Medicaid Financing for Services in Supportive Housing for Chronically Homeless People: Current Practices and Opportunities. 1. Introduction

This paper describes the variety of ways that Medicaid, in combination with other funding sources, may cover the costs of health and other services for chronically homeless people, both before and after they move from homelessness to housing. Most of this paper focuses on specific service and funding mechanisms that include Medicaid, describing the service or funding structure, who is eligible, the challenges involved in using Medicaid, opportunities for federal guidance to address the challenges, and what may change with each approach as states move toward full implementation of the Affordable Care Act (ACA) in 2014. First, however, it is important that readers understand a few of the basic ways that Medicaid works.¹

• 1.1. Medicaid Basics

  • Medicaid is implemented through partnerships between states and the Federal Government, with each paying part of the cost. Each state must develop a State Medicaid Plan that describes the benefits its program will provide, and must have this plan approved by the U.S. Department of Health and Human Services’ (HHS’s) Centers for Medicare and Medicaid Services (CMS). Federal law and CMS regulations prescribe a core set of benefits that each state must provide.² States may decide to cover additional optional services,³ and may limit eligibility for certain additional services to specific groups of people. States may modify their Plan’s coverage of services beyond the federally-mandated core, including changes in provider qualifications, definitions of covered services, target populations, and payment mechanisms for optional benefits. States must obtain CMS approval for all such modifications through State Plan Amendments (SPAs).

    Federal law also allows states to seek waivers of certain Medicaid rules and regulations. Two kinds of waivers are authorized under federal law--Section 1115 and Section 1915. States may apply for a Section 1115 waiver to obtain program flexibility to test new approaches to financing and delivering Medicaid. States may apply for Section 1915 waivers to introduce managed care arrangements (under 1915(b)) or to provide long-term care in home and community-based rather than institutional settings (under 1915(c)). Waivers have sometimes been used to expand Medicaid eligibility to people who otherwise were not eligible (prior to passage of the ACA), to implement changes in Medicaid payment and delivery systems through managed care, and/or to provide Medicaid coverage for some of the services that are needed by chronically homeless people and PSH tenants. Some examples of waivers that allow states to provide services to chronically homeless people and PSH tenants will be described in this paper.

• 1.2. Who is Eligible for Medicaid?

  • Until the ACA is fully implemented in 2014, Medicaid eligibility is based on income and also is “categorical.” Only some income-eligible people are in eligible categories defined by age, disability, or eligibility for another program. Among chronically homeless people, Medicaid eligibility is usually dependent on having a disability that makes the person eligible for Supplemental Security Income (SSI).⁴

    Chronically homeless people may qualify for SSI on the basis of SMI. Many chronically homeless people are seriously mentally ill, and may already be enrolled in SSI and therefore Medicaid. Others could participate in Medicaid through qualifying for SSI. Estimates of the prevalence of SMI among chronically homeless people vary, in part because of differences in data collection methods. A recent study of more than 3,000 chronically homeless adults in Philadelphia found that 75 percent of respondents had SMI.⁵ Surveys of more than 18,000 people in about 40 communities, most of whom were living on the streets, used a Vulnerability Index and found that 45 percent of respondents had SMI.⁶

    Chronically homeless people without SMI may be able to establish eligibility for SSI and Medicaid on the basis of other disabling health conditions such as HIV/AIDS, cancer, heart disease, amputations, or mobility impairments. These disabling health conditions may be complicated by mental disorders that would not by themselves create eligibility for SSI, including depression, anxiety, and post-traumatic stress disorder. They also may have substance abuse disorders.

    Substance abuse is a particularly complicated issue for SSI because, starting January 1, 1997, federal law and SSI regulations disallowed eligibility for SSI if substance abuse was the primary diagnosis or substance use “contributes materially” to disability. If a disabling impairment would still exist if the person stopped using drugs or alcohol, it is acceptable as a basis for SSI eligibility. People with some serious and disabling medical conditions that result from substance use (such as chronic liver disease) may be eligible for SSI. If, however, drug abuse or alcoholism is deemed “material” to the disability because evidence establishes that the person would not be disabled if drug or alcohol use stopped, the condition is not a basis for SSI eligibility and an application would be denied.⁷

    1.3. What Services Does Medicaid Cover for Permanent Supportive Housing

    Medicaid eligibility provides access to many health services and a mechanism for paying for them. For beneficiaries, Medicaid covers the hospital services that make up a big part of total health care costs, as well as doctor visits and other ambulatory health services that may be delivered in hospitals or in clinical settings. Some Medicaid-covered services can be delivered in other community settings, including in a person’s home.

