A New Law Sets a $1 Million Home Equity Cap for Medicaid Long-Term Care. It Takes Effect January 1, 2028. East Valley Seniors Need to Plan Now

TEAM CASSELS | EAST VALLEY MORTGAGE

SENIOR PLANNING ALERT

May 2026

5 min read

The Budget Reconciliation Act of 2025, signed into law on July 4, 2025, changes how much home equity a senior can hold and still qualify for Medicaid coverage of long-term care. Starting January 1, 2028, the new national limit is $1 million — a hard cap that does not adjust for inflation. For senior homeowners in Mesa, Gilbert, Chandler, Queen Creek, San Tan Valley, and Apache Junction with significant home equity, this creates a planning window that is closing. The deadline is real. The tools to address it exist. The conversation needs to start now.

THE MEDICAID HOME EQUITY RULE — WHAT CHANGED AND WHEN
Arizona — Now (2026) $752K Federal baseline. Arizona uses the minimum. Equity above this amount disqualifies you from Medicaid LTSS today.	National Maximum — Now (2026) $1.13M 12 states and DC currently allow this higher inflation-adjusted limit. They are being forced down to $1M in 2028.	National Standard — 2028 $1M Hard national ceiling. Not inflation-adjusted. Every state, every senior. Equity above this amount means no Medicaid LTSS coverage.
Source: Budget Reconciliation Act of 2025, signed July 4, 2025. Effective January 1, 2028. Justice in Aging, HousingWire, ElderLawAnswers.

What This Law Actually Does — and Why the Frozen Cap Is the Critical Detail

Medicaid has always treated the family home differently from other assets. Even when a senior moves into a nursing facility, the home is generally excluded from the asset calculations used to determine eligibility — as long as the senior expresses intent to return. That protection has never been unlimited, but the specific limit has varied by state. The new law ends that variation. Starting in 2028, $1 million is the national standard — above it, Medicaid will not cover long-term services and supports (LTSS), which includes nursing home care, home health aides, and adult day programs.

For Arizona specifically, the 2028 change raises the state's effective limit from $752,000 to $1 million — meaning seniors whose equity falls between those two figures will gain Medicaid eligibility they did not previously have. But for East Valley homeowners whose equity is approaching or already above $1 million, the 2028 rule creates a firm disqualification threshold. And the most consequential detail is what the law does not do: it does not index the $1 million cap to inflation. As East Valley home values continue their long-term appreciation trajectory, the share of senior homeowners affected by this cap will grow every year.

Housing advocates describe the affected population as "cash-poor and house-rich" — seniors who purchased their Mesa, Gilbert, or Chandler homes decades ago at a fraction of their current value, who have limited income and few liquid assets, but who now sit on seven-figure equity positions. The new law could force them to choose between keeping their home and accessing the Medicaid coverage that might be the only way to pay for long-term care.

Three Equity Scenarios — Where Do You Stand?

Your planning priority before 2028 depends entirely on where your home equity sits relative to the changing thresholds. Here is how to read your situation.

Your Equity Position	Medicaid Now (AZ)	Medicaid 2028	Planning Priority
Below $752,000	Eligible ✓	Eligible ✓	No immediate action needed. Monitor equity growth as East Valley values continue to appreciate.
$752K – $1 Million	Ineligible ✗	Eligible ✓	Best-case scenario: The 2028 rule helps you. You gain Medicaid eligibility you don't have today. Still worth reviewing with an elder law attorney.
Above $1 Million	Ineligible ✗	Ineligible ✗	Planning deadline: The 2028 rule locks in a permanent threshold. A reverse mortgage can legally reduce equity below $1M while allowing you to stay in your home. Consult an elder law attorney and a reverse mortgage specialist now.

The 2028 Deadline — and the Tool Federal Law Explicitly Permits

July 4, 2025 Law Signed Budget Reconciliation Act of 2025 signed into law

Now — 2027 Planning Window The time to consult an elder law attorney and evaluate reverse mortgage options

Jan 1, 2028 Rule Takes Effect $1M cap applies nationwide. All applications on or after this date are subject to the new limit

2028 and Beyond Cap Stays Frozen $1M does not adjust for inflation. As East Valley values rise, more seniors are affected each year

Federal Medicaid law explicitly states that nothing in the home equity provision prevents a senior from using a reverse mortgage or home equity loan to reduce their total equity interest below the limit. This is not a workaround or a loophole. It is a tool that Congress specifically preserved in the statute. A reverse mortgage allows a senior homeowner to borrow against their home equity, receiving proceeds as a lump sum, monthly income, or line of credit, while continuing to live in the home and without making monthly mortgage payments. As the loan balance grows, the homeowner's equity position decreases — potentially moving it below the $1 million Medicaid threshold.

The critical nuance is that this strategy requires careful coordination between a reverse mortgage specialist and an elder law attorney. The proceeds of a reverse mortgage, if held as cash or liquid assets, count toward Medicaid's asset limit ($2,000 for most applicants in most states) if not spent in the month received. The strategy works when the proceeds are used for care expenses, home modifications, or other qualified expenditures rather than accumulated as savings. Coordinating the structure of the reverse mortgage with your Medicaid planning is not optional — it is the difference between a strategy that works and one that creates new eligibility problems.