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


  1. The Kaiser Commission on Medicaid and the Uninsured has published Medicaid: a Primerwhich explains key information about the Medicaid program. This publication, available at provides clear explanations about Medicaid for readers who want more information about mandatory and optional benefits, waivers, and other terms that are used in this report.

  2. Mandatory benefits include inpatient and outpatient hospital services; nursing facility, rural health clinic, FQHC, prenatal and freestanding birth center services; physician, nurse-midwife, and certified pediatric and family nurse practitioner services; home health, family planning, tobacco cessation, laboratory, X-ray services; and early and periodic screening, diagnostic, and treatment services for children under age 21.

  3. Optional benefits include clinic services; prescription drugs; rehabilitative services; case management, HCBS services as an alternative to institutionalization, physical, occupational, speech, hearing, and language therapy; diagnostic, screening, and a variety of other services that may be approved by CMS.

  4. Strategies currently being used to improve access to SSI and enrollment in Medicaid are covered in Issue Paper #3. A few chronically homeless people may qualify for Medicaid through participation in Temporary Assistance for Needy Families (i.e., pregnant women and people with minor children staying with them).

  5. Stephen R. Poulin, Marcella Maguire, Stephen Metraux, and Dennis P. Culhane. “Service Use and Costs for Persons Experiencing Chronic Homelessness in Philadelphia: A Population-Based Study.” Psychiatric Services 61.11(2010): 1093-1098. Available at:

  6. One Year Anniversary Report: 100,000 Homes (2011). Available at

  7. Patricia Post, Yvonne Perret, Sarah Anderson, Mark Dalton, and Barry Sevin. 2007. Documenting Disability for Persons with Substance Use Disorders & Co-occurring Impairments: A Guide for Clinicians. Nashville, TN: National Health Care for the Homeless Council, Inc.

  8. For a good explanation of the framework for state flexibility in defining service eligibility, see Chapter 3 in Understanding Medicaid Home and Community Services: A Primer.

  9. The term “community-based mental health services” refers to an array of treatment and support services that allow people with mental illnesses to live in community settings instead of in institutions. These services may be provided in local clinics, residential or outpatient treatment programs, and other settings, including PSH. Community-based mental health services are increasingly delivered by mobile service-providers who may visit people where they live, work, or engage in daily activities.

  10. "Benchmark" benefit plans are based on coverage available in the private sector from large managed care plans or the package of health insurance coverage provided to state employees. For more information about the issues related to Medicaid benchmark benefits and coverage of the range of services needed by chronically homeless people, including services to address mental health and substance abuse problems, see this analysis by the National Council for Community Behavioral Healthcare

  11. Rehabilitation helps people recover lost skills, while “habilitative” services help people acquire new ones. The difference is subtle but it can be important. For example, rehabilitation can help people with schizophrenia improve social skills that allow them to resume participation in activities that had once been a part of their lives before the onset of their mental illness. Assessment for rehabilitation services includes a focus on identifying the level of functioning people had “at baseline” before they became disabled. Service-providers say that some chronically homeless people need to restore skills that they had prior to becoming disabled, while others may need to learn new skills for independent living, particularly if they experienced mental illness, addiction, homelessness, or institutionalization as young adults and never experienced stable independent living in community housing. Precise definitions under ACA are under development.

  12. We conducted site visits in the Boston/Worcester area, the San Francisco Bay Area, and Chicago. These communities were selected because each offers at least one Medicaid provider that integrates care for the physical health, mental health, and substance abuse conditions of chronically homeless people and does so as people move from the streets to housing. Each of the three communities also offers numerous other PSH programs from which we could learn whether and how Medicaid was being used to cover some of the costs of supportive services. We augmented these visits with calls to other communities.

  13. A full discussion of FQHC payment mechanisms is beyond the scope of this Issue Paper. For more information see

  14. See

  15. Federal law does not require states to limit coverage of rehabilitation services to those that address mental health conditions, and some states also use MRO to cover other types of rehabilitation services for substance abuse treatment, or services such as physical therapy and occupational therapy. For more information see

  16. The federal framework governing Medicaid reimbursement for these services is described in the Handbook: Using Medicaid to Support Working Age Adults with Serious Mental Illness in the Community at

  17. The focus of this report is on mental health services covered by Medicaid under the Rehabilitation Option, because these are the services most often delivered in PSH. The term “specialty mental health services” also includes other types of Medicaid-covered mental health services delivered in clinics, including CMHCs, other outpatient or residential treatment facilities, or local acute care hospitals which may provide emergency room care for psychiatric emergencies or short-term inpatient hospitalizations. “Carve-out” arrangements often include this broad array of service locations, providers, and clients, and may also include some pharmacy costs. In addition to these “specialty mental health services” Medicaid may also cover limited mental health services offered by primary care providers or managed care plans, such as prescribing medications for depression or limited counseling services.

  18. In some cases, states may use other Medicaid optional benefits, including the Clinic Option or the TCM Option, to reimburse providers for some mental health services. But service-providers who participated in site visits for this project reported that these benefits were generally not being used to reimburse services in supportive housing.

  19. In addition, the Massachusetts DMH administers some MRO mental health benefits directly rather than through the carve-out administered by MBPH.

  20. The Shelter Plus Care program subsidizes the rent in most of the scattered-site PSH, while SHP grants support the housing and some of the services in the site-based PSH.

