Her Seattle House Has More Than $1 Million in Equity. Starting in 2028, Medicaid’s Federal Ceiling Stops Rising and Could Block Her Nursing-Home Coverage
A Seattle widow with a paid-off home and almost no cash in the bank looks fine on paper for Medicaid nursing-home coverage, but a 2025 law rewrites the rules starting in 2028 in a way that could leave her stranded…
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Consider a widow who bought her Seattle house decades ago. The mortgage is almost paid off, the home holds more than $1 million in equity, and her checking account covers groceries and property taxes with little left over. If she needs extended care today, Washington’s Medicaid program can still protect that house. Starting January 1, 2028, a federal law caps that protection at $1,000,000 and freezes it there. Her equity alone could then make her ineligible.
The rule is the home equity interest limit. It’s federal Medicaid’s ceiling on how much equity an applicant can hold in a primary home and still qualify for coverage. Once she crosses it, the house can block her long-term-care Medicaid eligibility even though it would otherwise be protected.
Washington Uses the $1,130,000 Ceiling in 2026
Federal law has capped excluded home equity since 2006, using a floor and a ceiling that rise with inflation every year. In 2026, states must set their limit between $752,000 and $1,130,000, and most states use the floor.
Washington is near the top of the range. Its limit was $1,097,000 in 2025, one of the highest in the country, and the 2026 maximum is $1,130,000. Nearly a dozen states and the District of Columbia allow the higher limit, including California, New York, Massachusetts, Colorado, and Hawaii.
To clear up any confusion, Medicare can cover limited skilled-nursing care after a qualifying hospital stay, but it generally does not pay for ongoing custodial nursing-home care. Medicaid is the federal-state program that can cover those long-term nursing-home bills for people who meet its financial and other eligibility rules.
Starting in 2028, $1 Million Becomes a Frozen Ceiling
The One Big Beautiful Bill Act, enacted July 4, 2025, rewrites the rule in Section 71108. Starting in 2028, it caps the maximum home equity limit at $1,000,000 regardless of inflation indexing. Homes on property zoned for agricultural use are exempt from the cap and stay under the old rules.
That hits Washington homeowners twice. First, the ceiling drops $130,000 below the 2026 maximum. Then it stops moving, at least until Congress decides otherwise.
How Seattle Equity Crosses the $1 Million Line
Equity is the home’s market value minus what’s still owed on it. Say her house is worth $1,250,000 and she owes $150,000. Her equity comes to $1,100,000.
Under Washington’s 2026 limit of $1,130,000, she clears the bar. Under the 2028 cap, she’s $100,000 over it. Same house, same mortgage, same thin savings.
Time makes it worse. The S&P CoreLogic Case-Shiller National Home Price Index reached 337.3 in July 2026, its highest reading of the past year. Consumer prices rose 3.4% in the year through August 2026, and the latest estimate puts the 2027 Social Security cost-of-living adjustment (COLA) at 3.5%. Her benefit gets an inflation adjustment. The equity cap won’t.
Every mortgage payment also raises her equity. Paying off the house moves her closer to being disqualified.
Washington is already a pricey place to live, with a cost-of-living index of 107.013 against a national average of 100. In high-cost cities like Seattle, a house can top the cap even when its owner would qualify for Medicaid on every other count.
States that use the $752,000 floor get a break, for now. Analysts at Justice in Aging expect the floor to reach $1 million in roughly seven to 10 years under typical inflation. At that point, those states run into the same fixed limit.
Exceptions to the Rule
The home-equity cap does not apply when certain family members still live in the house. That includes a spouse, a child under 21, or a blind or disabled child of any age. If her husband were still living there, the value of the home would not block her Medicaid eligibility. As a widow living alone, however, she does not get that protection.
Families near the cap may have options, including a reverse mortgage or certain transfers, but both need careful planning. A reverse mortgage can reduce home equity, while a transfer can run into Medicaid’s five-year look-back and trigger a period of ineligibility. Families that act before a health crisis generally have more room to plan than those forced to make decisions afterward.
Come 2028, her house will hold the same cash value it does today. The rule that measures its equity changes, and that one change can be enough to block her long-term-care Medicaid.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
