Unwise Advice On Your Home Loan and Medical Bills

David Trammel's picture

Recently I was at my local bank, which I've had an account with for a decade and a half. Being the friendly person I am, I have gotten to know several of the long time tellers. As I was doing my business with one, a nice older woman, she asked me what I had been doing lately? I work third shift now and don't get in that often.

I mentioned that I was planning to build a small office and workshop on my sister's property over the next few years. She asked me if I was considering getting a loan/second morgage to pay for it.

I told her I was planning the exact opposite, that is paying for the construction out of pocket and just before retiring, pay the entire balance of my sister's morgage off, so we would be debt free.

Her reply has been bothing me ever since we talked.

BTW, I've noticed at this main stream bank, and at the credit union that I save at, there has been a push to turn tellers into sales people. Gone are the loan officers and bank people at desks except for the bank manager in her office. Instead if you want help you are funneled to a teller. I'm sure this is to cut costs but I wonder how much training the banks are giving them.

Anyway, what she said was that being debt free on a house was wrong because should we get a large medical bill then the government aka Medicaid (or Medicare, I'm just now learning the difference in programs) would force us to sell the home and major assest, essentially becoming poor, before they would help pay the bills.

I had heard of this but not that just because we had a loan on the home it would stop the government from doing that.

I didn't have time to argue with her over this or to get that much more info BUT her advice seems wrong.

I could see that if I had no equity in the home, it would be considered an access but I would also be saddled with a large loan payment each month, on I would still be forced to pay if I had a large medical debt come up.

I just turned 60 and I'm just beginning to learn the ins and outs for the government assistance available. Anyone who is older and has had some experience know wheter this was poor advice?

If you are in the US, you may want to consult with yur local Agency on Aging:


I'm right in the middle of all this, because of my mom going into a nursing home at some point soon and me being disabled. Medicaid is what pays for nursing homes (at least now, before Ryan cuts more) and yes, you do have to have less than $2k in assets to qualify and you can't have given $$ or assets away to family (ie: hidden them) within 5 years. BTW, many "assisted living" (new name for these places) now wont' take Medicaid unless you've privately paid for 2 years (which at $5k/month is a lot of money). I don't think it would matter if you had a loan or not - they would force you to divest from all your assets (so you'd just get a lot less when you sell the house) before they'd cover assisted living.

Medicare is what comes with retirement; you paid into that and you get it at 65 (or when you retire... or become disabled and qualify). That comes with a monthly insurance premium that gets taken out of your Social Security check and you have to find some medical group that takes Medicare, and they'll have co-pays and such. But they don't come after your house or car or anything in order to pay medical bills. In fact, my mom's got great coverage, between Medicare and AARP's supplemental... I'm the one matching up doc bills and the various reports of coverage, and she's been through 4 hospitalizations this year and hardly paid more than the initial deductible. I'm amazed.

Forgot to add: when Medicaid steps in to pay for the nursing home, they take all of your Social Security check except for about $35 "allowance" because theoretically you've got room/board, etc. all paid for. Don't know how that works now with everyone having large cell phone bills.

Blueberry's picture

When you put money in a bank, saving it is a asset for you but a liability for the bank. When you get a loan from the bank that is a asset for the bank. So you have to pay back the money plus interest. When you think about fractional reserve banking the banks create money out of thin air. So if you have a CD say $10,000 by the time they make several loans your CD maybe backing over $80,000 in loans. Have you ever seen a poor banker not in this life!!!!

ClareBroommaker's picture

At this point in time, many people with Medicare who go to a nursing home for their last months also get Medicaid, because Medicaid pays for nursing home. Once a Medicaid recipient homeowner dies, their estate (usually just a house or else their money assests could have paid for the nursing home) is sold. The portion needed to reimburse Medicaid is taken, and any heirs get the remainder.

In the case of a married couple, the house is not taken while the second spouse still lives in it. I don't know how this works out if the house is jointly owned by non-spouses. So if you and your sister would own the house together, I don't know how that works out. I don't suppose Medicaid could recover any money until the second owner dies or sells the house.

If you are going to co-own your house with your sister, you might need to look into arranging that sooner rather than later. There is this thing they call a "look back". That is, they look back at the years previous to going into a nursing home to see if the Medicaid recipient gave away assests just to keep them out of the hands of Medicaid. I think they used to look back two years, but now I think it is five. But please check that time period! I'm at the far edge of my knowledge of Medicaid, nursing homes, and real estate!

We have paid off our little dump of a house and it makes me worry less to know that the lenders have no hold on us. We just hope to heck that we will continue to be able to pay our real estate taxes in the coming years. We think we can, but who knows what the future holds.