House Committee Probes Further on Reverse Mortgages and Medicaid

Following a September hearing before the House subcommittee focused on Medicaid eligibility abuses, one ranking member probed further on the use of reverse mortgages as a way to offset Medicaid costs for those who have plenty of home equity to use toward health care expenses. The questions revealed some false ideas about reverse mortgages.

In response, Center for Long-Term Care Reform president Stephen Moses provided additional insight into reverse mortgages and Medicaid costs at the request of Rep. Danny Davis (D-Ill.).

Of the five questions to Moses following the “Examining Abuses of Medicaid Eligibility Rules,” hearing, three focused on reverse mortgages and the use of home equity to pay for health care costs. Mainly, they seem to indicate that the house committee may need some more knowledge of reverse mortgage products and how they work.


One question notes the costs of reverse mortgages—”up to $10,000″—as a deterrent, to which Moses stresses the point that there are many ways for people to extract home equity, and Medicaid should not exempt up to three quarters of a million dollars worth of home equity while paying for the owner’s long term care services.

A second question asks how reverse mortgages can be a viable means to saving $30 billion annually with only a small portion of dual eligibles being 65+. (Apparently, the congressman was not informed that those who are 62+ are eligible.) Third, a question asks whether an individual would be more likely to sell his or her home, rather than take out a reverse mortgage, when that individual is single and receiving Medicaid nursing care.

“Under existing Medicaid eligibility rules, the home remains exempt as long as the Medicaid recipient or his or her representative expresses a subjective intent to return to the home,” Moses writes. “It makes no difference whether the recipient is able medically ever to return to the home, is single or married, or whether anyone is residing in the home or not…If Medicaid eligibility rules were changed to exempt a smaller amount of home equity, individuals would need to extract the value of the home to pay for long-term care by various means. Reverse mortgages, either formal ones with a financial institution or informal ones with family members, are one means to put home equity to use to fund LTC.”

The follow up questions were not surprising, Moses told RMD in an email.

“The prejudice against private sector options and in favor of protecting the dominant government-financed status quo is ingrained,” he said.

Ultimately, the questions from Rep. Davis represented a lack of support for Medicaid alternatives, Moses said.

“Rep. Davis and his colleagues in the minority were unwilling to consider alternatives or solutions. I worry the Medicaid LTC safety net will collapse before they act. That will hurt the poor most because the middle class and affluent can turn to their savings, home equity, and private insurance,” he said.

Written by Elizabeth Ecker

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  • It is my prediction that if we pursue this line of reasoning with Congress, soon Congress will establish a purely government version of HECM to provide such funding.  The more CIS and its membership pursue this line of reasoning, the more potential there is to remove the entire concept out of the private sector.

    CIS and its membership should be educating Congress about the product not tying it to government savings.  This kind of advising Congress should come after HECM education has gone on for awhile.  Personally I question if it should go on at all.

  • Did someone at some in sensitive hospital forget to tell him about “Penny Health”. Also If you aren’t employed and have no means of paying for treatment the hospital will file the form and get reimbursed by medicaid.

  • I’m not sure I’m getting the right understanding.  But I am feeling great concern about anyone being interested in forcing seniors to give up their equity through the medicaid system which is what happens currently when the recipient owns a home the medicaid system attaches a lien.  As oppose to allowing the senior to make their own decision regarding using the comforts of a reverse mortgage, maintaining independence in their choices and being able to choose their own care.  Up or down, the choice should not be forced upon them. And this issue if I am understanding it correctly will steal the rights of people ( seniors ) to decide for themselves whether or not they want to be forced or if they would choose to manage their own assets, or better yet, how they may want to spend their money. Does the House Committee realize that the equity in the house belongs to the homeowner?  My question would be ” Does the United States really show No Regard for our elderly citizens when they get sick and need help the most?  Houses are the fruit of the American Dream, when you take is away, by any menas, the Dream becomes a Night Mare and seniors don’t need Nightmares to keep them up at night when they are not feeling well.  

  • Ms. Stevenson – The taxes that are used to pay for Medicaid were taken from me and every other hard working American by force. Those funds were the fruit of my labors and I had no say in the matter. However, given the choice between using ones own assets to pay for their medical needs or not is still entirely the seniors decision. There is no force involved. Use your home equity and then ask for Medicaid support or don’t. The idea of being self-reliant as long as one is able on their own assets, before seeking aid from big brother, seems perfectly logical if it means less government dependence.

  • Medicaid is needs based yet I’ve seen many folks prepare for Medicaid by “giving” away assets to other family members over a period of time so the 5 year lookback doesn’t find anything fishy.  Do those folks NEED Medicaid when their previous (and potential liquid) assets are sitting amongst family member’s holdings?  You tell me, its completely legal.  So if you don’t have the chance or the money to afford an elder law attorney to help you through this process, meaning you need to qualify in some capacity, why can’t your home’s equity be tapped before you require some form of needs based government care?  You’ve used the case of “what’s mine in mine and what’s yours is mine”.  At some point that system will run out. 

    I like the reverse for what helps the homeowner the best, to retain dignity and let them sleep at night without burdening the system or family members with limited resources. 

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