A new federal Medicaid rule will place a nationwide cap of $1 million cap on home equity for older adults who seek long-term care coverage, a change advocates say could increasingly affect middle-class homeowners in expensive housing markets.
The provision, included in the Budget Reconciliation Act of 2025 — otherwise known as President Donald Trump’s “One Big Beautiful Bill” — takes effect Jan. 1, 2028.
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.
Rising home values raise concerns
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.
Homes on agricultural land remain exempt from the new ceiling and will continue following the older inflation-adjusted rules, the report said.
Reverse mortgages, HELOCs may gain momentum
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 risks. Reverse mortgages can reduce values for heirs due to accumulated fees and interest, while HELOCs and home equity loans may create repayment obligations that are difficult for retirees on fixed incomes to meet.
Justice in Aging urged older adults to consult elder law attorneys or financial planners before borrowing against their homes.
“These are significant transactions — and Medicaid eligibility is not the only consideration,” the report stated. “It is critical to ensure that any decisions are well-informed and any potential borrowing against a home is done with eyes wide open.”
Waivers and family protections remain
Federal law still protects certain households from the equity cap.
The limit does not apply if a spouse, a child under 21, or a blind or disabled child lives in the home.
The law also requires states to offer hardship waivers, although Justice in Aging said many states have never established clear waiver procedures despite earlier federal mandates.
Advocates are urging states to improve waiver systems and ensure applicants receive advance notice of their options.
This article was written by Jonathan Delozier and generated with the assistance of HousingWire Automation. It was reviewed by a HousingWire editor before publication. The system helps convert company announcements and industry data into HousingWire-style news coverage.