Medicaid and Permanent Supportive Housing for Chronically Homeless Individuals: Emerging Practices From the Field. 1.2. The Three Pieces of the Puzzle: Chronic Homelessness, Permanent Supportive Housing, and Medicaid


Before turning to the details of innovations in the use of Medicaid for PSH tenants and people continuing to experience chronic homelessness, we briefly describe the three pieces of the puzzle that comprise the focus of our work--chronic homelessness, PSH, and Medicaid. The remainder of the report explores different aspects of Medicaid for people who are chronically homeless and for PSH tenants, including eligibility and enrollment, the most common ways that Medicaid has been used, recent innovations, and developments in progress.

1.2.1. Chronic Homelessness

Before 2012, the U.S. Department of Housing and Urban Development's (HUD's) definition of chronic homelessness applied only to single adults (i.e., not to families). A person would be considered chronically homeless if he or she was currently homeless, had one or more disabling conditions, and had been homeless either continuously for at least a year or had four or more episodes of homelessness within the past three years. The Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act of 2009 (P.L. 112-141) extended the definition of chronic homelessness to include families. HUD rules that went into effect on January 4, 2012, now define either a single adult or a parent in a homeless family as chronically homeless if he or she has been continuously homeless for a year or more or has experienced a total of 12 months of homelessness during the previous three years.8

Many people experiencing chronic homelessness have been on the streets or in shelters for years. They often have complex physical, mental, and substance use conditions that can only be ameliorated if they have a safe, stable, and secure living environment. Their homelessness may exacerbate health difficulties, making it increasingly unlikely that they can get back into housing on their own. Further, many of them make frequent and avoidable use of emergency rooms and inpatient hospitalization. This use of expensive crisis health services has been a major motivator for PSH development. PSH support services have been shown to help tenants avoid actions and decisions that would cause them to lose their housing again and revert to homelessness and previous patterns of crisis health service use (Burt, Wilkins, and Mauch 2011; Caton, Wilkins, and Anderson 2007).

Among people experiencing chronic homelessness, some are more likely to have access to PSH and comprehensive care than others. People living with mental illness severe and chronic enough to qualify for Medicaid and for Medicaid-reimbursable mental health services are likely to get the most comprehensive array of services thanks to states' use of some Medicaid program options (rehabilitative services and targeted case management).

1.2.2. Permanent Supportive Housing

What Is Permanent Supportive Housing?

At its simplest, permanent supportive housing (PSH) is an approach to subsidized housing that provides voluntary services for people with disabilities and chronic conditions to promote long-term stability, recovery and improved health. PSH offers flexible and individualized services on-site or off-site, delivered either by the same provider that operates the housing or through partnerships with community-based service providers. Supportive housing takes three primary forms:

  • Single-site housing, in which the tenants receiving support services live in units in the same apartment building or a group of buildings that offer affordable housing; supportive services may be provided at the housing site, through home visits, or at other locations in the community.

  • Scattered-site housing, in which tenants live in apartments throughout the community, often leased from private owners with rental assistance provided through government subsidies; supportive services may be delivered through home visits or provided at other locations in the community.

  • Mixed housing, in which tenants live in developments, usually affordable housing, that contain a mix of supportive housing tenants and other tenants not part of the supportive housing program; supportive services may be delivered through home visits or provided at other locations in the community.

In PSH, housing is coupled with a broad array of supportive services--including treatment for health, mental health, and substance use disorders--to help people get and retain housing, with the services coordinated through case management or care coordination. The extent and intensity of services varies, but generally PSH is designed for people experiencing long-term homelessness and comes with varied and intensive service offerings. Over the past decade, PSH has increasingly moved to a housing-first approach, which has proven successful at bringing people in from the streets without requiring that active mental illness or substance use be controlled.9

Medicaid's IMD Exclusion

The discussion of Medicaid reimbursement for services in permanent supportive housing often raises questions about the Medicaid payment exclusion for Institutions for Mental Diseases (IMDs). Medicaid payment does not extend to services provided to individuals who reside in facilities that are over 16 beds that meet the definition of an IMD, except for services furnished pursuant to the state plan benefit, "inpatient psychiatric services for individuals under 21," or pursuant to an exclusion for individuals age 65 or older who reside in institutions that are IMDs. Medicaid defines an IMD as "a hospital, nursing facility, or other institution of more than 16 beds that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care, and related services. Regulations also indicate that an institution is an IMD if its "overall character" is that of a facility established and maintained primarily for the care and treatment of individuals with mental diseases.*

Unlike institutions, PSH offers housing in community settings, facilitating engagement and integration in the broader community. Regardless of whether the housing is scattered-site apartments or apartments in buildings that provide PSH for people with disabilities who have been homeless, PSH offers personcentered community-based support. The housing is subject to a lease or similar rental agreement. Tenants have privacy and autonomy in their own living units, and they are free to come and go when they wish. PSH generally meets the criteria CMS has established to define a home and community-based setting in which some Medicaid services can be provided. The supportive services that are available to persons with mental disorders who live in PSH may include diagnosis or treatment of medical or behavioral health conditions, but the primary purpose of PSH is housing, not treatment. People living in PSH can choose whether to get health care, treatment, and other supportive services from other providers in the community or from service providers who may be connected to the supportive housing program who may deliver some services on-site or through home visits. Continued tenancy in the housing is not contingent upon participation in supportive services offered by the PSH program.

