How an Increase in Home Value Impacts a Medicaid Long Term Care Beneficiary's Eligibility

Summary
It’s possible to own a home and still qualify for Medicaid Long Term Care. That’s because when it comes to financial requirements, Medicaid treats the home differently than other assets. However, if a home increases too much in value, it could jeopardize Medicaid Long Term Care eligibility. In some cases, it could lead to a lapse in coverage.

How Medicaid Treats the Home for Eligibility Purposes

In order to qualify for Medicaid Long Term Care, applicants need to meet two financial requirements – an asset limit and an income limit. In most states in 2024, the individual asset limit is just $2,000, meaning applicants need to have $2,000 or less in countable assets to qualify, and beneficiaries must have $2,000 or less in countable assets to maintain their coverage.

If the home was counted toward that asset limit, homeowners would not be able to qualify for Medicaid Long Term Care. However, the home is not counted (also known as being exempt) from the asset limit in many situations, such as:

• If the applicant lives in their home and the home equity interest (the portion of the home’s equity value that the applicant owns minus any outstanding mortgage/debt) is less than the state’s home equity interest limit, then the home is exempt.
• If the applicant’s spouse, minor child, or blind or disabled child of any age lives there, the home is exempt regardless of the applicant’s home equity interest, and regardless of where the applicant lives.
• If none of the above-mentioned people live in the home, the home can be exempt if the applicant/beneficiary files an “intent to return” home and the home equity interest is at or below the state’s home equity interest limit.

These rules apply to two of the three types of Medicaid Long Term Care relevant to seniors – Nursing Home Medicaid and Home and Community Based Services (HCBS) Waivers. Aged, Blind and Disabled (ABD) Medicaid is the exception. Home equity interest limits do not apply to ABD Medicaid applicants or beneficiaries. It’s still possible for their homes to count toward the asset limit, and they still must follow the above rules, but they can disregard the home equity value aspect of the rules.

What Happens to Medicaid Eligibility If Home Value Increases

So, if the value of the home increases after a senior has started receiving Medicaid Long Term Care benefits, it would change their home equity interest. This could change the home’s standing as a countable or exempt asset, which would affect the status of the senior’s Medicaid eligibility.

For most states in 2024, the home equity interest limit is either $713,000 or $1,071,000 (states with higher property values use the greater figure). There are only exceptions to this – Idaho, Maine and Wisconsin – and the home equity interest limit in all three of those states is $750,000 (as of 2024). California does not have a home equity limit.

Again, home equity interest is the portion of the home’s equity value that the Medicaid applicant or beneficiary owns minus any outstanding debt on the home (usually a mortgage).

For example, let’s say a home in Pennsylvania has a fair market value of $1,000,000 when a senior applies for Nursing Home Medicaid. If there is still $300,000 outstanding mortgage on the home, and the applicant is the sole owner, the home equity interest is $700,000. This would put the senior below Pennsylvania’s home equity interest limit of $713,000, which means the home would not count toward the asset limit. However, if the home increased in value to $1,050,000, the home equity interest limit would increase to $750,000. This would put the senior, who is now a Nursing Home Medicaid beneficiary, over the home equity interest limit. This means their home will now be counted as an asset, so the senior would be well above the asset limit and their Medicaid eligibility would be in jeopardy during their next Medicaid Renewal, which we will discuss next.

Understanding Medicaid Renewals

Medicaid renewal is how states make sure Medicaid beneficiaries continue to meet the state’s eligibility criteria. These renewals generally happen once a year. During the process, state officials will evaluate Medicaid beneficiaries’ financial situations to ensure they still meet the asset limit and the income limit. If the value of their home increases, it could put a Medicaid beneficiary over the asset limit, as discussed above.

The state will check financial situations electronically as much as possible. If the city, county or state has conducted an official property assessment during the year the home’s new value will be part of the public record and the state will most likely act accordingly. However, the state may also ask the Medicaid beneficiary to list any change to their home’s value on their Medicaid Renewal Form. If the beneficiary, or their representative who is completing the Medicaid Renewal Form on their behalf, knows of any change in the home’s value they are obligated to report it. Click here to learn more about Medicaid renewals.

What to Do If a Home Becomes a Countable Asset

If the increase in a home’s value pushes the Medicaid beneficiary’s home equity interest over the limit in their state, there are ways the home can still be exempt and the beneficiary can maintain their coverage. Before getting into how this can happen, it’s important to note that the beneficiary can not just transfer ownership of their home to get under the asset limit. This would violate the Look-Back Period, which Medicaid uses to prevent applicants from simply giving away assets to become eligible. Seniors who violate the Look-Back Period will have their Medicaid applications denied and will likely face a penalty period of ineligibility.

Although it can’t just be given away, there are still ways a home can be exempt from the asset limit even if it’s value increases enough to push the Medicaid beneficiary over the home equity interest limit:

• As mentioned above, the home is always exempt if the beneficiary’s spouse, minor child or disabled child of any age lives there.
• If the beneficiary has ABD Medicaid, the home equity interest doesn’t matter.
• If there is a qualified adult child or sibling who has been living in the house, it’s possible the beneficiary could transfer ownership of the home (so it wouldn’t be counted against their asset limit) without violating the Look-Back Period by using either the Child Caregiver Exemption or the Sibling Exemption. An adult child who has been living in the house for two years and providing care might be qualified to assume ownership of the home using the Child Caregiver Exemption. A sibling who has been living in the home for at least one years and is also a co-owner might be qualified to assume ownership of the home using the Sibling Exemption.

If none of those options are available, the senior may end up losing their Medicaid Long Term Care coverage. In these cases, the home could be sold and the proceeds would be used to pay for the long-term care that Medicaid was covering. When the proceeds are low enough that the senior is once again below the asset limit, they can re-apply for Medicaid Long Term Care. This can be a complex process, especially if you want to do it without any lapses in coverage and without violating any other Medicaid rules. That’s why it’s recommended you or your loved one consult with a professional like a Certified Medicaid Planner or an Elder Law Attorney before attempting it on your own.