If you are considering an Arizona reverse mortgage, be sure that you ask your loan officer about something called “Loss of Medicaid Eligibility”. If you aren’t careful, and you aren’t familiar with what choices you make with your reverse mortgage, you could be at risk of losing your Medicaid eligibility.
Loss of Medicaid Eligibility: What Is It?
There are a number of different ways that you can access your equity with a reverse mortgage. You can get a line of credit, a monthly payout, or even get your money in a lump sum. What you may not be aware of is that some of these payouts actually put you at risk of being ineligible for Medicaid — so choose your payout wisely!
The essence of a LOME risk is that a reverse mortgage borrower could pile up cash in an account and deny themselves the significant health benefits that medicaid could provide. Medicaid is a federal-state health care program for the poor. To qualify for Medicaid, a senior must show monetary evidence of poverty. Although the program varies from state to state, a federal “means test” says that you can have no more than a few thousand (the number changes regularly) dollars in liquid assets.
Which means if you took out a reverse mortgage, chose the wrong payout program and later become ill and needed long term care, you may be denied Medicaid coverage based on your liquid assets.
Loss of Medicaid Eligibility: A Rule of Thumb
The general rule of thumb regarding LOME risks is this: all reverse mortgage payout options except for the line of credit option carry significant LOME risks because they could lead to risky accumulation of countable assets.
Now, this doesn’t mean that you should always select the line of credit option when choosing a payout method — but it does highlight the point that you need to be aware of this important potential problem.
And now that you are aware of it, you will at least know to ask more questions about what payout you pick might impact your eligibility for Medicaid in the future.
