The number of Medicare Advantage plans is set to shrink in 2027, which could drive demand for reverse mortgages and other home equity lending solutions as the U.S. senior population seeks alternatives to cover rising healthcare costs.
HousingWire‘s Reverse Mortgage Daily (RMD) reported in February that Medicare Advantage plans were becoming less available as some insurers — including UnitedHealthcare, Aetna, Elevance Health and Humana — had scaled back their offerings in 2027.
A recent report from NPR, which cited data from KFF, found that Medicare Advantage plans are becoming nonexistent in some rural parts of the country, even as dozens of options remain for seniors in some of the largest metro areas. KFF data showed that 193 U.S. counties will be without plans in 2027 — up from 123 this year.
Shrinking availability in urban and rural areas
With Medicare’s annual open enrollment period having kicked off Oct. 15 and running until Dec. 7, NPR reported over the weekend that the Advantage programs are utilized by more than half of the 70 million Americans enrolled in Medicare.
The broader Medicare program, which is administered by the federal government, is available to those 65 and older and those with qualifying conditions. Conversely, Medicare Advantage is run by private insurers who contract with the government, and many Americans turn to it because it offers services like vision and dental while often including lower premiums than traditional Medicare.
As NPR pointed out, however, private insurers are able to choose where they offer Advantage plans, meaning they can leave communities where programs are not profitable. The outlet cited research published in the Journal of the American Medical Association (JAMA) showing that the number of people forced to unenroll from Medicare Advantage has skyrocketed in the past few years.
From 2015 to 2024, the research found, about 1% of program beneficiaries were forced to unenroll. But that share jumped to 6.9% in 2025 and to 10% in 2026. In seven states — New Hampshire, Vermont, Maryland, North Dakota, South Dakota, Wyoming and Idaho — this year’s rate of forced disenrollment was 40% or more.
KFF research published earlier this month illustrated a divide between the haves and the have-nots in terms of Advantage Plan availability. About 20% of Medicare beneficiaries who have 40 or more plan options are concentrated in 4% of U.S. counties — led by high-population areas of Pennsylvania, Ohio, Michigan and California.
But many parts of rural America and some major metro areas offer fewer choices today. There are 638,000 Medicare beneficiaries living in the 193 counties without Advantage plans in 2027, or 1% of all beneficiaries, up from 399,000 in 2026. In Alaska, the state’s 110,000 Medicare beneficiaries do not have any Advantage plan options.
In large population centers like Dallas, Minneapolis, Seattle and Houston, seniors will have between one-quarter and one-third fewer plans to choose from next year, according to KFF.
How it relates to home equity
For senior homeowners who may be struggling financially due to a lack of healthcare coverage or rising costs of care, tapping into home equity is a potential solution. For this group, it’s important to know that taking out a reverse mortgage — such as a federally insured Home Equity Conversion Mortgage or a proprietary product — does not impact their Medicare eligibility.
Reverse mortgage proceeds are not treated as taxable income by the IRS, so borrowers will not incur a higher tax payment simply because they utilized one. And because they are considered borrowed funds, reverse mortgages typically don’t increase the income levels used to determine Medicare premiums. The same goes with Social Security benefits, which are based on a recipient’s earnings history rather than their accumulated assets or any financial products used in retirement.
But borrowers should be aware that broader financial decisions can be impacted by a reverse mortgage.
For example, Medicaid and Supplemental Security Income (SSI), which serve low-income individuals, treat unspent reverse mortgage proceeds sitting in a bank account as additional income. That could affect a borrower’s eligibility for these types of needs-based benefits. Financial advisers say that lump-sum payments from a reverse mortgage should be spent the same month they’re received.
But for the vast majority of reverse mortgage borrowers who utilize a line of credit, the unused portion of an LOC is not considered income. Interest and fees are charged only on the funds withdrawn, with the remainder growing over time at a rate equivalent to the loan’s interest rate plus the annual mortgage insurance premium.