    Many of the mental health and substance use treatment services needed by people in PSH are not mandatory benefits in the Medicaid program. Instead, states may provide coverage for these services as optional benefits. States may also set additional criteria that determine who is eligible to receive specific services. These “medical necessity” or “service access” criteria may take into consideration diagnosis, health and health-related needs, functional limitations, and/or other factors.

    All Medicaid services must be “medically necessary,” clinically efficacious, and cost-effective. CMS has generally given only limited guidance about the criteria or processes that states establish for determining medical necessity or need for services, so states have significant flexibility to set their own.⁸ States establish these criteria to balance several purposes, including controlling service use and costs, ensuring that the limited services available go to those who need them the most, and avoiding the use of limited resources to pay for services that are not needed or are unlikely to be effective. The degree of state flexibility in setting these criteria depends on whether the service is federally-mandated or a state option, and also on whether the service is offered through a program authorized under a Medicaid waiver approved by CMS.

    An important point for the chronically homeless population and those living in PSH is that, while they may be eligible for Medicaid, if they are not seriously mentally ill they generally are not eligible for most community-based mental health services, which are often limited to serving persons with serious mental illness (SMI) or severe and persistent mental illness (SPMI).⁹ Persons without SMI or SPMI may qualify for a few hours of assessment or stabilization services in the event of a temporary acute mental health crisis. If medically necessary, they may also qualify for emergency and inpatient care, which is most often provided in a local hospital. Medicaid-covered benefits might also include limited counseling services or medications prescribed by a physician (for example, to treat depression). Similarly, coverage for substance abuse treatment and recovery support services usually is very limited.

    1.4. Expanded Medicaid Coverage Under the Affordable Care Act

    In 2014, nearly all Americans with incomes below 133 percent of the Federal Poverty Level (FPL) will become eligible for Medicaid, without the requirement that they meet additional categorical eligibility criteria. Some people will be ineligible because of immigration status.

    Newly eligible people who did not previously qualify for Medicaid on the basis of age, disability, or other categorical criteria are likely to get coverage for a “benchmark” benefit package that may not include some of the services covered under “full scope” Medicaid.¹⁰ According to the ACA, the “minimum essential benefits” offered by the benchmark benefit plans must include treatment services for mental health and substance use disorders as well as rehabilitation and “habilitative” services.¹¹ Behavioral health treatment cannot be more limited than treatment for physical conditions.

    HHS will provide additional guidance and rules for benchmark services, which may have a significant impact on the scope of services that will be available to newly eligible Medicaid beneficiaries, including chronically homeless people and formerly homeless people who are residents of PSH. However, state policy decisions will determine whether Medicaid will cover many of the services that are most often delivered in PSH, since many of these services will still be considered “optional benefits.” States will continue to decide whether to provide these services as covered benefits, as well as the qualifications that providers must meet before they can be certified to receive Medicaid reimbursement for the services they deliver.

    1.5. State Steps Toward Implementing the Affordable Care Act

    Some states are already moving to implement provisions of the ACA that allow them to expand coverage right now to include people living in poverty or near-poverty who do not have categorical eligibility for Medicaid. Other states are using Medicaid’s 1115 waivers as a “bridge to reform.” As research and demonstration projects, these waivers allow states to extend some form of coverage to people who do not qualify on the basis of current categorical eligibility criteria.

