How a Reverse Mortgage Impacts Medicaid and Supplemental Security Income (SSI)

I absolutely love questions from readers!  I recently received an email to my blog from Dave in New Jersey asking me whether the money received from a reverse mortgage will impact eligibility for Medicaid or Supplemental Security Income (SSI).  This is a really good question, and a sign that Dave is trying to learn about every aspect of the reverse mortgage and how it will impact him.

The short answer is that money received from a reverse mortgage might impact a person’s eligibility for Medicaid or SSI.  However, there are a few things that determine if and how this might happen that I’d love to explain.  

Medicaid and SSI are both need based programs.  This means that people qualify for them based on things like their income and assets.  Medicaid provides health benefits to a wide range of Americans, and is run by each state (although jointly funded by states and the federal government).  Supplemental Security Income, or SSI, is a federal program that provides income to those over 65, the disabled, or the blind.  

So how does a reverse mortgage impact eligibility for these programs?  

First, it’s important to remember that a reverse mortgage is a loan.  The borrowers receive payments from the bank, but these payments are not viewed as income.  They are loan advances.

If you have read my blog post “Payments to the Home Owner With a Reverse Mortgage”, you’ll recall that a reverse mortgage offers several payment options including: lump sum, fixed payments, a line of credit, or a mix of those.  Since this money is not income, it may be viewed as an asset if the cash is held in a borrower’s bank account.  Having this cash in a bank account may impact eligibility for Medicaid and SSI since these programs are based on need, and need is determined by things like cash.

SSI limits for resources are $2,000/individual and $3,000/couple.  While the definition of resources includes things like property, vehicles, and life insurance, cash is also a consideration.  If you are eligible for SSI, in most states you may automatically qualify for Medicaid.  If you have a reverse mortgage and choose the lump sum option, this might put a lot of money in your bank account all at once.  Doing so could definitely impact Medicaid and SSI eligibility.  For more information on SSI eligibility, I’d recommend this link.

The other two options to consider are the fixed payments and line of credit.  These may be more favorable if you are concerned with eligibility for Medicaid and SSI.  For the line of credit specifically, if you take out a large portion of cash using that option and spend it immediately, this may not create the same issue as the lump sum payment (which may “sit” in your bank account for some time).

As you can see, the short answer of “yes” to this question may not fully explain how this could or could not impact each borrower.  

If you have any additional questions about a reverse mortgage and how it could impact your Medicaid or SSI benefits, I’d recommend reaching out to a specialist.  The folks at Equity Access Group can definitely help clarify if a reverse mortgage is right for you.