Medicaid’s New $1 Million Home Equity Limit: What Seniors and Their Advisors Need to Know Before 2028
Many seniors have spent decades building wealth in their homes. In states like California, that wealth often exists on paper as home equity rather than in liquid assets.
That’s why a recent change to Medicaid rules is generating significant discussion among seniors, families, elder law attorneys, financial planners, and long-term care professionals.
The issue is simple: beginning in 2028, a new federal home-equity limit could affect eligibility for certain Medicaid long-term care benefits.
Let’s separate fact from fiction and discuss what is currently known.
First, This Is About Medicaid — Not Medicare
One of the biggest misconceptions circulating online is that homeowners with more than $1 million in equity will lose Medicare benefits.
That is not true.
Medicare eligibility is generally based on age or disability status and is not determined by the amount of equity in your home.
The recent legislation affects Medicaid eligibility for long-term care services, such as nursing home care and certain long-term support programs.
What Is Changing?
Beginning January 1, 2028, individuals seeking Medicaid long-term care benefits generally may not have more than $1 million in equity in their primary residence.
Prior federal rules allowed states to utilize higher home-equity thresholds that increased over time with inflation. The new legislation establishes a fixed $1 million cap and eliminates future inflation adjustments.
While $1 million may sound like a large amount, homeowners in many parts of California, Florida, and other appreciating real estate markets can reach that threshold much more easily than many people realize.
How Is Home Equity Determined?
Home equity is generally calculated by subtracting any mortgages or liens from the current market value of the property.
For example:
- Home value: $1,500,000
- Mortgage balance: $250,000
- Estimated equity: $1,250,000
In this example, the homeowner would have approximately $1.25 million in equity.
While implementation details may continue to evolve as states and agencies provide guidance, the basic concept remains straightforward: Medicaid evaluates the owner’s equity interest in the home rather than simply the home’s market value.
Why This Matters
Many retirees today are what financial professionals often call “house rich and cash poor.”
They may have:
- Significant home equity
- Modest retirement savings
- Limited monthly income
- Concerns about future long-term care expenses
Historically, many families viewed the primary residence as largely protected when discussing future Medicaid planning. While important protections remain in place, this new equity cap creates additional considerations for homeowners whose equity exceeds the threshold.
As home values continue to appreciate, more middle-class retirees may find themselves affected by this rule in the years ahead.
Planning Conversations May Need to Start Earlier
One of the biggest lessons from this change is that waiting until a health crisis occurs may not be the best strategy.
Families may benefit from discussing:
- Long-term care funding options
- Aging-in-place strategies
- Estate planning considerations
- Home equity management
- Medicaid planning with qualified elder law attorneys
Every family’s situation is different, and there is no one-size-fits-all solution.
Where Reverse Mortgages Fit Into the Discussion
As a reverse mortgage specialist, I expect this topic to become increasingly important over the next several years.
A reverse mortgage is not a Medicaid planning tool, nor should anyone make decisions regarding Medicaid eligibility without consulting qualified legal and financial professionals.
However, for some homeowners, the conversation highlights a larger issue: how to strategically utilize home equity during retirement to support aging in place, supplement cash flow, fund care needs, or improve overall retirement flexibility.
The key takeaway is that homeowners should understand their options before a crisis occurs.
Final Thoughts
The new Medicaid home-equity limit does not mean seniors with more than $1 million in home equity automatically lose benefits.
It does mean that home equity may become a more important factor when evaluating eligibility for certain Medicaid long-term care programs beginning in 2028.
For homeowners, families, financial planners, elder law attorneys, and care professionals, now is the time to become educated on these changes and begin planning conversations early.
The rules will continue to be clarified over time, and I will continue providing updates as additional guidance becomes available.
Mike Beal
Mortgage Broker | Senior Services Specialist
25 Years of Mortgage Experience
Serving California, Texas, Florida, and Michigan
📞 (619) 218-4706
