The cost of long-term care is surging in 2025, and many families are realizing that what they thought was “safe” may not withstand today’s Medicaid rules. Nursing home care can easily exceed $100,000 per year, and even at-home services are draining savings faster than expected.
At the same time, states are tightening their eligibility requirements. Stricter asset tests, reduced retroactive coverage, and new home equity limits mean that families who delay planning could face unexpected and painful consequences. For anyone who assumed Medicaid and long-term care were problems for “later,” the warning lights are flashing now.
The message is clear: integrating long-term care planning into your estate strategy isn’t optional—it’s essential to protect both your care and your legacy.
What’s Changing and Why It Matters
Beginning October 1, 2028, the OBBBA law imposes a maximum $1 million home equity cap for Medicaid long-term care eligibility (no inflation adjustment). That means seniors in high-cost housing markets could be disqualified even if their other assets are modest.
Shrinking retroactive coverage. Medicaid currently covers up to three months of medical bills incurred prior to application. Under the new law, that “retro” coverage will shrink to two months for traditional enrollees and one month for expansion enrollees, leaving families with unexpected bills if they delay applying.
State variability. Rules differ by state. For example, California temporarily suspended its Medi-Cal asset test in 2024, but the limit will be reinstated in 2026. [Medicaid Planning Assistance†source] Other states, like Massachusetts, already report nursing home costs in the $140,000–$300,000 range annually.
Bottom line: Assumptions about “exempt homes” or long look-back periods may no longer be valid. Every family’s plan needs a fresh review.
Key Tools That Still Work
Even with tighter rules, several estate planning strategies remain effective if structured and timed properly.
Medicaid Asset Protection Trusts (MAPTs). These irrevocable trusts move assets outside of Medicaid’s countable resources. However, they only take effect if established at least five years before an application (the federal look-back period). Done right, they can safeguard significant assets from being spent down on care.
Medicaid set-aside trusts (MSATs). Useful in cases of personal injury settlements or large medical costs. First-party trusts often require a payback clause to the state; third-party versions may not.
Deed-based tools and spousal protections. Options vary by state, but in some cases, shifting ownership structures or using spousal allowances can help preserve eligibility while protecting family assets.
Shielding from estate recovery. Properly structured trusts can also reduce or eliminate the risk of Medicaid estate recovery, ensuring heirs aren’t forced to sell the family home to repay benefits.
What to Watch Out For
These tools are powerful but not without trade-offs.
- Control. With irrevocable trusts, you must give up direct control of the assets.
- Complexity. Errors in funding or titling can invalidate the protection, leaving assets exposed.
- State-by-state rules. What works in one state may be irrelevant—or even harmful—in another.
Families who plan early, work with knowledgeable elder law attorneys, and account for both state and federal rules consistently achieve the best results.
Practical Steps for Families
- Start early. Don’t wait for a health crisis. The earlier trusts or asset transfers are made, the more options you preserve.
- Review your home equity. If your home’s value exceeds the new cap, explore deed strategies or downsizing before the rules take effect.
- Use MAPTs correctly. Fund them outside the five-year look-back and understand what control you give up.
- Check your state’s thresholds. Community spouse allowances, income caps, and resource limits vary widely.
- Budget for professional help. Legal, financial, and appraisal guidance is critical—mistakes can trigger penalties or delays.
Conclusion
Long-term care is no longer a distant concern. With new home equity caps, tighter retroactive coverage, and shifting state rules, Medicaid planning has become a front-row issue in 2025.
The good news: with the right tools—MAPTs, set-aside trusts, spousal protections—you can still protect your assets, secure care, and preserve your legacy. But timing and precision matter.
At Bascom Law, we help families navigate these rules with clarity and foresight. If you’d like to review or update your plan before the new restrictions take hold, contact us today.
Visit BascomLaw.com or call 770-285-5493 to schedule a consultation.
Sources
Association of State and Territorial Health Officials
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