Home equity cap tied to Medicaid eligibility is set to change

Medicaid will not cover long-term services and supports, including nursing home care and home-based care, for applicants whose home equity exceeds $1 million. Agricultural zoning provides exceptions, and those properties continue under older inflation-adjusted rules. Medicaid generally limits older adults and people with disabilities to about $2,000 in countable assets, while primary residences have been exempt to prevent people from losing homes to receive care. Federal law began home equity limits in 2006, with a standard cap of $752,000 for 2026 and an option for states to raise the limit up to $1.13 million. Advocates warn the cap does not match rising home prices, potentially reducing access for low- and moderate-income seniors. The change may also increase use of reverse mortgages, HELOCs, and home equity loans to reduce equity interest, though these products carry risks.

"Under the new law, Medicaid will not cover long-term services and supports, including nursing home care and home-based care, for applicants whose home equity exceeds $1 million. Exceptions exist for properties zoned for agricultural use, according to a recent report from Justice in Aging. Medicaid generally limits older adults and people with disabilities to about $2,000 in countable assets, but a primary residence has long been exempt under the idea that people should not have to lose their homes to receive care."

"Congress first imposed home equity limits for long-term care eligibility in 2006. Current federal rules set the standard cap at $752,000 for 2026, while allowing states to raise the limit to as much as $1.13 million. A dozen states and the District of Columbia currently use the higher threshold, Justice in Aging noted. Advocates for older adults say the cap does not reflect rapidly rising home prices in many urban and coastal areas."

"A million-dollar house in New York City or San Francisco, for example, may be a simple two- or three-bedroom residence that might cost $200,000 or less if located elsewhere, the Justice in Aging report stated. In some cases, what is now a million-dollar home was purchased forty or fifty years ago by the Medicaid applicant for $50,000 or less. The organization warned that more low- and moderate-income seniors could lose access to Medicaid-funded care as property values continue to climb."

"The new rule could also increase demand in certain financial products, including reverse mortgages, home equity lines of credit (HELOCs) and traditional home equity loans. Federal Medicaid law explicitly allows applicants to use a reverse mortgage or home equity loan to reduce the individual's total equity interest in the home, Justice in Aging explained. Still, experts caution that such products carry ri"

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