Medicaid Financing for Services in Supportive Housing for Chronically Homeless People: Current Practices and Opportunities. 5.1. Who is Eligible?


In most states persons with substance use disorders are not eligible for Medicaid enrollment unless they are part of a group with “categorical” eligibility for another reason. Among chronically homeless people this is most likely to be another disabling health conditions such as SMI, a physical disability or a disabling medical condition. When people who are enrolled in Medicaid also have co-occurring substance use disorders, they may qualify to receive Medicaid-covered substance use services.

5.2. How is Substance Abuse Treatment Provided to Permanent Supportive Housing

Service-providers working in PSH help tenants with problems related to substance use, but they rarely receive Medicaid reimbursement for these services. PSH case managers work to motivate tenants to recognize and seek help for substance use problems and to achieve recovery goals. They connect tenants to other programs that offer treatment services.

Most PSH service-providers offer individual counseling and plenty of encouragement for residents to pursue treatment, and they provide ongoing coaching and support to help tenants achieve recovery goals, but they have limited capacity to provide substance abuse treatment services directly as part of the on-site services they deliver. We did not find any examples during site visits of Medicaid reimbursement for services delivered on-site in PSH that explicitly focus on problems related to substance use disorders. Alcoholics Anonymous/Narcotics Anonymous or recovery support groups are often available, but they are not supported by Medicaid reimbursement.

Residents of PSH who are FQHC clients may receive some Medicaid-reimbursable services through their FQHC that address substance abuse problems. Services may include motivational interviewing and counseling from clinical social workers or psychiatrists.

Mental health providers that are not FQHCs often try to offer services that integrate treatment for co-occurring mental health and substance abuse disorders, but find themselves hard pressed to cover the cost. Agencies that are primarily substance abuse treatment providers may find it difficult to serve people with more severe mental health issues, while some agencies that are primarily mental health providers may limit themselves to people with “light” substance abuse if they are not licensed to provide substance abuse treatment for which they can get reimbursed. Thus some mental health providers are willing to help people who are already clean-and-sober to maintain their sobriety, but they may have a harder time working with active users.

Illinois. The state’s Medicaid program provides support for substance abuse treatment through the Department of Human Services’ Division of Alcoholism and Substance Abuse (DASA). DASA administers funding from federal block grant and state programs, under which it issues contracts for treatment for substance use disorders. DASA also certifies providers who may then receive Medicaid reimbursement for covered treatment services. DASA is supportive of the harm reduction approach used by many PSH providers, and people housed in settings that follow a harm reduction model may receive substance abuse treatment in DASA-licensed facilities without a requirement for abstinence. All services paid for with DASA’s state funding or Medicaid reimbursement must be delivered by a provider with a DASA contract, in a physical space licensed by DASA. For a number of years, DASA has used state funding to give grants to licensed providers to serve people with substance use disorders who do not have Medicaid. However, in March 2011 the Illinois governor announced a proposal to cut these funds from the state budget.

5.3. Challenges, Obstacles, and Limitations Related to Medicaid Coverage of Substance Abuse Treatment

5.3.1. Medicaid-Reimbursed Substance Abuse Services Cannot Be Delivered On-Site in Permanent Supportive Housing

Medicaid reimbursement for substance abuse treatment services is frequently limited by state policy to services that are provided in particular types of outpatient clinics or licensed/certified treatment facilities. There is often no reimbursement mechanism designed to pay for counseling or treatment services that address substance abuse problems in the context of a home visit, a visit with a primary care provider, or care provided by a multi-disciplinary team that engages and provides community support for people with co-occurring physical and behavioral health needs.

In some PSH buildings, particularly single room occupancies (SROs) in which all tenants formerly were homeless, so many residents have substance use disorders that it can be a challenging environment for those who are in early stages of recovery and trying to stay clean-and-sober. Many PSH service-providers would like to be able to offer more services to address substance abuse and support recovery, but Medicaid reimbursement is not available to support delivering these services in a housing setting. When Medicaid reimbursement is available for substance abuse treatment services provided by organizations that also deliver services in PSH, usually the substance abuse treatment services must be provided in a separate location that has been licensed or certified as a treatment program.

