Her Ski-Town Home Crossed Medicaid’s $1.13 Million Equity Limit. Rising Prices Did It Without Adding a Dollar to Her Income
She paid off her mortgage, never borrowed against the house, and watched her equity climb with the market just like millions of other retirees. Now Medicaid says she has too much wealth to qualify for long-term care coverage, and her…
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Consider a widow who bought a modest house in a mountain ski town decades ago, back when the town had more pickup trucks than private jets. She lives on Social Security and a small pension. She never sold, never refinanced and never took out a home equity line. She paid off the mortgage years ago.
She always figured the house was safe if she ever needed long-term care. Then a care-planning meeting delivered the news: her home equity now sits above the $1,130,000 Medicaid limit KFF lists for her state. Rising real estate values did all the work while her income held steady.
That reversal is central to Medicaid’s home equity test. It measures what a person owns in the house, so market gains alone can push a homeowner over the line.
Medicaid’s Home Equity Ceiling
First, a quick sorting of two programs people mix up. Only short skilled nursing stays after a hospitalization are covered by Medicare, the federal health insurance for people 65 and older. Long-term nursing home care is paid for by Medicaid, the joint federal and state program for people with limited means. It also applies financial eligibility rules, including a separate home-equity test for many people who need long-term care.
KFF’s 2026 survey of Medicaid financial eligibility for older adults and people with disabilities found that federal rules require home equity limits for most people who qualify based on ongoing care needs. According to KFF, the 2026 limits must fall between $752,000 and $1,130,000.
States pick their own spot in that range, which is why the answer depends on the address. KFF found most states set the 2026 limit at $752,000, while KFF counts 11 states that use the federal maximum. Our homeowner lives in one of those maximum-limit states. She gets the highest ceiling available and still clears it.
Why a Paid-Off House Crossed the Line
Equity is the home’s market value minus whatever is owed against it, such as a mortgage or home equity loan. A paid-off house has equity equal to its full value, so every dollar of appreciation lands directly on the Medicaid calculation.
Income plays no part in that formula. A retiree on a fixed pension can watch her equity climb year after year without lifting a finger. Resort towns with scarce land and steady demand from second-home buyers tend to speed the process along.
National prices show how strong that boost has been. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, the benchmark gauge of single-family home prices, reached 337.306 in July 2026, its highest reading of the past five years and up 1.9% from a year earlier. In October 2021, it stood at 273.563.
That appreciation makes her look wealthy on an application, yet it pays zero dollars toward long-term care costs unless she sells or borrows against the house.
Exceptions, California and the 2028 Drop
The limit has escape hatches. According to KFF, every state has circumstances where the home is exempt from the equity limit, such as when a spouse still lives there. Families with a spouse at home often face a very different calculation than a single homeowner like our widow.
California stands alone today. KFF reports it’s the only state with no home equity limit at all.
That changes soon. The 2025 reconciliation law cuts the maximum home equity limit to $1 million starting January 1, 2028, regardless of inflation, according to KFF. That lowers the ceiling in the maximum-limit states and brings a limit back to California.
A frozen cap coupled with rising home values means more paid-off houses will drift over the line each year, even when their owners do nothing but keep living in them.
What Families Track Before a Care Crisis
Families that pull a current market estimate and the exact mortgage payoff balance before a health emergency know where they stand. Families that wait usually find out at the application desk, when options are fewer and the time is running.
The other key fact is the state’s actual number. Their state may use the lower $752,000 limit KFF found in most states, or a spouse exemption may change the picture entirely.
Mark January 1, 2028 on the calendar. For homeowners in maximum-limit states, a house that sits just under today’s ceiling could land over the new one without a single dollar changing hands. Checking now, while there’s still time to plan around the number, costs far less than learning it in a hurry.
Contact [email protected] for any questions or corrections.
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.
