A Primer on Using Medicaid for People Experiencing Chronic Homelessness and Tenants in Permanent Supportive Housing. 6.1. Medical Necessity Criteria: Implications for People Living in Permanent Supportive Housing


State policies regarding medical necessity criteria have important implications for people experiencing homelessness and for PSH service providers because these policies determine who qualifies to receive specific Medicaid-reimbursed services. Some people who experience chronic homelessness are likely to have the specific health conditions, diagnoses, and other characteristics that make them eligible to receive some of the services that Medicaid covers, including services that can be delivered in a range of home or community settings outside of clinics or treatment facilities. On the other hand, other people who experience homelessness may not meet the criteria associated with eligibility for these types of services.

6.1.1. Medical Necessity for Rehabilitative Services

In many states, medical necessity for rehabilitative services delivered in PSH or other community settings is limited to people with SMI, particularly for service approaches such as community support or ACT that offer an intensive or moderately intensive level of support.

State plans, and policies that states often incorporate into Medicaid provider manuals or similar guidance, may include specific diagnostic and additional criteria related to service need, or they may simply set forth service descriptions available under the rubric of rehabilitative services. When they include specific criteria, diagnosis and functional impairment are often included.

  • The diagnosis criterion, when it is specified, is most often one of the following diagnoses, which may also be accompanied by a co-occurring diagnosis of substance use disorder or developmental disability:

    • Schizophrenia;
    • Other psychotic diagnosis;
    • Bipolar disorder;
    • Major depressive disorder.

Some states use medical necessity criteria that include a broader range of mental health disorders. States may use criteria that include additional diagnoses as well as consideration of severity of symptoms or needs, including co-occurring substance use disorders or other health conditions.

  • Service need or functional level criteria often take into consideration some or all of the following factors, and admission and continued eligibility criteria for some intensive services are likely to require some combination (often more than three) of the factors:

    • Recent and/or multiple psychiatric hospitalizations, emergency room visits, or interactions with law enforcement for emergency services due to mental illness or substance use.
    • Inability to participate or remain engaged or respond to less-intensive community-based services.
    • Inability to meet basic survival needs, chronically homeless, homeless, or at imminent risk of becoming homeless.
    • Evidence of co-occurring mental illness and substance use disorder.
    • Suicide attempt or suicidal ideation.
    • History of violence due to untreated mental illness or substance use disorder.
    • Lack of support systems.
    • History of inadequate follow-through with treatment plan, resulting in psychiatric or medical instability.
    • Documented inability to sustain involvement in needed services, or evidence that a comprehensive integrated program of medical and psychosocial rehabilitation services are needed to support improved functioning at the least-restrictive level of care.
    • Evidence of harm to others, or significant psychotic symptomology such as command hallucinations to harm others.
The LOCUS assesses seven domains, using five-point scales for which a higher score indicates greater need for assistance. The seven domains are listed below:
  • Risk of harm;
  • Functional status;
  • Co-morbidity;
  • Recovery environment level of stress;
  • Recovery environment level of support;
  • Treatment and recovery history; and
  • Engagement.

The assessor rates a person on each domain, and then adds up the scores to get a global score. States that use rating scales vary in the number of levels of care they define and how they match LOCUS or GAF scores to those levels. Levels may be called "tiers," "levels," or simply associate a global LOCUS score or range of scores with particular services.

As part of the determination of service need, states may require use of a rating scale such as the Global Assessment of Functioning (GAF) Scale or Level of Care Utilization System (LOCUS) (see box above).79 Some states specify certain scores on these instruments as qualifying for different types of service interventions, but these scores are virtually always only one piece of evidence among others considered in the determination of service need. For instance, the District of Columbia requires a global LOCUS score of 20 to qualify for community support services and a score of 24 or higher to qualify for ACT, along with other criteria. In Minnesota, the LOCUS score is converted to a level of care recommendation.

6.1.2. Medical Necessity for Behavioral Health Services: Broadening the Definition

Some people who experience chronic homelessness have mental health conditions such as depression, anxiety, or trauma, and they also have co-occurring substance use disorders or cognitive impairments resulting from brain injuries. Yet the conditions they have may not be considered to be SMI and therefore will not meet the medical necessity criteria adopted by states for mental health services. These individuals may have significant impairments that interfere with their ability to get and keep housing, avoid crises, and manage chronic health conditions, but they do not qualify to receive rehabilitative services or other mental health services covered by Medicaid in some states, or they may be eligible to receive only a more limited set of benefits such as mental health assessment or crisis intervention.