    • Under a Medicaid waiver, the Massachusetts Medicaid program provides benefits through MassHealth to designated groups of low and moderate-income people who would not otherwise meet categorical eligibility requirements. MassHealth offers health care benefits directly or by paying part or all of the health insurance premiums for qualified persons. Eligibility varies by coverage type, and qualifications and benefit packages are specified for each group of eligible persons. Chronically homeless people in Massachusetts are nearly all eligible for Medicaid, under the following types of coverage:

      • MassHealth Standard, which serves disabled SSI recipients.
      • MassHealth Basic, for those unemployed for a year or longer without other benefits.
      • MassHealth Essential, for those who are long-term unemployed but whose immigrant status bars them from MassHealth Basic.
      • CommonHealth--in the less likely scenario that they are over 65, disabled, and working 40 hours per month (e.g., some long-term shelter residents).

    • The level of coverage and types of services available for behavioral health care differ among these coverage packages. For example, MassHealth Standard and CommonHealth have more robust behavioral health benefits.

    • In California, a recently approved Medicaid waiver establishes expanded coverage under a new Low-Income Health Program (LIHP) that counties will design and implement, with counties providing the funds to match Federal Financial Participation (FFP). This strategy will likely produce significant variations among California counties as they determine who will be eligible and what services the LIHP will cover.

    • Maine has used a Medicaid waiver to establish coverage for limited health benefits for “non-categoricals” and has been able to enroll many chronically homeless people who have not gone through the SSI disability determination process. Because there is a cap on the number of people who can be enrolled under this provision of the waiver, the Maine Medicaid office also assesses “non-categoricals” to see if their disabilities are sufficient to qualify them for full scope Medicaid. The office has been able to qualify about two-thirds of “non-categoricals,” as disabled, which moves them from the “non-categorical” group into being “categorically eligible” and frees up “non-categorical” slots for new people. Individuals who have been re-classified in this way are strongly encouraged to apply for SSI, as the criteria to establish disability used by the Medicaid office are the same as those used by SSI, and qualifying for SSI would give people an income source in addition to their Medicaid coverage.

    • Connecticut was the first state to get federal approval to expand Medicaid income eligibility under ACA provisions. New Medicaid coverage replaces the state-administered General Assistance medical program and provides full Medicaid benefits for low-income adults who do not receive SSI or Medicare and are not otherwise eligible for Medicaid. Income eligibility for adults age 19-64 is 56 percent of FPL, except in southwestern Connecticut, where it is effectively 68 percent of FPL.

    • In May 2010, the District of Columbia (DC) filed a Medicaid SPA, expanding Medicaid eligibility under the authority provided by ACA to cover legal residents with incomes up to 133 percent of FPL who were not previously categorically eligible, and enrolled about 33,000 new beneficiaries. A few months later DC received approval of a waiver to increase the eligibility level to 200 percent of FPL, which added a few thousand more people to the Medicaid rolls. Nearly all of the homeless people who had previously been unable to meet Medicaid’s categorical eligibility requirements are now covered by Medicaid benefits. They are primarily single persons with substance use conditions.

    • Minnesota has also opted for early adoption of the ACA Medicaid expansion provisions. Newly eligible people will include an estimated 32,000 General Assistance Medical Care (GAMC) clients, 51,000 low-income adults from the MinnesotaCare program, and 12,000 uninsured persons. Before this expansion, homeless people served in the GAMC program could get care only in four safety net hospitals in the Twin Cities, which were too far away for many people to use. Now homeless people will have care delivered by Medicaid providers throughout the state.

    1.6. The Rest of This Paper

    Based on the results of site visits and telephone interviews conducted in early 2011,¹² this paper describes several different service approaches and financing mechanisms that have already been implemented or are in development to provide Medicaid reimbursement for services for chronically homeless people and residents of PSH.

    The remaining sections of the paper are organized according to the Medicaid financing mechanisms and service approaches that are most frequently used in connection with PSH:

    • Federally Qualified Health Centers (FQHCs), including Health Care for the Homeless (HCH) programs and Community Health Centers (CHCs).

    • Mental or behavioral health services, including services covered under the Rehabilitation Option and benefits that may be covered through “carve-outs.”

    • Models that integrate FQHC and mental/behavioral health financing mechanisms.

    • Substance abuse treatment.

    • Home and community-based services (HCBS) to support people in the community who would otherwise enter nursing homes or other expensive residential care.

    • Managed care.

    • The health homes option.

    These financing mechanisms and service approaches are not mutually exclusive. As will be evident, the providers and programs highlighted in this paper often used more than one.

