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Medicaid and Permanent Supportive Housing for Chronically Homeless Individuals: Emerging Practices From the Field

Publication Date

Martha Burt, Carol Wilkins, and Gretchen Locke

Abt Associates
This is one of two reports examining the use of Medicaid to cover services for individuals experiencing chronic homelessness, particularly in Permanent Supportive Housing (PSH). It describes existing practices in the field of communities currently serving homelessness and formerly homeless individuals Medicaid beneficiaries.

DISCLAIMER: The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.

This Executive Summary is available on the Internet at:

Permanent supportive housing (PSH) offers subsidized housing for formerly homeless people with disabilities and chronic health conditions. It provides flexible and individualized support services that are offered to tenants, who can participate on a voluntary basis. PSH services focus on promoting long-term housing stability, recovery, and improved health. PSH service providers may deliver or coordinate access to treatment for health, mental health, and substance use disorders. PSH programs also directly provide case management services and supports to help people who are homeless obtain and retain housing. The housing component of PSH provides a platform for improving health and for changing patterns of health care utilization, with the appropriate use of health and behavioral health care replacing frequent use of emergency rooms and inpatient hospitalization. This in turn reduces the public cost burden of inappropriate use of crisis services.

When the Federal Government first committed to ending chronic homelessness in 2003, it was understood that PSH would be a big part of reaching that goal. Since then, federal and other resources have helped to add more than 140,000 PSH beds, bringing the PSH-bed total to 284,298 in January 2013.1 The impact of these new units is evident: The number of people with histories of chronic homelessness found in unsheltered locations decreased by 25 percent between 2007 and 2013 (HUD 2013).

PSH programs use multiple funding sources to ensure that supportive services are available to their tenants. Medicaid reimbursement has often been used to pay for some of the services provided to some PSH tenants. Some PSH tenants who were enrolled in Medicaid were eligible to have some aspects of their health and behavioral health care covered even before Medicaid expansion under the Affordable Care Act. As of January 1, 2014, 25 states and the District of Columbia expanded Medicaid coverage to adults aged 18-64 if their household income was at or below 133 percent of the federal poverty level, as allowed under provisions of the law. The expansion means that many more PSH tenants as well as people still experiencing chronic homelessness because they have very low incomes are now eligible for Medicaid. Thus, understanding Medicaid's potential as a funding source for the services needed by Medicaid beneficiaries living in PSH is even more important now, for those newly eligible as well as for those eligible under the rules that applied in 2013 and earlier.

In anticipation of changes stemming from the Affordable Care Act, the U.S. Department of Health and Human Services (HHS), Office of the Assistant Secretary for Planning and Evaluation (ASPE), contracted with Abt Associates in October 2010 to conduct a study to explore the roles that Medicaid, Health Centers, and other HHS programs might play in providing services for people who had experienced chronic homelessness before moving into PSH. This study examined the intersection of three pieces of a complex puzzle that if assembled correctly can end chronic homelessness: (1) chronic homelessness itself; (2) permanent supportive housing; and (3) Medicaid's potential to fund health-related services for people experiencing chronic homelessness or living in PSH. It looked at program innovations already in practice, because the best indicators of Medicaid's potential usefulness to people experiencing homelessness are the ways that today's providers are using Medicaid to cover some of the support in supportive housing. That support includes health and behavioral health care for people who have been chronically homeless and are now living in PSH.

Findings reported here are based on more than two years of observing developments in six communities.2 Each community had been pursuing at least one of several innovations, many of which are still evolving, including (1) early expansion of eligibility based on Affordable Care Act income rules (Connecticut, District of Columbia, and Minnesota); (2) Medicaid waivers to create coverage for low-income people through new types of health plans that offer a "bridge" to the expanded coverage available under the Affordable Care Act (Cook County, Illinois; Los Angeles County; and the State of California); (3) linking Medicaid-covered mental health and behavioral health services to housing assistance to create PSH; (4) expanding the types of services covered by Medicaid (Louisiana, Minnesota); (5) involving Health Centers (Chicago, Los Angeles); (6) expanding the role of managed care (District of Columbia, Louisiana, Minnesota, and Los Angeles); and (7) developing entirely new structures for integrating physical and behavioral health care with links to housing (Chicago, Minnesota).

