Reverse Mortgages: Potential Impact on Medicaid Eligibility

A reverse mortgage can impact a borrower’s Medicaid eligibility, in particular when the borrower receives a lump-sum payment for the mortgage, says a longtime MarketWatch housing columnist. This can have a very adverse effect on a borrower’s ability to pay for nursing home care, should he or she require that care soon after the reverse mortgage is taken out.

In a MarketWatch question and answer forum featuring the advice of housing writer Lew Sichelman, Sichelman addresses what he calls a little understood and under-publicized aspect of reverse mortgages: their impact on Medicaid eligibility.

“If a patient takes out a reverse mortgage and receives a lump-sum, they’re often ineligible for Medicaid to pay for nursing home care,” the column begins. The rules are complicated, the article explains, but Medicaid allows a patient to have not more than $2,000 plus a house and automobile. A large, lump-sum payment can impact that dollar amount in the month when it is received, according to Sichelman.

A reverse mortgage, while it does not impact Medicare or Social Security, can have an effect on Medicaid and Supplemental Security Income, he writes. “If you opt for a lump-sum payment from a reverse mortgage, any amount retained the month after you receive it would count as a resource and could affect SSI or Medicaid coverage,” the article states. “Also, when the proceeds of a reverse mortgage are paid out on a monthly basis, the payments act to increase the senior’s income and could possibly render him or her ineligible for Medicaid.”

While reverse mortgages are a viable option for those who wish to improve their later-years’ lifestyle, he says, “they could prove to be deadly—financially speaking—if they must move into a nursing home, even if only on a short-term basis.”

Read the full article.

Written by Elizabeth Ecker

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