For years, affluent families have treated Medicaid as a non-issue, assuming their assets would never qualify. But as parents age and require round-the-clock care, advisors are discovering that the program's rules vary dramatically by state—and that upcoming federal changes could upend even well-funded retirement plans.
A new 50-state report card from the Heartland Institute, a free-market think tank, quantifies these disparities. Kansas leads with a score of 74 out of 100, while California trails at 22. The national average is 45.5. The grades reflect Heartland's policy preferences, with the heaviest weight—12 points—given to states that rejected the Affordable Care Act's Medicaid expansion. The 10 non-expansion states average 57.7 points, versus 42.4 for the rest.
The report does not measure health outcomes, but other research shows those differ too. The Commonwealth Fund found that Kentucky, which expanded early, saw its low-income uninsured rate drop from 38% to 12% between 2013 and 2023. Neighboring Tennessee, which did not expand, only improved from 37% to 24%. For advisors, the takeaway is practical: Medicaid is the largest payer for long-term care, covering more than half of the roughly $415 billion spent on long-term services and supports in 2022, according to KFF. And the rules are set state by state.
Fiscal stress and federal cuts
The report's fiscal section is most useful for planners. Top-ranked states averaged 18 of 26 fiscal points, while the bottom 10 averaged just 7. Wyoming, Mississippi, and Hawaii earned perfect fiscal scores; New York got zero. State budget commitments vary fourfold: MACPAC data shows Medicaid consumed 25.5% of Missouri's state-funded spending in fiscal 2023 and 25.4% of Texas's, but only 5.7% in Hawaii and 5.8% in West Virginia. Florida, a retirement magnet, sits at 18.2%.
State budgets were already strained before new federal rules took effect. A KFF survey of Medicaid directors found state Medicaid spending rose 12.2% in fiscal 2025, and nearly two-thirds said the chance of a fiscal 2026 shortfall is at least 50-50. Rising long-term care demand is a key driver.
The 2025 reconciliation law—the One Big Beautiful Bill Act—cuts federal Medicaid spending by an estimated $911 billion through 2034. The pain will not align with Heartland's rankings. A RAND Corporation analysis projects states will lose more than $660 billion in combined Medicaid funds over the decade. Arizona, Iowa, and Nevada are expected to lose more than 15% each, due to restrictions on provider taxes and state-directed payments. Iowa ranks seventh on Heartland's card. Florida, North Dakota, and Nebraska come out roughly even, while Wyoming and South Dakota gain from a new $50 billion rural health fund. Tennessee, Mississippi, and South Carolina face the biggest hits relative to program size.
When budgets tighten, long-term care is often the first target. During the last major federal pullback, every state reduced home care spending, 40 served fewer people, and 47 cut benefits or payment rates, per KFF. Some firms are already helping Gen X clients plan for aging parents as part of regular reviews.
The $1 million home-equity cap
The provision most likely to affect affluent families takes effect January 1, 2028. From then on, Medicaid will not cover long-term care for anyone with more than $1 million in home equity, and the cap will not adjust for inflation. In 2025, states chose limits between $730,000 and $1,097,000, so the new ceiling cuts the limit in higher-limit states—and will affect more families each year as home prices climb. The cap does not apply if a spouse or qualifying child still lives in the home.
Consider a widowed mother in suburban Boston or coastal California who owns her house outright. She could exceed the cap with few other assets. Justice in Aging warns that some seniors will face a choice between selling the home and going without care. The law also shortens the look-back window for asset transfers, making timing critical when a health crisis hits. Medicaid's five-year look-back means trusts, gifts, or reverse mortgages must be discussed with an elder law attorney well before they are needed.
The stress extends to fixed income. Hospitals are the second-largest sector in the Bloomberg Municipal Bond Index by par value, with 358 issuers and more than $163 billion outstanding. Medicaid covered 19% of hospital spending in 2023, according to an InvestmentNews analysis of not-for-profit hospital credit. As federal cuts bite, hospital finances—and the bonds that fund them—could face new pressure.