This report focuses on the innovations that are primarily mechanisms for coordinating and integrating health care (for physical, mental, and substance use conditions and supports to help people get and keep housing. The impetus for these innovations is the increasingly widespread recognition that people with complex needs require integrated care and housing stability for better health outcomes, better patient and client experiences, and more cost-effective care. Our study leads us to the following conclusions:

  • Many useful approaches are being pioneered in study communities. Using Medicaid to fund services to serve PSH tenants is complicated, but it can be done.

  • Medicaid will not cover every service, but it can be a vital funding source for services needed by PSH tenants.

  • Many types of Medicaid providers--managed care organizations, Health Centers, behavioral health providers, and Accountable Care Organizations--are playing important roles.

Summary of Key Findings

Medicaid Eligibility, Enrollment, and Services

Medicaid eligibility expansion offers health insurance coverage to thousands of people experiencing chronic homelessness or living in permanent supportive housing who would not otherwise meet categorical eligibility criteria. Services available under Medicaid include the Medicaid state plan (the array of services that anyone qualifying for Medicaid on a categorical basis would be able to receive) and Alternative Benefit Plans (the basic array of covered services that states must provide to those newly eligible for Medicaid based on income alone). The latter plans may be more limited than full State Plan Medicaid, but must include the ten essential health benefits specified in the Affordable Care Act.

Eligibility is one thing; actually getting newly eligible people enrolled in Medicaid and helping them remain enrolled is another. In the course of eligibility expansion, states and localities have had to develop a range of outreach and engagement strategies for identifying eligible people, helping them enroll, and helping them maintain or re-establish their eligibility when they need to recertify. Assistance to establish eligibility for Supplemental Security Income (SSI) has also been a priority.

Experimenting Under Waivers

Some states have used Medicaid waivers authorized under Section 1115 of the Social Security Act to expand health coverage for low-income people, giving them the ability to reach many people experiencing homelessness or who were once homeless and now live in PSH. California and Illinois have used 1115 waivers as a "bridge to reform," helping them establish low-income health plans in advance of 2014 that offer access to health care for many people who would become eligible for Medicaid upon full implementation of the Affordable Care Act.

Under these waivers, jurisdictions received federal Medicaid funds to match state and county spending on health care services delivered to qualifying low-income people. The availability of the federal match may free up some county funds for reassignment to other uses, such as helping safety net hospitals and other health care providers to prepare for service, billing, and payment systems that needed to be in place for 2014. Most of the people enrolled in the health programs developed under the California and Illinois waivers were automatically switched over to Medicaid enrollment on January 1, 2014.

Involving Federally Qualified Health Centers

Health Centers, which include Health Care for the Homeless Programs, receive federal grants from HHS's Health Resources and Services Administration to provide comprehensive primary care services to low-income people in underserved communities. These Health Centers also receive Medicaid reimbursements as Federally Qualified Health Centers (FQHCs). FQHCs in Chicago, Los Angeles, and the District of Columbia, are significant providers of health care and other services and supports to people with histories of chronic homelessness and to PSH tenants. They offer models of possible strategies that other communities could adopt. For example, to address barriers to Medicaid enrollment, PSH and homeless assistance providers in Los Angeles have worked closely with Health Centers to help uninsured people access Health Center services and, if eligible, to enroll in Medicaid.

A growing number of Health Care for the Homeless Programs and a few other Health Centers havedeveloped ways to engage and provide ongoing health care and supportive services linked to permanent housing for people with histories of chronic homelessness. To do so, they collaborate with numerous partners, including community-based mental health and housing support service providers and sometimes agencies providing rental assistance or PSH units.Integration of primary and behavioral health care is an important goal, as is consideration of housing status and recognition of the importance of housing stability for health outcomes. But challenges remain because best practices for serving people experiencing chronic homelessness or living in PSH often do not align with payment structures for FQHCs.

Mental Health Services and Medicaid

Among people experiencing chronic homelessness, those with a diagnosis of serious mental illness may be the most likely to benefit from supports funded in part through Medicaid. This is because people with a diagnosis of serious mental illness are more likely to have SSI income; to be Medicaid-eligible because they have SSI; to come under the aegis of state and county mental health departments, which have responsibilities for their well-being; and to qualify to receive the most effective models of community-based mental health services that have been identified by extensive research.

