Reverse Mortgage

Can a Reverse Mortgage Affect Your Eligibility for Medicaid?

A reverse mortgage serves as a great option for elderly homeowners who are looking to improve their way of living during their senior years. While this type of mortgage can improve the finances of a homeowner, some aspects of the mortgage may affect a person’s ability to receive certain benefits from the government.

Medicaid, for instance, may not be available to elderly homeowners who take out a reverse mortgage, especially if they choose to get the payment in a lump sum.

An Overview of Medicaid

Medicaid is a great government program that offers reduced-cost or free health care coverage to over 50 million pregnant women, families, children, and people with disability. Many Americans enroll and rely on this program to take care of their health or the health of their family. On top of that, elderly individuals who are on fixed incomes depend on Medicaid to obtain the health care they need.

The Effect of Reverse Mortgage on Medicaid

Since the government bases the eligibility for Medicaid on financial resources and income, senior citizens who get payments from a reverse mortgage may find that they are unable to qualify for coverage.

Reverse mortgage form on a table and money

A reverse mortgage loan is the opposite of a regular mortgage. Rather than making monthly payments, the homeowner receives payment from the lender in the form of regular installments, a lump sum, or a combination of both, which are borrowed from the home’s value. This type of mortgage amortizes backward, with the balance of the loan rising over time instead of falling.

The unique feature of the reverse mortgage program may affect the incomes of elderly borrowers to the point where they get too much money to be eligible for means-tested federal programs, such as Supplemental Security Income (SSI) and Medicaid. These programs test to see the available financial resources of homeowners to learn if the homeowners are eligible or not.

You Won’t Be Completely Disqualified, Though

Does this mean that having a reverse mortgage automatically disqualifies you from Medicaid and other means-tested programs? Not necessarily.   Your eligibility for such programs will depend on a couple of factors, specifically the amount of money you’re getting as a result of your reverse mortgage and your financial situation. If you are receiving a lump sum, you’re at a greater chance of losing your eligibility for Medicaid. The money from the lump sum will likely be sufficient to increase your income and push you beyond the threshold for eligibility.

Homeowners Receiving Regular Payments Are Not off the Hook

While individuals who get regular reverse mortgage payments are unlikely to go over the eligibility threshold, disqualification is still possible. Homeowners receiving regular payments should make sure that the money they’re getting isn’t enough to boost their income up to the disqualification ceiling for Medicaid benefits.

The rules for financial resources and income governing Medicaid can be complicated and confusing. Before taking out a reverse mortgage, homeowners should seek the assistance of an experienced professional to avoid or minimize the risk of becoming ineligible for Medicaid benefits.