2025 Federal Budget Reconciliation Bill: Key Changes to Medicaid and Home Equity Limits
The 2025 Federal Budget Reconciliation Bill, recently passed by the U.S. House of Representatives, includes several provisions affecting Medicaid. However, it does not contain sweeping changes to the qualification requirements for long-term care Medicaid.
On June 16, the Senate Finance Committee released its proposed language for the bill. While the proposal increases work requirements and tightens citizenship verification, it also contains one particular change related to home equity limits for long-term care Medicaid that was in the House bill.
Proposed Changes to Home Equity Limits
Both the House and Senate versions propose changes to the home equity limit defined in 42 USC §1396p(f). Under the proposed legislation, the maximum home equity cap would be set at $1,000,000, with an exception for “certain agricultural homes.” This exception applies to homes located on lots zoned for agricultural use.
Currently:
- Seven states and Washington, D.C. have home equity limits above $1,000,000, set at $1,097,000 for 2025.
- California has no asset limit, although legislation to reintroduce one is moving through the state legislature.
- All other states have limits of either $730,000 or $750,000 for 2025.
If the bill passes as proposed, those states with limits exceeding $1,000,000 should be required to lower them to comply. Furthermore, future adjustments for inflation would be capped at the $1,000,000 limit.
What This Means for Elder Law Attorneys
For many Americans, home equity represents their largest financial asset. As property values continue to rise, these new limits could have a significant impact on Medicaid eligibility planning.
Elder law attorneys should be ready to advise clients on potential strategies, such as:
- Reducing home equity through lending options (e.g., reverse mortgages or home equity loans)
- Downsizing into a lower-equity home and using a Medicaid Compliant Annuity to handle any excess assets from the sale
Krause Financial will continue to monitor and report on proposed changes to long-term care Medicaid eligibility. Sign up for Attorney Access to receive timely updates and guidance as new developments emerge.
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