Medicaid Matters Weekly is a blog series aimed to be a trusted source for timely updates, insights and expert guidance on the ever-changing landscape of Medicaid, with a special focus on long-term care. Each week we’ll highlight critical developments, how they impact your clients, and offer practical tips to keep your planning strategies sharp and your clients protected.
Home Equity Cap Could Squeeze Future Long-Term-Care Applicants
Among the most consequential Medicaid provisions in the House Commerce Committee’s proposed budget bill is a subtle, yet significant, change to the treatment of home equity. Currently, federal Medicaid rules exclude home equity up to a certain value when determining eligibility for long-term care benefits. In 2025, that range is between $730,000 and $1,097,000, depending on the state. The cap adjusts annually for inflation, and eleven states, including high-cost housing markets like New York and New Jersey, currently use the higher threshold.
The proposed bill would freeze the maximum home equity limit at $1,000,000 nationwide, with no inflation adjustment going forward. This would take effect January 1, 2028. It also prohibits asset disregards from being used to waive this cap, clearly aimed at California, who exempts the home entirely after eliminating asset tests altogether.
Planning Consequences of this Change
Inflation will Erode Protection. Freezing the cap at $1,000,000 means that what one considers a “modest home” today may be a disqualifying asset in 5-10 years, especially in growing areas. This creates a ticking clock for clients who plan to rely on the home exemption rules.
High Value Homes at Risk. Clients with properties nearing or above $1 million in equity, especially in states like Massachusetts, California, New York, may need to consider alternative planning options. Remember, this more directly affects crisis planning, since strategic gifting (to an irrevocable trust) will still be available to protect the home.
Farm Exemptions. The bill permits states to apply different treatment for homes located on farms. If the bill passes, be sure to watch your state’s implementation closely if this affects your client base.
LWP Practice Tip: Use this as an opportunity to talk about the long-term effects of inflation, real estate appreciation and Medicaid rule tightening. This is a chance for you to demonstrate the value of doing planning early, by establishing an irrevocable trust to hold the primary residence and avoid these equity limits altogether.
This proposed change is one of several aimed at narrowing Medicaid eligibility and curbing overall long-term-care costs. If passed, it will further reinforce the value of proactive planning, and increase the risks of a wait-and-see approach. Make sure your clients know that Medicaid matters!