To accommodate the realities of multiple co-occurring chronic conditions that are common among people experiencing chronic homelessness, some states use broader medical necessity criteria for eligibility for some services than the specific diagnoses that are recognized as SMI. For example, in Massachusetts the services provided by the Community Support Program to End Chronic Homelessness are covered under a Medicaid waiver as "diversionary services" and available to people enrolled in the Medicaid program (MassHealth) who have mental health and/or substance use conditions or are at increased medical risk, and experiencing chronic homelessness. The services are designed to respond to the needs of people at high risk of hospital admission. Clinical criteria to establish medical necessity for the Massachusetts program appear in the box below.

Massachusetts: Clinical Criteria to Establish Medical Necessity for Diversionary Services
  1. Member demonstrates symptomatology consistent with a DSM-IV-TR (Axes I-V) diagnosis, which requires and can reasonably be expected to respond to therapeutic intervention; or
  2. Is referred by a primary care clinician for assistance with necessary medical follow-up (AND)
  3. The member is at risk for hospitalization or multiple hospitalizations, or the individual's health is at risk due to difficulty accessing or engaging in appropriate health care services.
  4. Member demonstrates symptomatology consistent with a DSM-IV-TR (Axes I-V) diagnosis, which requires and can reasonably be expected to respond to therapeutic intervention; or
  5. Is referred by a primary care clinician for assistance with necessary medical follow-up (AND)
  6. The member is at risk for hospitalization or multiple hospitalizations, or the individual's health is at risk due to difficulty accessing or engaging in appropriate health care services.

6.1.3. Eligibility for HCBS 1915(i) State Plan and 1915(c) Waiver Services

States define eligibility for Medicaid HCBS so they can target these services to people who are, or might otherwise be, receiving care in nursing homes or other institutional settings, or to people who need HCBS so they can live independently in community settings.

As described earlier in this chapter, Section 1915(c) waivers are used to provide HCBS to individuals who meet the criteria for an institutional level of care. To qualify to receive services under a HCBS waiver, a person must be disabled and qualify to receive care in a nursing home or other institutional setting. Growing numbers of people experiencing chronic homelessness are older adults with health conditions that put them at risk for needing nursing home care if they are unable to get support and move into more appropriate housing. In addition, nonelderly people with disabilities who experience chronic homelessness may be discharged from hospitals to nursing homes because they do not have a place to live and are unable to care for themselves following a health crisis. If such individuals also have access to affordable housing, HCBS may be an appropriate way to ensure that they make the transition to community living successfully. While people experiencing chronic homelessness have not been a significant part of the population receiving HCBS covered under waivers in many states, it is likely that some of these individuals qualify to receive these services.

HCBS 1915(i) state plan services can be provided to people with disabilities who do not need institutional care. This makes these services potentially available to people with a broader range of disabling conditions and levels of functioning. A state must establish needs-based criteria for determining an individual's eligibility for 1915(i) HCBS, and must develop an independent assessment process that determines the necessary level of services and supports to be provided to each individual. The independent assessment cannot be provided by the same organization that delivers the HCBS.

In the design and implementation of eligibility criteria for a HCBS waiver and state plan services covered under Sections 1915(c) and 1915(i), states should consider issues related to the continued eligibility of participants to receive the services they need to live successfully in integrated community settings such as PSH. For many people who have experienced chronic homelessness, their health and functioning will improve after they move into stable housing and receive appropriate health care and supports. As they recover they may no longer qualify to receive institutional care, and as a result they no longer qualify for the 1915(c) HCBS. Continuity of care can be facilitated if the PSH providers delivering support to the individual are qualified to deliver both HCBS 1915(c) waiver and 1915(i) state plan services. As determined by an independent assessment and the individually identified goals and preferences reflected in the person-centered POC, less-intensive ongoing services and supports could be made available through 1915(i) for people who no longer qualify to receive the HCBS waiver.

6.1.4. Eligibility for Health Home Services

Section 2703 of the Affordable Care Act allows states to elect to provide optional health home benefits under the state's Medicaid plan. The health home provision authorized by the Affordable Care Act provides an opportunity to build a person-centered system of interdisciplinary care to improve outcomes for beneficiaries with chronic health conditions, while also providing value to state Medicaid programs.

Medicaid health home benefits can be made available to Medicaid beneficiaries with:

  • two or more chronic conditions;
  • one chronic condition and who are at risk for a second; or
  • a serious and persistent mental health condition.

All people served with Medicaid health home benefits must meet the minimum criteria described above, which are set by federal law.

As part of a SPA to add these benefits, states may designate particular chronic conditions and eligibility criteria. For example a state might target these services to people with higher numbers or severity of chronic health conditions, or higher costs that might be associated with frequent and avoidable use of hospital emergency and inpatient care. In defining the population eligible for health home services, a state might choose to use eligibility criteria that incorporate the chronic conditions that are often found among people experiencing chronic homelessness. These include mental health and substance use disorders, diabetes, asthma, and heart disease. In addition, states may request CMS approval to base eligibility on additional or different chronic conditions, including conditions that occur at high rates among people experiencing homelessness. These might include Hepatitis C, liver disease, and HIV/AIDS. A state might also request CMS approval to incorporate measures of vulnerability or chronic homelessness into criteria used to determine the severity of chronic health conditions.