• 1.3. What Services Does Medicaid Cover for Permanent Supportive Housing Tenants?

  • Medicaid eligibility provides access to many health services and a mechanism for paying for them. For beneficiaries, Medicaid covers the hospital services that make up a big part of total health care costs, as well as doctor visits and other ambulatory health services that may be delivered in hospitals or in clinical settings. Some Medicaid-covered services can be delivered in other community settings, including in a person’s home.

    Many of the mental health and substance use treatment services needed by people in PSH are not mandatory benefits in the Medicaid program. Instead, states may provide coverage for these services as optional benefits. States may also set additional criteria that determine who is eligible to receive specific services. These “medical necessity” or “service access” criteria may take into consideration diagnosis, health and health-related needs, functional limitations, and/or other factors.

    All Medicaid services must be “medically necessary,” clinically efficacious, and cost-effective. CMS has generally given only limited guidance about the criteria or processes that states establish for determining medical necessity or need for services, so states have significant flexibility to set their own.⁸ States establish these criteria to balance several purposes, including controlling service use and costs, ensuring that the limited services available go to those who need them the most, and avoiding the use of limited resources to pay for services that are not needed or are unlikely to be effective. The degree of state flexibility in setting these criteria depends on whether the service is federally-mandated or a state option, and also on whether the service is offered through a program authorized under a Medicaid waiver approved by CMS.

    An important point for the chronically homeless population and those living in PSH is that, while they may be eligible for Medicaid, if they are not seriously mentally ill they generally are not eligible for most community-based mental health services, which are often limited to serving persons with serious mental illness (SMI) or severe and persistent mental illness (SPMI).⁹ Persons without SMI or SPMI may qualify for a few hours of assessment or stabilization services in the event of a temporary acute mental health crisis. If medically necessary, they may also qualify for emergency and inpatient care, which is most often provided in a local hospital. Medicaid-covered benefits might also include limited counseling services or medications prescribed by a physician (for example, to treat depression). Similarly, coverage for substance abuse treatment and recovery support services usually is very limited.

• 1.4. Expanded Medicaid Coverage under the Affordable Care Act

  • In 2014, nearly all Americans with incomes below 133 percent of the Federal Poverty Level (FPL) will become eligible for Medicaid, without the requirement that they meet additional categorical eligibility criteria. Some people will be ineligible because of immigration status.

    Newly eligible people who did not previously qualify for Medicaid on the basis of age, disability, or other categorical criteria are likely to get coverage for a “benchmark” benefit package that may not include some of the services covered under “full scope” Medicaid.¹⁰ According to the ACA, the “minimum essential benefits” offered by the benchmark benefit plans must include treatment services for mental health and substance use disorders as well as rehabilitation and “habilitative” services.¹¹ Behavioral health treatment cannot be more limited than treatment for physical conditions.

    HHS will provide additional guidance and rules for benchmark services, which may have a significant impact on the scope of services that will be available to newly eligible Medicaid beneficiaries, including chronically homeless people and formerly homeless people who are residents of PSH. However, state policy decisions will determine whether Medicaid will cover many of the services that are most often delivered in PSH, since many of these services will still be considered “optional benefits.” States will continue to decide whether to provide these services as covered benefits, as well as the qualifications that providers must meet before they can be certified to receive Medicaid reimbursement for the services they deliver.

• 1.5. State Steps Toward Implementing the Affordable Care Act

  • Some states are already moving to implement provisions of the ACA that allow them to expand coverage right now to include people living in poverty or near-poverty who do not have categorical eligibility for Medicaid. Other states are using Medicaid’s 1115 waivers as a “bridge to reform.” As research and demonstration projects, these waivers allow states to extend some form of coverage to people who do not qualify on the basis of current categorical eligibility criteria.