Medicaid state plans specify how eligibility is to be determined for mental health services and other services. Diagnosis and a functional impairment scale or rating scale is typically used. States can also consider diagnostic indicators, including previous psychiatric inpatient admissions, and may consider other risk factors such as chronic homelessness, repeated arrests and incarcerations, lack of follow-through taking medications, and excessive use of crisis or emergency services with failed linkages.

Persons with a serious mental illness who are clients of a public mental health agency will most likely qualify to receive supportive, community-based rehabilitative services. This research identified several models of care that can be delivered as part of PSH. Most of the states included in this study used the rehabilitative services state plan benefit and the targeted case management state plan benefit to cover behavioral health services in PSH. For example, in several states Assertive Community Treatment and Community Support Programs are Medicaid-covered mental health services that are reimbursed under Medicaid's rehabilitative services option. Some states cover similar types of services as optional home and community-based services. Minnesota makes extensive use of Medicaid targeted case management benefits to provide case management services in PSH. Targeted case management benefits include assessment, service plan development, and the referral, monitoring, and follow-up often used to help people get and keep housing.

Connecting People to Medicaid Services and Housing

Several models exist at the provider level for linking health and behavioral health care, supportive services, and housing, starting with outreach and engagement to initiate connections with people experiencing homelessness. Models include: (1) one agency providing both housing and services; (2) partnerships in which one agency provides housing and another provides the behavioral health and other supportive services; and (3) one agency provides housing and each tenant is linked to his or her own primary service provider for rehabilitative services. Medicaid includes a freedom of choice provision that applies to PSH tenants regardless of the PSH model used by their program. State Medicaid programs must allow Medicaid recipients to obtain services from any qualified Medicaid provider. Some exceptions to this freedom of choice occur under managed care arrangements.

To receive Medicaid reimbursement under any PSH model a state may use, providers must meet requirements established by the state's Medicaid program for documenting the delivery of covered services to recipients who are eligible to receive those services. The service must also be delivered by qualified staff, and states can specify the locations or settings in which some Medicaid-reimbursed services can be delivered.

Discussion of Medicaid reimbursement for services in permanent supportive housing often raises questions about the Medicaid payment exclusion for Institutions for Mental Diseases (IMDs), because in general Medicaid does not pay for care to people living in these facilities. PSH provides permanent housing in community settings, and offers person-centered community-based support. PSH differs from an IMD in many important ways, and it generally meets the criteria that the Centers for Medicare and Medicaid Services (CMS) has established to define a home and community-based setting in which some Medicaid services may be provided.3

The services for PSH tenants covered by Medicaid must also be "comparable," which in Medicaid terms means that the medical assistance available to one group of individuals "shall not be less in amount, duration, or scope than the medical assistance made available to any other individual."4 This provision also ensures comparability of services between individuals within a group of categorically eligible beneficiaries. Therefore, state plan services are available to all beneficiaries who may need them, not simply those who participate in particular PSH programs.

Many issues related to payment were common across case study sites. These involved mainly which aspects of the supports needed by people experiencing chronic homelessness and PSH tenants the Medicaid arrangements available during the study period (2010-2012) would and would not cover. Medicaid reimbursement often covered community-based rehabilitative services, including services provided in the consumer's home or other community settings and focused on the individual's recovery and resiliency goals. Covered services could include coordination and management; skills teaching; illness management and recovery, including self-monitoring and crisis and relapse prevention; crisis intervention; and peer supports. Some elements of service strategies that are critically important for engaging people who have experienced chronic homelessness and supporting recovery and stability in community settings are commonly omitted from some definitions of Medicaid-covered services. These include outreach, care not specifically related to mental illness, and travel time.

The Emerging Role of Medicaid Managed Care

States began enrolling eligible persons into managed care plans with a focus on enrolling children and families. However, a growing number of states are expanding to enroll people with disabilities and seniors in managed care plans. Among the sites studied in this research, California, Illinois, and Minnesota have this requirement for all or many beneficiaries who are seniors and persons with disabilities.

Many states are using managed care for individuals who became newly eligible for Medicaid in 2014 under the terms of the Affordable Care Act, which includes many people experiencing homelessness or living in PSH. As the shift to managed care happens, organizations that provide Medicaid-covered health services to indigent and homeless people need to become part of the health plans' or specialty plans' provider networks.

