my earlier post on joint bank accounts and Medicaid eligibility for how account titling creates problems both during the Medicaid application process and after death.
When Will New Jersey Not Pursue Recovery?
Recovery is not automatic upon death. New Jersey is prohibited from pursuing estate recovery — or must defer its claim — under the following circumstances:
Surviving Spouse
DMAHS will not pursue recovery while a surviving spouse is alive. Recovery is deferred until after the spouse’s death. At that point, New Jersey may seek recovery from whatever remains in the estate — including assets that passed from the Medicaid recipient to the surviving spouse. This is an important planning consideration, particularly for couples who did not pursue Medicaid planning before the first spouse’s death.
Surviving Child Under 21
Recovery is deferred while the recipient has a surviving child under the age of 21. Once the child reaches 21, or upon the child’s earlier death, DMAHS may pursue recovery from remaining estate assets.
Blind or Permanently Disabled Child
Recovery is deferred while the recipient has a surviving child who is blind or permanently and totally disabled under Social Security standards. Recovery may be pursued after that child’s death or if the disability no longer applies.
Cost-Effectiveness
DMAHS has discretion not to pursue recovery if it determines that doing so would not be cost-effective. In practice, this exception applies to very small estates where the administrative cost of collection would outweigh the recovery amount.
The Hardship Waiver: Narrow in New Jersey
Federal law requires all states to offer a hardship waiver — a mechanism by which the estate representative can seek to have DMAHS waive or reduce its recovery claim based on undue hardship to the beneficiaries. Some states have adopted generous hardship waiver standards. New Jersey has not.
⚠️ Important: New Jersey’s hardship waiver rules are among the strictest in the country. Under N.J.A.C. 10:49-14.1(h), New Jersey recognizes hardship only in very limited circumstances: when the deceased’s property is the sole source of income for one or more surviving family members, and pursuing recovery would likely cause those survivors to become eligible for public assistance or Medicaid. A waiver may also be considered if it would not be cost-effective to pursue recovery.
This standard is significantly narrower than the federal guidance, which suggests states also waive recovery against homes of modest value, income-producing family farms or businesses, and other compelling circumstances. New Jersey has not adopted those broader protections.
The practical consequence is that most NJ families who would otherwise qualify for a hardship waiver in other states will not qualify in New Jersey. An adult child who lived in and cared for a parent’s home, for example, would not qualify for a waiver simply because they stand to lose their residence — unless they can demonstrate they have no other source of income and would be driven to public assistance.
How New Jersey Places and Enforces Liens
When a Medicaid recipient dies and the conditions for recovery are met — no surviving spouse, no qualifying child — DMAHS will seek to be repaid up to the amount of all Medicaid assistance provided for services received at age 55 or older, including all capitation payments.
New Jersey does not typically force the immediate sale of a home to satisfy a MERP claim. However, there is an important exception to the deferral rule for family members residing in the home. Under New Jersey’s rules, if a family member of the deceased Medicaid beneficiary had continuously resided in the home prior to the beneficiary’s death, and the home was the beneficiary’s primary residence and remains the family member’s primary residence, DMAHS may record a lien against the property but will not enforce it until:
The property is voluntarily sold
The resident family member dies
The resident family member vacates the property
This deferral can provide meaningful relief for a family member — often an adult child caregiver — who has been living in the home. But it is a deferral, not a waiver. The lien remains. When any of the triggering conditions occur, DMAHS will pursue its claim from whatever value remains in the property.
Life Insurance, Annuities, and Burial Trusts
Life Insurance
Proceeds from life insurance policies are generally considered assets of the named beneficiaries — not the estate — and are therefore not subject to recovery, provided a beneficiary other than the estate is named. However, if a named beneficiary predeceases the Medicaid recipient and the estate becomes the default beneficiary, those proceeds become recoverable.
Annuities
Annuities that were not liquidated prior to Medicaid eligibility must name the State of New Jersey as the remainder beneficiary in the primary position — or secondary position if there is a community spouse or qualifying child. Upon the recipient’s death, the state collects any remaining principal or income from the annuity before any other beneficiary receives a distribution.
Irrevocable Funeral Trusts
Under New Jersey law, any funds remaining in an irrevocable funeral trust after reasonable funeral expenses have been paid must be forwarded to DMAHS if the deceased received Medicaid or public assistance benefits. This applies equally to burial insurance policies.
What the Estate Is Required to Do
The obligation to notify DMAHS falls on whoever is handling the estate — whether an executor, administrator, or family member. Under New Jersey’s rules, the estate representative must contact DMAHS in writing as soon as possible after the Medicaid recipient’s death to determine whether a claim exists. This notice must be sent before any assets are distributed to creditors or heirs (with the exception of reasonable funeral expenses).
Distributing estate assets to heirs before satisfying a DMAHS claim can expose the executor or administrator to personal liability. Written notice should be sent to:
DMAHS Office of Legal and Regulatory Affairs Attn: Estates PO Box 712 — Mail Code #6 Trenton, NJ 08625 Phone: 609-588-3016
How to Protect Your Home and Assets From Estate Recovery
The most important thing to understand about Medicaid estate recovery is that it is largely avoidable with proper advance planning. The strategies that work best require time — ideally years — before a Medicaid application is filed.
Medicaid Asset Protection Trust (MAPT): Transferring a home or other assets into an irrevocable Medicaid Asset Protection Trust removes those assets from the recoverable estate, provided the transfer occurs more than five years before a Medicaid application. Assets held in a properly structured MAPT are not subject to MERP because they are no longer owned by the Medicaid recipient at death. This is the single most effective tool for protecting a home from estate recovery.
Life Estate Deed: A life estate deed transfers remainder interest in the home to children or other heirs while the owner retains the right to live there for life. However, this type of transfer must be made more than 5 years before the first Medicaid application. This strategy should only be used if the plan is to stay in the home permanently. If the Medicaid recipient vacates the home or if it is sold, it may affect the home's exempt status under Medicaid rules or be considered a receipt of assets. There are nuances to this approach and it is not appropriate in all situations.
Spousal planning: A home transferred to a community spouse during the Medicaid recipient’s lifetime can be considered an exempt asset. Proper titling and estate planning for the community spouse can limit what remains in a recoverable estate at the survivor’s death. There are also potential pitfalls to be aware of such as the unexpected death of the community spouse before the Medicaid recipient.
Beneficiary designations and joint ownership: Unlike some states, New Jersey reaches jointly held property and certain non-probate assets for recovery purposes. Families should not assume that a joint account or payable-on-death designation will shield assets from MERP in New Jersey.
For a broader discussion of Medicaid planning strategies available to married couples, including some that require a more difficult conversation, see my post on Divorce as a Medicaid Planning Strategy in New Jersey.
Final Thoughts
New Jersey’s Medicaid Estate Recovery Program is real, it is active, and it reaches further than most families expect — including jointly held property, home-based care recipients, and assets that pass outside of probate. The hardship waiver is available in theory but rarely granted in practice under New Jersey’s narrow standards. The families who successfully protect their homes and assets are almost always the ones who planned ahead. If you or a loved one is aging or dealing with health concerns, the question of Medicaid estate recovery is worth discussing with an elder law attorney now — before a nursing home admission, before a Medicaid application, and before it is too late to take meaningful action.
