The American Health Care Act Sec. 114 (b) would repeal the authority of states to set a minimum amount of home equity as a countable resource for Medicaid eligibility. This is according to “Considerations on Limitations to Home Equity for Medicaid Eligibility” released by the National Academy of Elder Law Attorneys.
This policy would affect the ability of individuals to remain in their homes and receive their long term care services and supports at home. The result would be an increase in costly institutional care.
What Are Home Equity Rules for Medicaid Long-Term Services and Supports (LTSS)?
For Medicaid LTSS, current limitations to home equity as a countable resource applies to individuals with disabilities of all ages that have no community spouse, a child under 21 or a child with disabilities.
In 2017, States must exempt a minimum of $552,000, but may increase that amount at their option up to $840,000 ( such as New York). This number is adjusted for inflation every year.
The limitation applies at any age, whether a senior with dementia or a 40 year old who suffered a traumatic brain injury. Some individuals with disabilities may hope to stay at home for multiple decades.
Home Equity Becomes an Available Resource in Many States for Those Institutionalized Already.
Although states exempt home equity at time of qualification for Medicaid LTSS that does not mean it will always remain an exempt resource. Today, some states will count home equity as an available resource, if the individual has been institutionalized for a period of time, such as six months or a year. In those states, the house gets liquidated any way and the funds must get spent down.
In other states, as long as an intent to return home remains, home equity stays exempt. In those instances, family must determine whether the cost of maintaining the home from their own funds makes economic sense. In many states, the home is the most sought after asset upon death for the state’s recovery of Medicaid costs.
Exempting Home Equity Helps Expand Less Costly Home and Community Based Services.
Most individuals with disabilities hope to remain at home as long as possible. Moreover, providing care at home is cheaper than institutional care, in part because Medicaid does not have to pay for room and board at an institution.
By exempting home equity as a countable asset, individuals can remain at home, receive waiver services, and not become unnecessarily institutionalized.
Reverse Mortgages Are Not Available to the Institutionalized Nor Are Other Lines of Credit Guaranteed.
Individuals with disabilities whose home equity is above the maximum have few options. For the institutionalized, they cannot qualify for a reverse mortgage regardless of age. Home loans are not automatic either. Many, particularly in crisis situations, must liquidate their house.
ISSUES RELATED TO FURTHER LIMITATIONS TO HOME EQUITY FOR MEDICAID ELIGIBILITY PURPOSES
· Increased Risk of Institutionalization. Due to costs of home upkeep, Medicaid eligibility, and qualifying for loans/reverse mortgages place single persons at greater risk of institutionalization. Disabled individuals in a HCBS waiver often need specially equipped or configured homes, which even in lower cost areas can be quite expensive, e.g., with extra structural support for ceiling tracks for lifts, etc.
· Forced Sale of Home. Careful analysis needs to be done on the policy around reverse mortgages and other lines of credit and how they interact with the Medicaid programs rules. Can everyone that would now need to qualify, actually qualify? If not, individuals with disabilities may be forced to fire-sale their home.
Many, particularly in crisis situations where an individual gets admitted to the nursing home, may wish to return home at some point, but they cannot get access to credit and are forced to sell. That in turn means they must spend down the entire proceeds of the sale.
Worse, returning back home to receive services is now entirely foreclosed.
· Impact on Rural Areas/Farmsteads. While homes in high cost areas come to mind, such as a home in Westchester Country, NY, this could impact rural areas as well, given that the contiguous farm may be considered part of the home under Medicaid law.
· Removal of State Flexibility. Today, states have the option to increase home equity above the current minimum. This provision would limit, not assist, states’ ability to customize their Medicaid program.