Managed care plans must either provide care management or service coordination to their members or contract with other organizations to do so. It is typical for the plans to provide such services by telephone--a practice with severe limitations when working with clients experiencing homelessness and even people living in PSH. As they accommodate to serving members with more complex health and behavioral health conditions, managed care plans are being encouraged to revamp their approach to care coordination for these higher-need members.

In Minnesota, the state's Special Needs Basic Care demonstration managed health plans are responsible for a range of Medicaid-covered services, including both medical care and community behavioral health services. Some of these managed care health plans have structured agreements with community-based providers of mental health services, including services linked to PSH, to integrate health-related care management services with the targeted case management services they deliver. These providers receive additional reimbursement for the more intensive coordination activities involved.

Managed care plans have an incentive to control costs by helping to reduce avoidable hospitalizations or emergency room visits for their members. When the managed care plans receive a fixed payment per-member per-month, they may also have flexibility to pay for more intensive care coordination services if those services are likely to produce better outcomes while reducing the use of other types of services such as inpatient hospital care.

State Medicaid agencies set managed care rates. Managed care plans often have the flexibility to negotiate rates that are risk-adjusted based on the complexity of a member's health status and therefore the intensity of the care coordination needed. Generally, states are not using risk adjustment methodologies that account for the complexity of health care needs and a person's history of service utilization and costs. This may limit opportunities for managed care plans and provider networks to design and sustain programs that offer the services and care coordination needed for people experiencing chronic homelessness and others with the most complex health and social support needs.

Louisiana has undertaken a multiyear, comprehensive redesign of its public behavioral health system for children and adults, involving numerous waivers, state plan amendments, and a contract with one statewide management organization. One of this program's components, authorized under a Section 1915(i) state plan amendment, was designed to cover the array of behavioral health services needed to serve persons with behavioral health and often co-occurring disorders, which includes helping people experiencing homelessness get and keep housing. It is an excellent example of a Medicaid state plan modification that has won CMS approval for Medicaid coverage of the services most needed by people experiencing homelessness and living in PSH.

New Mechanisms for Care Coordination

The study examined three innovative models for care coordination for people experiencing chronic homelessness. Two examples--Together4Health in Chicago and Hennepin Health in Minnesota--are developing Medicaid service delivery systems based on the model of Accountable Care Organizations. The third example is a unique approach to integrating housing into health and behavioral health care in Los Angeles launched by the county Department of Health Services. All three are creating strategies that seek to integrate care for their clients across four critical domains--medical care (both primary and specialty), mental health care, substance use treatment, and housing.

The Accountable Care Organization (ACO) concept is fairly new, first appearing in 2007. The Kaiser Commission on Medicaid and the Uninsured describes an Accountable Care Organization as, "a providerrun organization in which the participating providers are collectively responsible for the care of an enrolled population and also may share in any savings associated with improvements in the quality and efficiency of the care they provide."

The first ACOs were created to serve Medicare patients. Recently several states have launched initiatives to develop and implement Medicaid ACOs or ACO-like systems, most of which are in the early stages of development.

Challenges and Opportunities

The efforts under way to link Medicaid-financed services to housing assistance for people experiencing chronic homelessness face a number of challenges and opportunities:

The U.S. Supreme Court's Olmstead Decision. In 1990, Congress passed the Americans with Disabilities Act. Title II of that act affirms the right of persons with disabilities to live in the most integrated setting possible. In 1999, the Supreme Court issued a decision in Olmstead that prohibits the unjustified segregation of people with disabilities. The ruling creates a mandate for states and other public entities to reduce the isolation and segregation of people with disabilities in institutional settings and instead provide community-based services. It requires that people with disabilities be housed in "a setting that enables individuals with disabilities to interact with nondisabled persons to the fullest extent possible."

Investigations based on Olmstead are stimulating states to rebalance their long-term care systems and expand the availability of home and community-based services linked to housing for people with disabilities who have long resided in institutional settings or who are at risk of institutionalization. Settlement agreements and consent decrees vary widely depending on the circumstances, population, and complaint. States are exploring housing and services opportunities to comport with their agreements.

