With the growing number of homeowners choosing a HECM, many are also concerned about the impact of this option on their eligibility for Social Security, Medicaid, or Medicare. A HECM does not affect the homeowner’s Medicare or Social Security coverage. However, if you have Medicaid, this might be a little more complicated.
Medicare is the medical coverage automatically provided for seniors over 65, while Medicaid is the health insurance for low-income individuals. If you are on Medicaid and are looking to qualify for a HECM, a large sum of money could change your eligibility for the medical assistance.
Individuals who have liquid resources over $2,000 or couples that have liquid funds over $3,000 would no longer be eligible for Medicaid. Receiving your HECM payment in one lump sum is helpful if you can spend it all at once so that no money is left over for future months (such as using all funds to simply payoff the existing mortgage or cover extensive repairs or household emergencies. Unused HECM proceeds would count as an asset, and may push you over the Medicaid eligibility limit.
If you cannot spend the entire lump sum at once, then it may be better for you to receive your HECM as a line of credit or in payments. A line of credit is a lump sum that has been set aside for you. You have full access to it, but it’s not counted as an asset because you don’t have the money until you withdraw it.
It’s important to check with your local Agency on Aging or a Medicaid expert to know your options. While HECMs are an excellent way to relieve financial stress, there’s also no reason why you should lose medical coverage to pay for other necessities in life. Keep in mind that it is entirely possible to qualify for a HECM, and also keep your Medicaid eligibility.
For homeowners with Medicare and Social Security, there are no financial eligibility requirements that prevent you from obtaining a HECM.