  21. For more information about CST and other service definitions, see

  22. Some of the services described in this paragraph are potentially Medicaid-reimbursable as optional benefits under federal law, but states may have limited coverage for these services in order to control costs or protect against fraud or abuse, or the reimbursement mechanisms may not be available to the providers who deliver services in PSH.

  23. For more information about Illinois Medical Necessity Criteria see

  24. For generic problems with “carve-outs,” see W. Joines, J. Menges, and J. Tracey, “Programmatic Assessment of Carve-in and Carve-out Arrangements for Medicaid Prescription Drugs,” prepared for Association for Community Affiliated Plans. The Lewin Group. October 17, 2007.

  25. See for example and In a population-based Philadelphia study of chronically homeless adults 56 percent had both a SMI and a history of substance abuse treatment (Psych Services, Nov 2010); 22 percent of more than 18,000 homeless individuals living on the streets surveyed as part of the 100,000 Homes Campaign are living with tri-morbid conditions, meaning a serious medical condition and a SMI and a substance abuse disorder.

  26. For example see and

  27. In the Philadelphia study (Poulin et al., 2011, op. cit.), 86 percent of chronically homeless people in the bottom quintile of public costs had a history of substance abuse treatment but no diagnosis of SMI. Health costs were not included in this analysis, which could leave out a substantial segment of costs for this population. Costs of ambulances, emergency room care, hospitalizations and detoxification or sobering center services for chronically homeless people with serious alcohol problems (chronic public inebriates) can be very high. In other communities, a focus on the most frequent users of costly crisis care has led to the identification of people with serious and often untreated substance abuse problems, for whom it may be very cost-effective to reimburse services in PSH as an alternative to paying for repeated hospitalizations and emergency room visits. However, costs of health care have been very low for a large group of chronically homeless people with substance abuse problems, for whom public services expenditures primarily reflect costs of shelter, food stamps and General Assistance. (See Where We Sleep report--Flaming et al., 2009. Available at

  28. Kaiser Commission on Medicaid and the Uninsured. “Medicaid Home and Community-Based Services Program: Data Update.” December 2011.

  29. See A. Pathania, “Nursing Homes in U.S. Register a 41% Increase in Occupancy.” March 23, 2009. Data analysis done by the Associated Press using data provided by CMS, This finding is cited in the report titled The State of Housing in America in the 21st Century: A Disability Perspectivefrom the National Council on Disability, submitted to the President in January 2010.

  30. The Deficit Reduction Act of 2005 added Section 1915(i) to the Social Security Act, which was amended by the ACA of 2010.

  31. ADLs include eating, bathing, dressing, toileting, transferring (e.g., from a bed to a chair), and maintaining continence. IADLs include medication management, money management, light housework, laundry, meal preparation, transportation, grocery shopping, and using the telephone.

  32. See

  33. Basu, A., Kee, R., Buchanan, D., and Sadowski, L. (2011). Comparative Cost Analysis of Housing and Case Management Program for Chronically Ill Homeless Adults Compared to Usual Care. Health Services Research, doi: 10.1111/j.1475-6773.2011.01350.x.

  34. See

  35. See

  36. See

  37. There is growing interest among policy makers, funders and non-profit housing developers in models that integrate PSH units into affordable housing developments. In these developments, PSH units are usually no more than 25 percent of the housing units. In January 2011, President Obama signed the Melville Act, which reforms HUD’s 811 housing program for people with disabilities. Among the reforms are provisions that would commit project-based rental assistance to help create integrated supportive housing for extremely low-income people with disabilities. No more than 25 percent of units in a housing development receiving these funds may be used for PSH or have an occupancy preference for persons with disabilities. This new 811 approach requires a partnership between the public housing agency and the state Medicaid agency. For more information see

  38. A full description of the ACA provisions related to HCBS is beyond the scope of this report. More information about some of these provisions is contained in a report from the National Academy for State Health Policy, “Implementing the Affordable Care Act: New Options for Medicaid Home and Community Based Services,” October 2010. Available at

  39. See

  40. Frequently people who are “dual-eligibles,” enrolled in both Medicaid and Medicare, are not required or permitted to enroll in Medicaid managed care. States may exclude or exempt some groups of particularly vulnerable people with disabilities or very costly or life-threatening illnesses from the requirement to enroll in Medicaid managed care.

  41. For more discussion of managed care rate-setting and “in lieu of” or substitute services, see page 15 of CMS guide “Providing Long Term Services and Supports in a Managed Care Delivery System.”

  42. See

  43. "Health homes” established under this state option will be similar to but distinct from “medical homes” that are also being considered or implemented by many health care providers and delivery systems. Among other distinctions, medical homes may be established for a wide range of consumers, with or without chronic health conditions or other special needs, who may be covered by private insurance as well as Medicaid or other forms of health coverage. Because medical homes often serve a more diverse patient population, reimbursement rates may be lower than the payment rate for services provided through a “health home” as defined by the ACA provisions. For example Minnesota’s multi-payer health care home/medical home initiative provides some complexity-adjustment in payment rates, including adjustments for people with SMI and/or whose primary language is not English. However, the maximum payment rate for the care coordination these health care homes provide will be approximately $65-$80 per month, which will not cover the level of support and care coordination needed by a chronically ill person with complex health and behavioral health conditions.

  44. State Medicaid Director #10-024, November 16, 2010. This letter indicates that CMS will provide additional guidance to states in the future.

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