Use Reverse Mortgages, Save $30 Billion on Medicaid?

Reverse mortgages could play an important role in saving $30 billion per year in Medicaid spending, says long-term care reform advocate Stephen Moses. If people had to consume their home equity before qualifying for public benefits, spending on those public benefits would see a substantial decrease, Moses said in a congressional hearing Wednesday on Medicaid and long-term care financing.

“Medicaid’s home equity exemption prevents people from using reverse mortgages to finance home care,” Moses, who is president of the Center for Long-Term Care Reform, said in testimony before a House Oversight and Government Reform Subcommittee on Health Care. “Well intentioned public policy has turned into a perverse incentive discouraging responsible LTC planning,” he said.

Moses noted the home equity exemption cap of $500,000 (and $750,000 in some areas) as being well beyond the allowance in England.


In an effort to address concerns regarding spending on Medicaid and catering the program to those who truly need it to fund their long-term care, Moses’s testimony noted research he has conducted that explains how Medicaid can save $30 billion annually by encouraging financing of long term care through reverse mortgages and private insurance. He provided that research to the committee. (It can be found here.)

“Medicaid LTC financing co-opts the market for reverse mortgages by paying for most formal long-term care for most Americans, exempting most home equity,  and thus obviating the need to tap home equity for long-term care,” the report states.

Citing research from the National Council on Aging that indicates that half of people over 62 in the U.S. can get more than $70,000 from a reverse mortgage, Moses’s analysis shows that Medicaid would need to reduce the number of dual eligibles by 21% in order to reach the $30 billion in savings.

“[Medicaid’s] most expensive ‘dual eligible’ recipients could be reduced by 20%,” he said in the hearing. “Reverse mortgages to fund long-term care would thrive and generate new jobs and tax revenue. The private long-term care insurance market would expand creating even more jobs and revenue.”

Read more on Moses’s views of reverse mortgages and funding long-term care.

View the report.

Written by Elizabeth Ecker

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  • Medicaid has been flawed for years.  What is suggested is intereting but the issues are far broader and deeper than what is addressed.  There are far more fundamental issues about what Medicaid should and should not be doing which must be answered before considering how to keep this blood sucking monster going as is. 

  • Sounds like the first volley in the unavoidable battle to REQUIRE the use of accessible home equity prior to Medicaid eligibility.  Will be a boon to our industry, but a painful road getting there.

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