Under Section 6014 of the Deficit Reduction Act of 2005 some individuals with substantial home equity are disqualified from receiving Medicaid assistance to pay for long term care. The section is codified at 42 U.S.C. 1396p(f). The idea underlying this provision of Medicaid law is to force individuals with substantial equity in their homes to tap into that equity to pay for their care before applying for Medicaid long term care benefits.
The law initially set an equity interest of $500,000 as the threshold for disqualification. States were given the option to increase this level to $750,000 but Pennsylvania declined to do so. The law also specified that beginning in 2011 the threshold would be adjusted for inflation based on the percentage increase in the consumer price index -Urban (CPIU).
As a result of this inflation adjustment, the home equity limitation will be $536,000 in Pennsylvania during 2013. In states like New York, New Jersey, and California which elected to use the higher level, the limit in 2013 will be $802,000.
This limitation on the on the value of home equity does not apply if the applicant has a spouse, a child under age 21, or a child who is blind or disabled, any of whom lawfully reside in the home. The limitation is also to be waived in the case of a demonstrated hardship. (See 42 U.S.C. 1396p(f)(4). In Pennsylvania see also 55 Pa.Code § 178.62a).
The limitation applies to Medicaid long term care benefits provided to nursing facility residents and through home and community based services like the Aging Waiver program. It does not affect an individual’s eligibility for other medically necessary Medicaid covered services. Individuals who are disqualified for benefits due to the equity limit may be able to reduce their equity interest through the use of a home equity line of credit or reverse mortgage.
For more information on the home equity limitation, see my December 2011 blog post here.