Reverse Mortgages and Medicare Savings Programs: How Payments Are Counted

Payments received from a reverse mortgage do not count as monthly income for Medicare Savings Program eligibility. Under federal rules established in SSA POMS SI 00815.350, reverse mortgage proceeds represent borrowed loan equity rather than earned or unearned income. How you manage those proceeds in your bank account determines whether they affect state asset tests.

Reverse mortgage rules for MSP applicants

• Reverse mortgage payments are loan proceeds and do not count toward QMB, SLMB, or QI income limits.
• Monthly tenure payments from a reverse mortgage do not raise your countable monthly income.
• Money remaining in a bank account in the calendar month after receipt becomes a countable resource in asset-test states.
• In the 14 jurisdictions with no MSP asset test, reverse mortgage funds in bank accounts have no impact on eligibility.

How the Social Security Administration views reverse mortgage money

The Social Security Administration treats a reverse mortgage as a loan against home equity. Because the homeowner incurs a debt obligation that must be repaid when the home is sold or the owner permanently moves, the money received is not income. Whether you receive payments as a single lump sum, monthly installments, or draws from a line of credit, the state Medicaid caseworker cannot add those amounts to your gross income.

Example: A single homeowner receives $800 each month from a Home Equity Conversion Mortgage (HECM) alongside $1,250 in monthly Social Security benefits. For 2026 QMB income screening, only the $1,250 Social Security benefit counts. After the standard $20 general disregard, countable income is $1,230, which sits below the 2026 federal individual QMB countable limit of $1,330.

When do reverse mortgage proceeds become countable assets?

In the 37 states that apply an MSP resource test, the federal standard allows up to $9,950 for individuals and $14,910 for couples in 2026. Money from a reverse mortgage that you spend during the calendar month of receipt creates no resource issue. If you leave money in a checking or savings account into the first day of the following calendar month, the unspent balance converts into a countable financial asset.

Homeowners living in states with no asset test, such as New York, Arizona, or Alabama, do not face this limitation. In those jurisdictions, saved balances do not count against MSP eligibility. You can verify your state rules on our no-asset-test states guide.

Managing reverse mortgage disbursements responsibly

1. Take disbursements on a line of credit as needed for home repairs, medical expenses, or bills rather than in large unneeded lump sums.
2. Spend disbursed funds during the month you receive them to avoid accumulating countable bank balances.
3. Keep copies of your loan agreement, closing disclosure, and bank statements to document to the state caseworker that deposits reflect loan proceeds rather than taxable income.
4. Check your tier status using the free eligibility checker to see how your non-loan income matches state thresholds.

For more details on uncounted money, review our comprehensive analysis of income that does not count for MSP.

Frequently asked questions