New Federal Cap on Home Equity for Medicaid Long-Term Care: What It Means for Planning

A significant change to Medicaid rules is coming in 2028 that will affect many homeowners, especially those in higher-cost housing markets. On July 4, 2025, the Budget Reconciliation Act of 2025 (often called the “One Big Beautiful Bill”) was signed into law. One of its provisions creates a new nationwide cap on home equity for people seeking Medicaid coverage for long-term services and supports (LTSS), including both nursing home care and home- and community-based services (HCBS).

What Changed?
Previously, federal law set a minimum home equity limit (approximately $752,000 in 2026) that states could raise up to a higher amount (approximately $1,130,000 in 2026). Both figures were adjusted annually for inflation. Twelve states plus the District of Columbia had chosen the higher limit.
Starting January 1, 2028, the rules change dramatically:

• There is now a hard national ceiling of $1,000,000 on home equity.
• This cap is frozen; it will not increase with inflation in future years.
• States can no longer set a higher limit for non-agricultural homes.
• The change applies to both institutional care and HCBS waivers.

Illustration of the Change

Home Equity Amount	Current Rule (through 2027)	New Rule (effective Jan. 1, 2028)	Likely Outcome for Medicaid LTSS
$800,000	Exempt in all states	Exempt	Qualifies
$1,050,000	Exempt in high-limit states (NY, CA, etc.)	Ineligible	Disqualified
$1,200,000	Ineligible in most states	Ineligible	Disqualified
Agricultural-zoned home	Follows prior inflation-adjusted rules	Still follows prior inflation-adjusted rules	Better protection.

Important Exceptions
The home remains fully exempt (no equity limit applies) if:

• A spouse, child under 21, or blind/disabled child of any age lives in the home.
• The home is on property zoned for agricultural use (these homes keep the old inflation-adjusted rules).

States must still offer hardship waivers in cases of demonstrated need.  There are also federal provisions that allow transfer of the home to qualified individuals, such as certain child caregivers residing in the home for a period of two years, if the applicant was medically qualified for skilled nursing care for at least the two-year period. Why This Matters for Aging in Place
This change makes it harder for “house-rich, cash-poor” seniors to access Medicaid-funded home care or nursing home care without first reducing (spending down) their home equity. In high-cost areas (California, New York, Massachusetts, Hawaii, Colorado, etc.), even modest homes can push equity over $1 million. Because the cap is frozen, the problem will grow worse every year as home prices rise.
For families committed to aging in place, this development actually strengthens the case for proactive planning. Relying on Medicaid HCBS may become less reliable for homeowners with significant equity. Having private resources protected and/or available becomes even more valuable.Does This Change Impact an Existing or Contemplated  Medicaid Asset Protection Trust (MAPT)?
Short answer: No, it does not suggest you should fund a MAPT with fewer assets.
Here’s why:

• The new home equity cap is a separate rule that applies only to the primary residence when determining whether the home itself is an exempt resource.
• A Medicaid Asset Protection Trust (MAPT) is designed to protect countable assets (cash, investments, CDs, non-primary real estate, etc.) from Medicaid’s strict $2,000 asset limit.
• The home equity cap does not change the general asset test or how MAPTs work for non-home assets.

In other words, the new law does not mean you should put less money into a MAPT. If anything, it makes comprehensive asset protection planning more important. With the home potentially becoming a disqualifying factor for more people, protecting your other assets in a properly drafted MAPT gives you greater flexibility and resources while you pursue Medicaid eligibility on the home (if your equity is under the limit).
Note on putting the home itself into a MAPT: In most states, transferring your primary residence into a MAPT can remove it from the home equity calculation (because it is no longer “owned” by you personally). However, this strategy has important trade-offs, including the 5-year lookback period and state-specific rules. In a few states, placing the home in a MAPT can make it a countable asset. This is a complex decision that requires individualized legal advice.Bottom Line and Planning Recommendations
The new $1 million frozen home equity cap is another reminder that Medicaid is a needs-based program with increasingly strict rules. For families who want real choice about where and how they age, the best strategy remains proactive planning well before care is needed.
If you or a loved one owns a home with equity approaching or exceeding $1 million (or if you live in a state that previously allowed higher limits), now is an excellent time to:

• Review your current home equity and long-term care plans;
• Consider whether strategies to manage home equity make sense before 2028;
• Evaluate or establish a Medicaid Asset Protection Trust for other assets; and,
• Explore hybrid long-term care insurance or other private-pay options that support aging in place

This change does not eliminate the value of planning — it actually highlights why early, thoughtful elder law planning is more important than ever.