A decrease in the number of Medicare Advantage plans is anticipated for 2027, potentially leading to increased demand for reverse mortgages and other home equity lending solutions among seniors seeking alternatives to manage rising healthcare costs.
Medicare Advantage Plans: A Shrinking Environment
A report released in February revealed that several major insurers, including UnitedHealthcare, Aetna, Elevance Health, and Humana, have reduced their Medicare Advantage offerings for 2027, contributing to a decline in plan availability.
Research from the Kaiser Family Foundation (KFF), cited in a recent National Public Radio (NPR) report, indicates that Medicare Advantage plans are becoming increasingly scarce in rural areas, while dozens of options remain available in large metropolitan areas. Notably, 193 U.S. counties will lack Medicare Advantage plans in 2027, representing a significant increase from the 123 counties without plans this year.
Disparities in Plan Availability
The broader Medicare program, administered by the federal government, is accessible to individuals 65 and older, as well as those with qualifying conditions. In contrast, Medicare Advantage plans are operated by private insurers that contract with the government, often providing additional services like vision and dental care, frequently at lower premiums than traditional Medicare.
However, private insurers have the discretion to determine where they offer Medicare Advantage plans, allowing them to withdraw from unprofitable areas. According to research published in the Journal of the American Medical Association (JAMA), the number of individuals forced to unenroll from Medicare Advantage has surged in recent years. Between 2015 and 2024, approximately 1% of beneficiaries were forced to unenroll, but this figure jumped to 6.9% in 2025 and 10% in 2026.
In seven states – New Hampshire, Vermont, Maryland, North Dakota, South Dakota, Wyoming, and Idaho – the rate of forced disenrollment exceeded 40% this year.
Geographic Disparities in Plan Access
KFF research released earlier this month highlights a significant divide in Medicare Advantage plan availability. Approximately 20% of Medicare beneficiaries with access to 40 or more plans are concentrated in just 4% of U.S. counties, primarily in high-population areas such as Pennsylvania, Ohio, Michigan, and California.
Conversely, many rural areas and some major metropolitan areas offer limited options. The 193 counties without Medicare Advantage plans in 2027 are home to 638,000 beneficiaries, or 1% of the total beneficiary population, up from 399,000 in 2026. Notably, Alaska’s 110,000 Medicare beneficiaries will have no access to Advantage plans.
In large population centers like Dallas, Minneapolis, Seattle, and Houston, seniors can expect to have between one-quarter and one-third fewer plan options in 2027, according to KFF.
Reverse Mortgages: A Potential Solution
For senior homeowners struggling financially due to limited healthcare coverage or rising care costs, tapping into home equity may provide a viable solution. It is essential for this group to understand that obtaining a reverse mortgage – such as a federally insured Home Equity Conversion Mortgage or a proprietary product – does not affect their Medicare eligibility.
Reverse mortgage proceeds are not considered taxable income by the Internal Revenue Service, so borrowers will not incur higher tax payments solely due to utilizing a reverse mortgage.
Since reverse mortgages are considered borrowed funds, they typically do not increase the income levels used to determine Medicare premiums. The same applies to Social Security benefits, which are based on a recipient’s earnings history rather than their accumulated assets or financial products used in retirement.
However, borrowers should be aware that broader financial decisions can be impacted by a reverse mortgage. For instance, Medicaid and Supplemental Security Income (SSI), which serve low-income individuals, treat unspent reverse mortgage proceeds in a bank account as additional income, potentially affecting eligibility for these needs-based benefits.
Financial advisers recommend that lump-sum payments from a reverse mortgage be spent in the same month they are received.
For the majority of reverse mortgage borrowers who utilize a line of credit, the unused portion is not considered income. Interest and fees are charged only on the withdrawn funds, with the remaining balance growing over time at a rate equivalent to the loan’s interest rate plus the annual mortgage insurance premium.