In response to these opportunities and challenges, states and community providers have been working hard since Olmstead to develop financing strategies for delivering the services and supports called for by the court decision. Medicaid's home and community-based services are often an essential part of these strategies, including waiver services authorized under Section 1915(c) and state option services authorized under 1915(i).

Efforts to meet the requirements of Olmstead can be reasonably well-aligned with efforts to reduce chronic homelessness. However, this requires state leadership and providers to overcome potential competition for scarce resources. Louisiana and the District of Columbia's design and policies combined supporting housing programs for persons with disabilities and persons with disabilities who are homeless. Choice of setting is also available, assuring prospective tenants have their choice of housing options.

Workforce Capacity. As expanded eligibility swells the Medicaid rolls, newly eligible people may find it difficult to locate a provider or get care in a timely manner, due to a shortage of primary care providers as well as providers of specialty medical services. To translate coverage into meaningful access to care will require not only more medical providers in some communities, but also changes in the ways that health care is delivered to improve efficiency and the quality of care.

Team models using personnel such as nurses, community health workers, and peers as "care extenders" are likely to be important strategies.

Training, skill development, upgraded credentials, and increased supervision are likely to be needed to safely respond to some people's complex medical and behavioral health conditions. Movement to begin these processes is already under way in many places.

Increasing emphasis on care coordination and multidisciplinary team approaches creates another challenge, as even highly trained clinicians rarely have learned to work across disciplines or as members of teams.

Gaps. Current gaps in services include the need for more flexibility in services to address substance use disorders, alone and in the context of co-occurring medical and mental health conditions; and the need to address challenges in serving "dual eligibles"--those who receive both Medicare and Medicaid. These challenges lie primarily in aligning the very different payment mechanisms and covered services of the two programs.

New Opportunities. The Health Home option made available under the Affordable Care Act offers an important new opportunity to incorporate care coordination services for people with complex health needs into Medicaid state plans, with federal funding at 90 percent for the first two years of operation.

Some Concluding Observations

This study sought to identify the many ways that selected states and communities are moving forward, using and modifying their Medicaid programs and health care delivery systems to better serve people with histories of chronic homelessness. The findings indicate that through 2013 state Medicaid programs offered coverage opportunities for an array of the services needed by PSH tenants before and after they move into housing, with more opportunities becoming available through the Affordable Care Act in 2014 and beyond.

If the promise of new and emerging approaches to integrated and cost-effective care for people experiencing chronic homelessness and PSH tenants is to be realized, many aspects of Medicaid state plans will have to be brought into alignment. Service definitions will need to be examined and updated to ensure they can accommodate the evidence-based practices and emerging, more integrated models of care that are particularly important for people who have co-occurring behavioral health and chronic health conditions or other medical needs. Administrative silos (involving, for example, physical health care, mental health care, and substance use disorder treatment) will have to be breached so service providers can treat people holistically, sharing medical records, requesting payment, reporting performance, and performing similar tasks through streamlined and coordinated mechanisms.

Gaps in covered services (e.g., outreach and engagement, collateral contacts, and services that explicitly focus on helping people get and keep housing as a social determinant of health and a driver of health care utilization and costs) will have to be closed to the extent possible under Medicaid, and alternative funding mechanisms identified if possible to fill remaining gaps.

Given the enormous pressures currently facing state Medicaid agencies working to implement changes consistent with Affordable Care Act requirements, they may not immediately be able to focus on the needs of the relatively small population of PSH tenants and people still experiencing homelessness who could benefit from PSH.

Although the target population of people with histories of chronic homelessness is a small subset of all Medicaid-eligible people, it is no simple matter to design programs within Medicaid that meet its needs. For this reason, it makes sense to work with other constituencies who need home and community-based services to develop care structures that work across a wider range of populations.

As attention focused on the activities most critical to preparing for 2014, stakeholders involved in Medicaid were often reminded that this was an important deadline for some major activities but it was not the finish line. While the enrollment of millions of Americans into Medicaid or subsidized insurance coverage began in October 2013 for coverage starting in 2014, the work of ensuring that coverage and care delivery systems work well for the most vulnerable people, including those experiencing homelessness or living in PSH, will require sustained attention in the coming years. Rather than a finish line, 2014 is the beginning of the next phase of work to achieve the goals of health care reform.