Starting in 2028, More Than $1 Million in Home Equity Disqualifies You From Medicaid Nursing Home Coverage, and the Cap Never Adjusts for Inflation
A frozen dollar figure buried in a 2025 federal law could strip Medicaid nursing home coverage from retirees who spent decades building equity in an ordinary home, and the families most exposed are the ones least likely to see it…
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Starting in January 2028, a homeowner with more than $1 million in home equity cannot qualify for Medicaid long-term services and supports, no matter how thin the bank account. That ceiling was written into the Budget Reconciliation Act of 2025, signed into law on July 4, 2025, and it applies nationally to nursing home coverage under Medicaid.
The number that matters is equity. Equity is the current market value of the home minus the mortgage balance and any outstanding loans against it. A house worth $1.3 million with a $400,000 mortgage has $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 U.S., is separate from Medicare, which 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. In 2026, the federal floor is $752,000, and states are permitted to raise it as high as $1,130,000. Both of those numbers adjust upward every year for inflation.
The new law kills the inflation adjustment. The $1 million ceiling is frozen. Analysts at Justice in Aging estimate that the current $752,000 federal floor would have reached $1 million on its own in roughly seven to 10 years at typical inflation rates. After that, the cap keeps tightening in real terms every year the Consumer Price Index climbs, and the CPI has kept climbing. The index sat at 332.8 in July 2026, up from 324.245 in September 2025.
Which States Get Forced Down, and Why San Francisco Homeowners Should Read 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. Those states will be forced to lower to $1 million and hold there permanently.
Consider the cash-poor, house-rich retiree elder law attorneys describe often: a widow in San Francisco or Honolulu who bought in the 1980s for $110,000, has Social Security and a small pension, no meaningful savings, and a paid-off house now worth $1.4 million. The Case-Shiller National Home Price Index reached 336.7 in June 2026, up from a January 2000 base of 100. That kind of appreciation is exactly what pushes ordinary homeowners past a fixed $1 million line.
Carve-Outs the Headline Doesn’t Mention
The equity cap does not apply at all if certain family members live in the home. A spouse, a child under 21, or a blind or disabled child of any age living in the home removes the equity limit from the analysis. 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 and stay under the older rules, including the annual inflation adjustment.
Families with time before January 2028 have real options to bring countable equity down. 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 a loan can close. A home equity loan or HELOC, or a transfer to a qualifying spouse or dependent, can also work. None of these are do-it-yourself moves. Medicaid’s five-year lookback penalizes uncompensated transfers, so timing is the whole game.
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. Readers routinely conflate these two rules. They are not the same rule, and the paperwork that decides whether a house passes to family or to the state is the kind of thing we walked through 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 16 months of planning runway. An elder law attorney licensed in the relevant state is the correct starting point. The federal Eldercare Locator at eldercare.acl.gov or 1-800-677-1116 can point to local resources and area agencies on aging.
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