* The IMD payment exclusion is in Section 1905(a) of the Social Security Act (the Act) in paragraph (B) following the list of Medicaid services. The definition of an IMD is in Section 1905(i) of the Act and in 42 CFR 435.1010 of the Code of Federal Regulations. The exclusion for individuals aged 65 and older is in Section 1905(a)(14) of the Act, and 42 CFR 440.140. The exception for individuals under age 21 is in Section 1905(a)(16) of the Act and 42 CFR 440.160. Medicaid guidance can be found at Section 4390 of the State Medicaid Manual.

Public Benefits of PSH

The housing component of PSH provides a platform for improving health and for changing patterns of health care utilization, with the appropriate use of health and behavioral health care replacing frequent use of emergency rooms and inpatient hospitalization. This in turn reduces the public cost burden of inappropriate use of crisis services. PSH accomplishes these changes through its service component, which includes health and behavioral health care coordination and recovery support services including support to remain in stable housing. Interest in accessing Medicaid funding for Medicaid-covered services stems from the services' proven potential to reduce Medicaid-covered hospitalizations and emergency room visits.

1.2.3. Medicaid

Medicaid is one of the top three sources of funding for services to PSH tenants (Burt 2008) and is used most frequently for people with serious mental illness (SMI). Medicaid is a health insurance program implemented through partnerships between states and the HHS Centers for Medicare and Medicaid Services (CMS). Although states develop their own Medicaid state plans within the basic parameters set by CMS in accordance with federal law, every state's Medicaid program is different. States must include a core set of benefits and may choose to offer additional benefits allowed by CMS. Through waivers and state plan amendments, states may add benefits for specific purposes or populations, establish structures for care delivery such as managed care organizations, and follow other approaches to fit their program to state needs and budget realities.

Before 2014, many PSH tenants were not eligible for Medicaid because they did not fall into one of the categories through which eligibility is established in their state. For most of our case study communities that situation changed between 2010 and 2013 through early expansion of Medicaid eligibility. The situation changed even more in 2014, when most people experiencing homelessness in many states, because of their low incomes, became Medicaid-eligible under the Affordable Care Act of 2010. Medicaid is only one of the strategies that communities have used to create and sustain permanent supportive housing. By statute, Medicaid cannot pay for housing or room and board in residential treatment facilities.

Three aspects of Medicaid are important to understand for the purposes of this study: (1) the types of services that are reimbursable under Medicaid; (2) who is eligible for Medicaid; and (3) what services are available only for persons with a particular level of need or disabling condition.

Medicaid gives persons who meet income and other eligibility requirements access to health care. Medicaid-eligible persons can receive the specific services for which they are determined to have a need, based on established medical necessity criteria. When looking at how Medicaid might be used to cover services for PSH tenants, it is critical to take into consideration the medical necessity criteria that apply to behavioral health or home and community-based services that may be delivered in conjunction with PSH. Many PSH tenants are likely to meet these criteria, which take into consideration diagnoses and functional impairments, while other PSH tenants who do not meet these criteria may not qualify to receive the same Medicaid-covered services.

As part of its Medicaid state plan, a state may choose to make community-based mental health services available to people with serious mental illness (SMI) by including optional benefits such as the Medicaid Rehabilitative services option or targeted case management. States may use a Medicaid Section 1915(c) waiver to offer home and community-based services (HCBS) for people whose disabilities are severe enough to qualify them for institutional placement, or add coverage for HCBS optional services under Section 1915(i) for people whose disabilities meet specified criteria. These HCBS benefits may cover some services and supports for people living in PSH. Chapters 2 through 7 describe these and other approaches in more detail.

Before full implementation of the Affordable Care Act, most Medicaid beneficiaries were eligible for Medicaid because: (1) they were disabled as defined by eligibility criteria for Supplemental Security Income (SSI); (2) they were children, pregnant, or members of family households that met Medicaid eligibility criteria; or (3) they were Medicare beneficiaries whose incomes were low enough to qualify them for Medicaid (known as dual-eligibles).

In the 25 states that are not going forward with Medicaid expansion at this time, these eligibility criteria will continue to apply in 2014 and beyond. But for the 25 states and the District of Columbia that have expanded Medicaid eligibility, most people experiencing homelessness and those living in PSH who were not Medicaid-eligible before 2014 will now qualify because they will meet income criteria (income lower than 133 percent of the federal poverty level).

Between 2011 and early 2013, the period during which the research team visited the six case study communities, states were pursuing ways to expand eligibility, types of care, care integration, or combinations thereof that benefited or were likely to benefit people with complex health care needs, including people experiencing chronic homelessness and PSH tenants. Well before 2014, some of these approaches brought significantly more people experiencing chronic homelessness and more PSH tenants into Medicaid or waiver coverage. These were people who previously would not have qualified because they did not have a qualifying disability and did not meet "categorical" eligibility criteria. However, it remains important to distinguish between the two groups of current or potential beneficiaries, those who do have a serious mental illness and those who do not, because the Medicaid-reimbursed services for which they qualify are often quite different. We therefore maintain this distinction in the following chapters.

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