5.3.2. Substance Abuse Treatment Usually Is Not Consistent with a Harm Reduction Model or with Integrated Care

PSH service-providers find it difficult to link residents to off-site treatment services that are responsive to their needs. PSH supportive services staff members make referrals to detox or other treatment services available in the community, but few of these are willing to treat people who are not ready to commit to sobriety. Medicaid-reimbursed substance abuse treatment services generally must be provided in programs that are more highly structured than the flexible, client-centered services delivered in supportive housing.

5.3.3. Licensingand Funding Mechanisms for Substance Abuse Treatment Are Not Integrated with Other Types of Treatment

State-defined policies and procedures for provider qualifications and licensing, service definitions, service plans, documentation, and billing for Medicaid-covered substance abuse treatment services are often completely different from the policies and procedures for reimbursing other Medicaid-covered services for mental health or medical conditions, despite the fact that many people have co-occurring conditions.

The situation in Illinois illustrates some of the issues that providers have in using Medicaid to pay for services that address substance abuse problems. We heard the most about Medicaid coverage for substance abuse treatment in Chicago, along with some of the challenges. Becoming a DASA-licensed provider in Illinois takes substantial time and effort, with requirements that keep most agencies serving chronically homeless persons from pursuing the license. Even after an agency has become a DASA-licensed provider, it must operate as a licensed facility for two full years before it is eligible to receive Medicaid reimbursement.

In Illinois, as in many other states, DASA and DMH have different requirements for just about everything: timeframes for treatment planning and follow-up, allowable treatment types, amounts and duration of treatment, reporting, and other aspects of care. This makes it especially difficult for a program to serve chronically homeless people with multiple disabling conditions.

DASA funding covers care delivered in DASA-licensed spaces, while DMH coverage for mental health services under the state’s Rule 132/MRO is heavily oriented toward services delivered in the community, in people’s homes or in neighborhood locations. DASA’s model of care includes coverage for outreach and early intervention services, but in reality virtually all the DASA funding goes for facility-based care. DMH, on the other hand, allows care to be delivered to Medicaid recipients in many locations, but DMH does not have any way to cover outreach and engagement unless the person is already on Medicaid. In recent years, DMH used state resources to pay for outreach and engagement to non-Medicaid recipients, but that money is no longer available.

About 10 years ago, HHO developed an integrated assessment and service planning tool for the HHO target population of homeless people with two or more chronic and disabling conditions. DASA-supported substance abuse treatment may be delivered in the same space where mental health services are delivered, as long as the space is licensed by DASA; this is what happens in HHO’s Resource Center. The agency must maintain meticulous records showing who delivers what care to whom, so the right agency can be billed and claims will not be denied. When PSH residents need and want substance use-related services, they must go to HHO’s Resource Center to get them, while staff offering mental health services may come to where the clients live.

Other agencies in Chicago’s homeless assistance network also serve people with co-occurring mental illness and substance use disorders, but very few have a DASA facility license, so they cannot offer substance abuse treatment. Thresholds, a CMHC in Chicago, provides IDDT and raises money, with increasing difficulty, from sources other than DASA or Medicaid.

5.4. Looking Ahead to 2014: How are Services for Substance Abuse Likely to Change?

Much uncertainty exists about the scope of substance abuse treatment services that Medicaid will cover for newly eligible people in 2014. An additional issue is the implication of requirements for “parity” between benefits for treatment of substance abuse disorders and medical and surgical benefits, which are pending promulgation and testing. Guidance and regulations from CMS will be forthcoming, but Benchmark Plans must include ten “essential health benefits” which include mental health and substance use disorder services, including behavioral health treatment, rehabilitation, and habilitation.

In the current fiscal climate, many states are spending less on substance abuse treatment. The availability of Medicaid reimbursement for alternative treatment services currently funded by state resources or federal block grants may free up some of those resources to pay for types of recovery support services that are not covered by Medicaid.

For some of the people who will be newly enrolled in Medicaid, substance abuse will be found to have a significant impact on other health conditions for which treatment will be reimbursed by Medicaid, including the avoidable use of hospital emergency rooms and, ambulances. For these Medicaid enrollees, Medicaid state programs or Medicaid managed care plans may consider covering substance abuse treatment as a strategy for reducing costs. However, health care costs will be relatively low for people who have substance abuse problems without co-occurring serious medical conditions or mental illness,27 and this may discourage the use of resources for improving access to substance abuse treatment. Thus, Medicaid coverage and other sources of funding for substance abuse treatment services may continue to be limited.

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