    • Under a Medicaid waiver, the Massachusetts Medicaid program provides benefits through MassHealth to designated groups of low and moderate-income people who would not otherwise meet categorical eligibility requirements. MassHealth offers health care benefits directly or by paying part or all of the health insurance premiums for qualified persons. Eligibility varies by coverage type, and qualifications and benefit packages are specified for each group of eligible persons. Chronically homeless people in Massachusetts are nearly all eligible for Medicaid, under the following types of coverage:

      • MassHealth Standard, which serves disabled SSI recipients.
      • MassHealth Basic, for those unemployed for a year or longer without other benefits.
      • MassHealth Essential, for those who are long-term unemployed but whose immigrant status bars them from MassHealth Basic.
      • CommonHealth--in the less likely scenario that they are over 65, disabled, and working 40 hours per month (e.g., some long-term shelter residents).

    • The level of coverage and types of services available for behavioral health care differ among these coverage packages. For example, MassHealth Standard and CommonHealth have more robust behavioral health benefits.

    • In California, a recently approved Medicaid waiver establishes expanded coverage under a new Low-Income Health Program (LIHP) that counties will design and implement, with counties providing the funds to match Federal Financial Participation (FFP). This strategy will likely produce significant variations among California counties as they determine who will be eligible and what services the LIHP will cover.

    • Maine has used a Medicaid waiver to establish coverage for limited health benefits for “non-categoricals” and has been able to enroll many chronically homeless people who have not gone through the SSI disability determination process. Because there is a cap on the number of people who can be enrolled under this provision of the waiver, the Maine Medicaid office also assesses “non-categoricals” to see if their disabilities are sufficient to qualify them for full scope Medicaid. The office has been able to qualify about two-thirds of “non-categoricals,” as disabled, which moves them from the “non-categorical” group into being “categorically eligible” and frees up “non-categorical” slots for new people. Individuals who have been re-classified in this way are strongly encouraged to apply for SSI, as the criteria to establish disability used by the Medicaid office are the same as those used by SSI, and qualifying for SSI would give people an income source in addition to their Medicaid coverage.

    • Connecticut was the first state to get federal approval to expand Medicaid income eligibility under ACA provisions. New Medicaid coverage replaces the state-administered General Assistance medical program and provides full Medicaid benefits for low-income adults who do not receive SSI or Medicare and are not otherwise eligible for Medicaid. Income eligibility for adults age 19-64 is 56 percent of FPL, except in southwestern Connecticut, where it is effectively 68 percent of FPL.

    • In May 2010, the District of Columbia (DC) filed a Medicaid SPA, expanding Medicaid eligibility under the authority provided by ACA to cover legal residents with incomes up to 133 percent of FPL who were not previously categorically eligible, and enrolled about 33,000 new beneficiaries. A few months later DC received approval of a waiver to increase the eligibility level to 200 percent of FPL, which added a few thousand more people to the Medicaid rolls. Nearly all of the homeless people who had previously been unable to meet Medicaid’s categorical eligibility requirements are now covered by Medicaid benefits. They are primarily single persons with substance use conditions.

    • Minnesota has also opted for early adoption of the ACA Medicaid expansion provisions. Newly eligible people will include an estimated 32,000 General Assistance Medical Care (GAMC) clients, 51,000 low-income adults from the MinnesotaCare program, and 12,000 uninsured persons. Before this expansion, homeless people served in the GAMC program could get care only in four safety net hospitals in the Twin Cities, which were too far away for many people to use. Now homeless people will have care delivered by Medicaid providers throughout the state.

• 1.6. The Rest of This Paper

  • Based on the results of site visits and telephone interviews conducted in early 2011,¹² this paper describes several different service approaches and financing mechanisms that have already been implemented or are in development to provide Medicaid reimbursement for services for chronically homeless people and residents of PSH.

    The remaining sections of the paper are organized according to the Medicaid financing mechanisms and service approaches that are most frequently used in connection with PSH:

    • Federally Qualified Health Centers (FQHCs), including Health Care for the Homeless (HCH) programs and Community Health Centers (CHCs).

    • Mental or behavioral health services, including services covered under the Rehabilitation Option and benefits that may be covered through “carve-outs.”

    • Models that integrate FQHC and mental/behavioral health financing mechanisms.

    • Substance abuse treatment.

    • Home and community-based services (HCBS) to support people in the community who would otherwise enter nursing homes or other expensive residential care.

    • Managed care.

    • The health homes option.

    These financing mechanisms and service approaches are not mutually exclusive. As will be evident, the providers and programs highlighted in this paper often used more than one.

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