Blog

For seniors in New Jersey who require long-term care, Medicaid can be a financial lifeline. With the rising costs of nursing homes, assisted living, and home health aides, it’s no surprise that families turn to Medicaid to help cover expenses. However, Medicaid denials are more common than many people realize, and they can leave individuals without the care they need at the moment they need it most. The good news is that many of these denials are preventable with proper planning and professional guidance.

Understanding why applications are denied and how to address those pitfalls early on can help protect your family from stress, unexpected out-of-pocket costs, and long delays in coverage.

Common Reasons for Medicaid Denials (and How to Prevent Them)

Failing to meet Medicaid’s eligibility requirements or making missteps during the application process can lead to a denial. 

Below are the most frequent causes of Medicaid denials and tips to avoid them:

Missing or Incomplete Documentation

Medicaid applications require a significant amount of documentation. Missing bank statements, identification, or income records can result in an immediate rejection.

How to avoid it:

• Start gathering financial and legal documents early.
• Keep detailed records of all income, assets, and expenditures.
• Consult an elder law attorney to ensure your application is complete before submission.

Assets Over the Allowable Limit 

To qualify for Medicaid in New Jersey, an applicant generally must have no more than $2,000 in countable assets. However, not all assets are considered equally, which leads to confusion.

How to avoid it:

• Learn which assets are exempt (e.g., primary residence, certain personal belongings).
• Use Medicaid-compliant tools such as irrevocable trusts to reposition assets lawfully.
• Review your finances annually, especially as healthcare needs change.

Five-Year Look-Back Rule Violations

One of the biggest mistakes people make is transferring assets without fully understanding the consequences. Medicaid reviews financial transactions going back five years to ensure assets weren’t gifted or sold below market value.

How to avoid it:

• Avoid transferring property or funds without consulting a legal advisor.
• If a transfer has already occurred, disclose it transparently and plan for potential penalty periods.
• Plan Medicaid strategies at least five years before care is anticipated.

Incorrect Asset Valuation 

Assets such as real estate or valuable collectibles must be reported accurately. Over- or under-valuing them can raise red flags.

How to avoid it:

• Work with qualified professionals for real estate or asset appraisals.
• Submit documentation to justify the values listed on the application.
• Keep appraisals up to date so you are always prepared should you need to apply for Medicaid.

Applying Too Late or During a Crisis 

Many families wait until a loved one is already in a hospital or facility to begin Medicaid planning. Emergency applications are often rushed and more likely to be denied.

How to avoid it:

• Begin Medicaid planning while the applicant is still healthy.
• Meet with a legal advisor annually to update your long-term care strategy.
• Don’t wait for a crisis—proactive planning offers the most flexibility.

Exceeding Income Limits Without a Strategy 

Even if asset limits are met, exceeding income thresholds can result in a Medicaid denial. This is particularly problematic for those whose monthly income is only slightly over the limit.

How to avoid it:

• Explore the use of Qualified Income Trusts (QITs) to legally manage excess income.
• Speak with an attorney familiar with New Jersey Medicaid rules to properly structure your income.
• Never attempt to “hide” income—transparency is critical.

Benefits of Planning Ahead 

Planning ahead helps you avoid Medicaid denials and also gives you more control over your financial and healthcare future. Here are some of the benefits:

• Greater asset protection: Early planning allows for lawful asset repositioning, preserving your legacy.
• Peace of mind for families: Loved ones won’t have to navigate a complex system under stress.
• Higher chance of approval: Accurate applications and compliance with all requirements greatly increase your odds.
• Faster access to care: Delays caused by denials can mean weeks or months without essential services.

Working with an experienced Medicaid planning attorney ensures that you’re taking the right steps to prepare for care while protecting your assets and your family’s financial future.

Avoid Medicaid Denials – Partnering With Waypoint Legal

At Waypoint Legal, we understand how overwhelming the Medicaid application process can be. Our team has extensive experience navigating the New Jersey Medicaid system and helping families avoid costly mistakes. We take the time to understand your unique situation, explain your options clearly, and guide you through every step of the planning and application process.

Our goal is to protect your assets while securing the long-term care you or your loved one needs. Medicaid denials are avoidable. With thoughtful planning and experienced legal guidance, you can navigate the system with confidence and avoid Medicaid denials.

Contact Waypoint Legal today to schedule a consultation and start planning for a future that balances care, dignity, and financial stability.

Medicaid Denial FAQs

What are the most common reasons for Medicaid denials in NJ?
Missing documentation, having assets over the allowable limit, income that exceeds thresholds, or violating the five-year look-back rule are common causes of denial.

What is the five-year look-back rule, and why does it matter?
Medicaid reviews financial transactions made in the five years before you apply. Gifting assets or selling them below market value during this time can result in penalties or delayed eligibility.

Can I still qualify for Medicaid if my income is slightly over the limit?
Yes, but you may need to use a Qualified Income Trust (QIT) to meet Medicaid’s income requirements. A legal advisor can help you set one up correctly.

Do all assets count toward Medicaid’s $2,000 limit?
No. Certain assets, like a primary residence, personal belongings, and a car may be exempt. An elder law attorney can help identify which assets are countable.

Is it ever too late to apply for Medicaid?
While early planning is best, help is available even in crisis situations. A Medicaid planning attorney can guide you through the process and preserve as much as possible.

How can an attorney help prevent a Medicaid denial?
An attorney ensures your application is complete, helps you structure finances properly, and avoids costly mistakes like incorrect valuations or disqualifying transfers.