Ten States and D.C. Let Medicaid Applicants Keep Up to $1.13 Million in Home Equity. In 2028, the Ceiling Falls to $1 Million and Stops Rising With Inflation

Picture an 82-year-old widow entering a Manhattan nursing home this month. Her longtime brownstone is now worth $1.08 million and carries no mortgage. In 2026, that equity does not by itself disqualify her from Medicaid long-term-care coverage, because New York uses the $1.13 million federal maximum. In many other states, the same house blows past the $752,000 floor and locks her out.

That grace period has an expiration date. Beginning January 1, 2028, federal law imposes a non-indexed $1 million ceiling on home equity for Medicaid applicants whose homes sit on non-agricultural lots. Her brownstone does not have to appreciate another dollar for the eligibility math to turn against her.

Equity Is What Counts, Not the Home’s Sticker Price

Medicaid looks at the applicant’s equity interest, which is the current market value minus any debt secured by the property. A $1.2 million home carrying a $250,000 mortgage contains $950,000 of equity. A jointly owned home gives the applicant only a fractional slice.

Staying under the ceiling does not by itself open the door. The applicant still must satisfy the state’s income limits, countable-asset caps and medical-need criteria. The house also has to meet the criteria as the principal residence under the applicable exemption, usually through a documented intent to return. Think of the rule as one that lets an applicant remain eligible despite owning the home, rather than one that confers eligibility because of it.

Where the $1.13 Million Limit Applies in 2026

For 2026, CMS pegs the federal home-equity range at $752,000 on the low end and $1.13 million on the high end, both indexed for inflation. Every state picks a number in that band.

Ten states plus the District of Columbia use the top-of-band figure: Alabama, Colorado, Connecticut, the District of Columbia, Hawaii, Maine, Massachusetts, New Jersey, New York, Tennessee and Washington. California is a separate case: it currently reports no home-equity limit at all, but the new federal ceiling will reach it in 2028.

What Section 71108 Changes in 2028

Section 71108 of the 2025 reconciliation law installs a hard $1 million ceiling on home equity for non-agricultural lots, effective January 1, 2028. Jurisdictions currently sitting at $1.13 million take an immediate cut. States still using the lower indexed limit can keep raising it toward $1 million but cannot cross that line.

The bigger issue is what happens after 2028: the $1 million figure gets no automatic inflation adjustment. Someone with $1.05 million of equity clears today’s New York limit but overshoots the 2028 ceiling by $50,000.

The statute preserves the old indexed framework for a home on a lot that is zoned for agricultural use. That test turns on how the parcel is legally zoned, not on whether the owner keeps chickens, calls the place a farm or reports farm income. Rural does not necessarily translate to agricultural.

Family Exceptions and Estate Recovery

The equity cap generally does not apply while any of these relatives lawfully live in the home: the applicant’s spouse, a child younger than 21, or a blind or disabled child of any age. Federal law also requires each state to run a hardship-waiver process, though the criteria and speed vary widely.

Here is where families conflate two programs. Medicare, the age-65 health-insurance program, does not means-test the house at all and does not chase it after death. Medicaid, the state-administered safety-net program that actually pays for long-term nursing care, does. A home excluded during the owner’s lifetime can still face Medicaid estate recovery after death (the titling and beneficiary fixes that keep a house out of that pipeline are the sort of thing we put in a free estate checklist here). The $1 million ceiling decides eligibility. It does not shield the house from a later state claim.

What Families Are Doing Before 2028

Elder-law attorneys report three common moves.

• First, families pin down current equity with a defensible appraisal and the exact mortgage balance.
• Second, they confirm the state’s present limit, the lot’s zoning and whether a resident-family exception already applies.
• Third, they get legal advice before transferring the house or borrowing against it. A transfer can trigger Medicaid’s five-year look-back, and loan proceeds can become countable cash even as the debt shrinks home equity.

Beginning in 2028, legislation is set to move the eligibility line below many existing homes and stop that line from keeping pace with inflation. Her property’s value does not need to change to affect her eligibility.

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