Starting in 2028, More Than $1 Million in Home Equity Disqualifies You From Medicaid Nursing Home Coverage, and the Cap Never Adjusts for Inflation

Starting in January 2028, a homeowner with more than $1 million in home equity cannot qualify for Medicaid long-term services and supports, regardless of how little cash sits in the bank. That ceiling was written into the Budget Reconciliation Act of 2025 (popularly known as the “One Big Beautiful Bill”), signed into law on July 4, 2025, and it applies nationally to nursing home coverage under Medicaid.

The number that matters is equity, not market value. Equity is the home’s current market value minus the mortgage balance and any outstanding loans secured by the property. A house worth $1.3 million with a $400,000 mortgage carries $900,000 in equity and stays under the cap. A paid-off house worth $1.05 million does not.

How the $1 Million Cap Rewrites the Current Rule

Medicaid, the joint federal-state program that pays for most nursing home care in the United States, is separate from Medicare. Medicare covers only short post-hospital rehab stays and stops well short of long-term custodial care. Since 2006, federal law has already capped the excludable home equity for Medicaid eligibility. In 2026, the federal floor sits at $752,000, and states are permitted to raise it as high as $1,130,000. Both figures adjust upward every year for inflation.

The new law eliminates that inflation adjustment entirely. The $1 million ceiling is frozen in place. Analysts at Justice in Aging estimate the current $752,000 federal floor would have reached $1 million on its own in roughly seven to ten years at typical inflation rates. Once the cap arrives, it tightens in real purchasing-power terms every year that consumer prices rise. The Congressional Budget Office estimates this provision will reduce federal Medicaid spending by $195 million over ten years, a relatively modest fiscal number that belies how significantly it reshapes eligibility for individual households. The U.S. Bureau of Labor Statistics reported CPI-U at 334.98 in August 2026, up 3.4% from a year earlier, a pace that steadily erodes the real value of any fixed dollar threshold.

Which States Get Forced Down, and Why San Francisco Homeowners Should Read This Twice

Medicaid is state-administered, and the states that chose the higher federal ceiling will have to retreat. Twelve states plus the District of Columbia currently allow the higher limit, including California, New York, Massachusetts, Colorado, and Hawaii. Under the new law, all of them must drop to $1 million and hold there permanently.

Consider the cash-poor, house-rich retiree that elder law attorneys describe often: a widow in San Francisco or Honolulu who bought her home in the 1980s for $110,000, lives on Social Security and a modest pension, has no meaningful savings, and owns a paid-off house now worth $1.4 million. The S&P Cotality Case-Shiller U.S. National Home Price Index stood at 333.235 in July 2026, on a base of 100 in January 2000, according to the Federal Reserve Bank of St. Louis. That scale of appreciation over several decades is precisely what pushes ordinary long-time homeowners past a frozen $1 million line.

Carve-Outs the Headline Does Not Mention

The equity cap does not apply if certain family members live in the home. A spouse, a child under 21, or a blind or disabled child of any age in residence removes the equity limit from the eligibility analysis entirely. Federal law also requires every state to maintain a hardship waiver process, and homes on land zoned for agricultural use are exempted from the new cap, remaining subject to the older rules that include the annual inflation adjustment.

Families with time before January 2028 have real options to bring countable equity below the threshold. Federal law explicitly permits a reverse mortgage for this purpose, and HUD’s Home Equity Conversion Mortgage program requires counseling by a HUD-certified counselor on the HECM Roster before any loan can close. A conventional home equity loan or HELOC, or a transfer to a qualifying spouse or dependent, can also reduce countable equity. None of these are do-it-yourself moves. Medicaid’s five-year lookback rule penalizes uncompensated transfers, so the sequence and timing of any strategy is critical.

Estate Recovery Still Applies After Death

Qualifying for Medicaid while alive is not the same as keeping the house in the family after death. Medicaid estate recovery, the process by which states claw back what they spent on a beneficiary’s long-term care, still applies to the home once the Medicaid recipient dies. A house that stayed under the $1 million equity cap for eligibility purposes can still be claimed by the state to reimburse nursing home costs paid on the recipient’s behalf. These two rules are frequently conflated, but they operate independently, and the paperwork that determines whether a house passes to family or to the state is covered in a free estate checklist.

Families with a parent likely to need nursing home care after January 2028, and a home anywhere near the $1 million equity line, have roughly 15 months of planning runway from this writing. An elder law attorney licensed in the relevant state is the right starting point. The federal Eldercare Locator at eldercare.acl.gov or 1-800-677-1116 can connect families with local resources and area agencies on aging.

Editor’s note: This update corrects the Case-Shiller National Home Price Index figure to 333.235 for July 2026 (per the Federal Reserve Bank of St. Louis), updates the CPI-U to 334.98 for August 2026 with a 3.4% year-over-year rate per the Bureau of Labor Statistics, and adds the Congressional Budget Office’s estimate that the home equity cap provision reduces federal Medicaid spending by $195 million over ten years per the Kaiser Family Foundation’s analysis of the Budget Reconciliation Act of 2025.

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