Medicaid Financing for Services in Supportive Housing for Chronically Homeless People: Current Practices and Opportunities. 3.3. Challenges, Obstacles, and Limitations of Medicaid-Reimbursed Mental Health Services


3.3.1. Covered Services and Rules for Documenting Costs Can Be Inconsistent with Service Models

While the MRO is often used to cover rehabilitative and supportive services once a person is on Medicaid, these benefits do not cover the costs of the outreach and extended engagement sometimes required to bring a client into care and maintain the caregiving relationship. For residents of scattered-site PSH, there is usually no reimbursement for services that help people find apartments, advocate with landlords on behalf of homeless people during tenant screening, and negotiate with landlords to resolve disputes or arrange repairs. Furthermore, there may be no way to pay for the time mental health workers spend traveling between clients in different buildings or neighborhoods and for time spent when the client is not home when the service-provider arrives for a visit.22 While states could potentially use Medicaid’s Targeted Case Management (TCM) Option to provide Medicaid reimbursement for some of that effort, the site visits conducted for this project suggested that TCM benefits are limited, not well-aligned with MRO services, or not well understood by the providers serving chronically homeless people.

When reimbursement is provided on a fee for service (FFS) basis, most states require detailed documentation and billing by the minute or in 15-minute increments. Even when mental health services are covered through managed care arrangements, the MCO may reimburse the service-providers with which it contracts on a FFS basis. Substantial training and guidance is often needed to build the capacity of PSH service-providers to work with chronically homeless people and tenants to create and amend individual service plans and provide adequate documentation for covered services. Many service-providers who participated in this project's site visits said their staff are frustrated by the time it takes them to meet the requirements that they document each service with case notes and bill by the minute. Staff say these tasks limit their ability to be available for flexible personal engagement and relationship-building with people who are not seeking treatment even though they have a high level of disability.

Sometimes a service-provider engages a tenant several times for short contacts during the same day to establish and sustain a trusting relationship, and help build skills for socialization and independent living. Computer billing systems sometimes reject these as duplicate services, and documenting such activity in a way that supports reimbursement for multiple services during the same day can be challenging. PSH residents may be reluctant to sign off on service plans or other paperwork that is are essential to the providers if they are to get reimbursed for the care they deliver. Many providers observed that policy changes that would give them more flexibility to provide consistent services, including multiple services on the same day, could also lower administrative costs and increase quality.

3.3.2. State Rules May Reduce Funding for Mental Health Services for Permanent Supportive Housing Residents

People with mental illnesses recover, and their needs for supportive services change over time. Adjusting the types and levels of services provided to PSH tenants can be challenging for providers. For example:

  • Illinois recently imposed requirements for periodic review to determine whether clients continue to meet criteria for eligibility to receive ACT or CST services. When PSH tenants recover, they may become ineligible to continue receiving the types of services that are most often available in PSH, and relationships between tenants and their service-providers may be disrupted. For providers, this may reduce the only available funding source for mental health services for PSH residents. Some providers may be able to maintain funding by using staff who work in PSH to deliver services to other people with SMI living nearby.23

  • In Massachusetts, Medicaid reimbursement is available for a broad range of living and social skills training, counseling, and therapies in home and community-based settings, which are covered under the MRO if services are related to the client’s action plan. However, site visit participants reported that outpatient reimbursement rates in the Medicaid program are very low, and supplemental payments that were once funded through contracted state dollars to outpatient providers to cover collateral care activities have been cut. Some providers in Massachusetts reported that the state has revised rules for Medicaid reimbursement under the MRO to reduce flexibility in developing client action plans and to pay for only “face to face” or “phone” contacts. As a result, costs cannot be recovered for outreach and engagement if the person is not found where expected or for “no shows” in office settings.

3.3.3. Fiscal and Administrative Responsibility May Be Fragmented

When mental health services are “carved out,” fiscal and administrative responsibility for mental health or behavioral health services is separate from responsibility for other types of health care. This may limit incentives for policy makers and program administrators to examine the full cost of health care and patterns of health service use that could be improved with better care management or by linking behavioral health services to housing.24 This is particularly true for people who are chronically homeless, who may be frequent users of hospital emergency rooms or may receive medical or psychiatric care in jail. Engaging these individuals in services in PSH may result in significant savings by reducing the use of health care provided in emergency, inpatient, or institutional settings, but “carve-out” arrangements can limit opportunities to recognize and reinvest these savings in services provided and reimbursed through the mental health system.

In part because mental health services are often separated from other Medicaid-covered health care services under a carve-out arrangement, medical necessity criteria and definitions of covered services often allow for reimbursement of services that focus on symptoms of mental illness or functioning impaired by mental illness, but do not cover services that focus on co-occurring medical or substance abuse related problems. For example:

  • Some state Medicaid programs cover mental health services delivered in community settings, but not substance use services, and Medicaid often does not cover the cost of coordinating care and benefits across mental health and substance use treatment services.

  • To obtain Medicaid reimbursement for services provided by ACT, CSTs, or other mental health service-providers, in many states there must be clear documentation that connects each service to the client’s mental illness and plan of care to reduce symptoms of mental illness or restore functioning impaired by mental illness. This often means that claims may be disallowed if the progress notes indicate that services focus on problems related to substance abuse, managing a chronic health condition, or treating an acute health crisis that is not clearly related to the diagnosis or symptoms of mental illness.

3.3.4. Similar Services Are Often Not Covered for Vulnerable Chronically Homeless People Without S erious Mental Illness

Outreach workers often encounter chronically homeless people who have very serious health problems--and often co-occurring substance abuse problems, but not SMI. They may have less severe mental health disorders (including depression, anxiety, or trauma) or behavioral or cognitive impairments that result from brain injury, dementia, other physical conditions that produce mental disorders, or developmental disabilities. Some conditions may impair a person’s thinking and functioning but are “excluded diagnoses” for purposes of determining eligibility for mental health services, using the criteria established by the state. Programs cannot enroll or serve these people if they rely on funding through Medicaid reimbursement for mental health services. In some states, outreach teams and other mental health providers may be reimbursed for a very limited number of hours of services provided to a person with a suspected mental disorder, to complete assessments to determine if the person has SMI that would meet eligibility criteria for ongoing mental health services, or to respond to acute crises. Outreach workers may try to link people who are not eligible for Medicaid-funded mental health services to other services, but usually cannot follow up.

View full report


"ChrHomls2.pdf" (pdf, 1.47Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®