Eligibility for health home services cannot be limited based on other factors such as age, use of a specific delivery system, or category of aid. States may not exclude people who are eligible for both Medicaid and Medicare (dual eligible beneficiaries).

Section 1945(f) of the Affordable Care Act requires states that implement Medicaid health home programs to track avoidable hospital readmissions. States are also expected to track emergency room visits and skilled nursing facility admissions. A substantial body of evidence shows that for people experiencing chronic homelessness, PSH is associated with reductions in hospital admissions and emergency room visits.80 There is also some evidence that PSH is associated with reductions in admissions to skilled nursing facilities for people with chronic health conditions who are experiencing homelessness.81 States that establish Medicaid health home programs using eligibility criteria that include people experiencing chronic homelessness, and link these services to housing opportunities, may be able to achieve significant reductions in avoidable hospital readmissions.

6.1.5. Targeting Services to Frequent Users of Crisis Health Services to Decrease Costs and Improve Outcomes

Innovative health care providers and their partners have developed promising approaches that target new models of care delivery to Medicaid beneficiaries with complex health issues and a history of frequent encounters with health care services in hospitals and institutional settings--sometimes called super-utilizers.82 A disproportionate share of all health care spending is used to provide care for a relatively small group of patients, with just 5 percent of Medicaid beneficiaries accounting for 54 percent of total Medicaid expenditures, and 1 percent of Medicaid beneficiaries accounting for 25 percent of total Medicaid expenditures. Most of these high-cost Medicaid beneficiaries have multiple chronic health conditions, often including co-occurring mental health and/or substance use disorders, and some are experiencing homelessness.83

Some states are designing or considering health home benefits to provide more cost-effective, coordinated care for these frequent users, potentially targeting health home benefits to the highest-cost beneficiaries with the most severe conditions or the greatest number of chronic or mental health conditions.84 States could also structure payment methodologies to incentivize health homes to deliver more-intensive care management services to the most complex patients who have the greatest need. These approaches are likely to include some of the most vulnerable people who are experiencing chronic homelessness.

6.1.6. Accommodating Changes in Service Needs and Eligibility as People Recover

States often define medical necessity or service eligibility criteria for continued eligibility for some types of services, as well as the initial admission criteria. Criteria for continued eligibility will be different from criteria for admission to services, allowing people whose health and functioning is improving to remain eligible to receive services and supports they need to maintain stability and continue in their recovery.

As people who live in PSH recover and as their functioning improves, they may no longer have symptoms or impairments that meet medical necessity criteria for continued eligibility for services they needed when they were experiencing homelessness or when they first moved into housing. In developing strategies to finance services for people living in PSH, providers and funders need to anticipate that the needs of tenants may change over time, and some tenants may no longer have a medical necessity for some of the Medicaid-covered services that can be delivered in a PSH setting. This can create challenges for some people living in PSH, particularly if they have established trusting relationships with service providers and have come to rely on the availability of supports that help them maintain stability, manage chronic and disabling health conditions, and anticipate and respond quickly to relapse.

States may use more than one Medicaid benefit package to provide the range of services that help people with disabilities who have experienced homelessness live successfully in the community. Doing so would make it easier to ensure continuity of care to beneficiaries whose health conditions and functioning change over time. If the services that support community living include varying levels of intensity, available through several elements of a state's Medicaid program that all provide benefits for people with complex health needs, a person could potentially shift seamlessly from coverage under one benefit package to services available under a different one as needs change over time. To ensure maximum continuity of care it is also important that the same provider or team of providers is able to deliver the new level of supports. To make this possible, it is advisable that the providers available to this population include health professionals who meet the qualifications established by the state and set forth in the Medicaid state plan or waiver program.

Because the nature of mental illness may include worsening of symptoms and functioning from time to time as well as the types of improvements just discussed, it is important that Medicaid structures facilitate periodic changes in care levels to increase as well as decrease the intensity of care. The ability to modify individual care plans as needed is also an important factor in successful supports for people with complex health conditions who experience chronic homelessness. When an individual first accepts care and works with program staff to develop an individual treatment plan, he or she may not reveal, or may not be ready to work on, some aspects of recovery and may not be willing to have them included in the treatment plan. Providers need to have the flexibility to add components to an existing plan or modify components that are already there and know that they will be able to receive Medicaid reimbursement for the additions and modifications as long as the need for them is appropriately documented.

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